This study tests whether Fidelity Management and Research Company possesses private information when it makes large trades. We use a conditional performance measure inspired by Admati and Ross (1985) and by Grinblatt and Titman (1993) that does not require a benchmark used in risk-adjusted measures. It conditions the performance of each trade on public information, measured by the market price ...

We formulate and study the requirement on an allocation rule that no agent should be able to benefit by augmenting his endowment through borrowing resources from the outside world (alternatively, by simply exaggerating it). We show that the Walrasian rule is not “borrowing-proof” even on standard domains. More seriously, no efficient selection from the endowments-lower-bound correspondence, or ...

A market is liquid if no individual’s actions have a big effect on the prices of goods traded in that market. Perfectly competitive markets are therefore perfectly liquid. It is well known that market liquidity can be achieved by increasing the number of traders so that individual trades are small compared to total trades. We show that even when there are only few traders, market liquidity can ...

This paper studies crash risk of currencies for funding‐constrained speculators in an attempt to shed new light on the major currency puzzles. Our starting point is the currency carry trade, which consists of selling low interest rate currencies—“funding currencies”—and investing in high interest rate currencies—“investment currencies.” While the uncovered interest rate parity (UIP) hypothesize...

There is a large and growing literature documenting the relation between ex ante observable variables and stock returns. Importantly, much of the evidence on the relation between returns and observable variables like market capitalization, the ratio of price/book, and prior price change has been portrayed in the context of returns to simulated portfolio strategies. Often missing in these analys...

This dissertation studies the market microstructure of over-the-counter markets. All three chapters are based on the municipal (tax-exempt) bond market. However, the implications on price formation, price discovery and dealer’s market power can be generalized into the other OTC markets such as corporate bond and derivatives markets as well. In the first chapter “Price Clustering and Dealer’s Ma...