Order Flow Volatility and Equity Costs of Capital

Published Online:https://doi.org/10.1287/mnsc.2017.2848

References

  • Abarbanell J, Bushee B, Raedy J (2003) Institutional investor preferences and price pressure: The case of corporate spin-offs. J. Bus. 76(2):233–261.CrossrefGoogle Scholar
  • Akbas F, Petkova R, Armstrong W (2011) The volatility of liquidity and expected stock returns. Working Paper, Case Western Reserve University, Cleveland.Google Scholar
  • Amihud Y (2002) Illiquidity and stock returns: Cross-section and time series effects. J. Financial Markets 5(1):31–56.CrossrefGoogle Scholar
  • Amihud Y, Mendelson H (1986) Asset pricing and the bid–ask spread. J. Financial Econom. 17(2):223–249.CrossrefGoogle Scholar
  • Ang A, Hodrick R, Xing Y, Zhang X (2006) The cross-section of volatility and expected returns. J. Finance 61(1):259–299.CrossrefGoogle Scholar
  • Asparouhova E, Bessembinder H, Kalcheva I (2010) Liquidity biases in asset pricing tests. J. Financial Econom. 96(2):215–237.CrossrefGoogle Scholar
  • Avramov D, Chordia T (2006) Asset pricing models and financial market anomalies. Rev. Financial Stud. 19(3):1001–1040.CrossrefGoogle Scholar
  • Back K, Crotty K, Li T (2016) Estimating information asymmetry in securities markets. Working paper, Rice University, Houston.Google Scholar
  • Bali T, Cakici N, Whitelaw R (2011) Maxing out: Stocks as lotteries and the cross-section of expected returns. J. Financial Econom. 99(2):427–446.CrossrefGoogle Scholar
  • Bali T, Peng L, Shen Y, Tang Y (2014) Liquidity shocks and stock market reactions. Rev. Financial Stud. 27(5):1434–1485.CrossrefGoogle Scholar
  • Ball R, Brown P (1968) An empirical evaluation of accounting income numbers. J. Accounting Res. 6:159–178.CrossrefGoogle Scholar
  • Banz R (1981) The relationship between return and market value of common stocks. J. Financial Econom. 9(1):3–18.CrossrefGoogle Scholar
  • Baruch S, Panayides M, Venkataraman K (2017) Informed trading and price discovery before corporate events. J. Financial Econom. 125(3):561–588.CrossrefGoogle Scholar
  • Bernard V, Thomas J (1989) Post-earnings-announcement drift: Delayed price response or characteristic premium? J. Accounting Res. 27:1–36.CrossrefGoogle Scholar
  • Bernard V, Thomas J (1990) Evidence that stock prices do not fully reflect the implications of current earnings for future earnings. J. Accounting Econom. 13(4):305–340.CrossrefGoogle Scholar
  • Brennan M, Subrahmanyam A (1996) Market microstructure and asset pricing: On the compensation for illiquidity in stock returns. J. Financial Econom. 41(3):441–464.CrossrefGoogle Scholar
  • Brennan M, Chordia T, Subrahmanyam A (1998) Alternative factor specifications, security characteristics, and the cross-section of expected stock returns. J. Financial Econom. 49(3):345–373.CrossrefGoogle Scholar
  • Chakrabarty B, Moulton P, Shkilko A (2012) Short sales, long sales, and the Lee–Ready trade classification algorithm revisited. J. Financial Markets 15(4):467–491.CrossrefGoogle Scholar
  • Cheng S, Hameed A, Subrahmanyam A, Titman S (2017) Short-term reversals: The effects of past returns and institutional exits. J. Financial Quant. Anal. 52(1):143–173.CrossrefGoogle Scholar
  • Choi J, Jin L, Yan H (2016) Informed trading and expected returns. Working paper, Yale University, New Haven, CT.Google Scholar
  • Chordia T, Huh S, Subrahmanyam A (2009) Theory-based illiquidity and asset pricing. Rev. Financial Stud. 22(9):3629–3668.CrossrefGoogle Scholar
  • Chordia T, Roll R, Subrahmanyam A (2001) Market liquidity and trading activity. J. Finance 56(2):501–530.CrossrefGoogle Scholar
  • Chordia T, Roll R, Subrahmanyam A (2005) Evidence on the speed of convergence to market efficiency. J. Financial Econom. 76(2):271–292.CrossrefGoogle Scholar
  • Chordia T, Roll R, Subrahmanyam A (2011) Recent trends in trading activity and market quality. J. Financial Econom. 101(2):243–263.CrossrefGoogle Scholar
  • Chordia T, Subrahmanyam A, Anshuman R (2001) Trading activity and expected stock returns. J. Financial Econom. 59(1):3–32.CrossrefGoogle Scholar
  • Collin-Dufresne P, Fos V (2015) Do prices reveal the presence of informed trading? J. Finance 70(4):1555–1582.CrossrefGoogle Scholar
  • Corwin SA, Schultz P (2012) A simple way to estimate bid–ask spreads from daily high and low prices. J. Finance 67(2):719–759.CrossrefGoogle Scholar
  • Cooper M, Gulen H, Schill M (2008) Asset growth and the cross-section of stock returns. J. Finance 63(4):1609–1651.CrossrefGoogle Scholar
  • Diether KB, Malloy CJ, Scherbina A (2002) Differences of opinion and the cross section of stock returns. J. Finance 57(5):2113–2141.CrossrefGoogle Scholar
  • Easley D, O’Hara M (2004) Information and the cost of capital. J. Finance 59(4):1553–1583.CrossrefGoogle Scholar
  • Easley D, Hvidkjaer S, O’Hara M (2002) Is information risk a determinant of asset returns? J. Finance 57(5):2185–2221.CrossrefGoogle Scholar
  • Easley D, Lopez de Prado M, O’Hara M (2012) Flow toxicity and liquidity in a high-frequency world. Rev. Financial Stud. 25(5):1457–1493.CrossrefGoogle Scholar
  • Easley D, Kiefer N, O’Hara M, Paperman J (1996) Liquidity, information and infrequently traded stocks. J. Finance 51(4):1405–1436.CrossrefGoogle Scholar
  • Ellis K, Michaely R, O’Hara M (2000) The accuracy of trade classification rules: Evidence from Nasdaq. J. Financial Quant. Anal. 35(4):529–551.CrossrefGoogle Scholar
  • Fama E, French K (1992) The cross-section of expected stock returns. J. Finance 47(2):427–465.CrossrefGoogle Scholar
  • Fama E, French K (1993) Common risk factors in the returns on stocks and bonds. J. Financial Econom. 33(1):3–56.CrossrefGoogle Scholar
  • Fama E, French K (2006) Profitability, investment and average returns. J. Financial Econom. 82(3):491–518.CrossrefGoogle Scholar
  • Fama E, MacBeth J (1973) Risk, return, and equilibrium: Empirical tests. J. Political Econom. 81(3):607–636.CrossrefGoogle Scholar
  • Gao X, Ritter J (2010) The marketing of seasoned equity offerings. J. Financial Econom. 97(1):33–52.CrossrefGoogle Scholar
  • Gomes J, Kogan L, Zhang L (2003) Equilibrium cross-section of returns. J. Political Econom. 111(4):693–732.CrossrefGoogle Scholar
  • Gompers P, Metrick A (2001) Institutional investors and equity prices. Quart. J. Econom. 116(1):229–259.CrossrefGoogle Scholar
  • Hirshleifer D, Teoh SH (2003) Limited attention, information disclosure, and financial reporting. J. Accounting Econom. 36(1):337–386.CrossrefGoogle Scholar
  • Holden C, Jacobsen S (2014) Liquidity measurement problems in fast, competitive markets: Expensive and cheap solutions. J. Finance 69(4):1747–1785.CrossrefGoogle Scholar
  • Hvidkjaer S (2008) Small trades and the cross-section of stock returns. Rev. Financial Stud. 21(3):1123–1151.CrossrefGoogle Scholar
  • Hwang C, Qian X (2011) Is information risk priced? Evidence from the price discovery of large trades. Working paper, Nanyang Technological University, Singapore.Google Scholar
  • Jacoby G, Fowler D, Gottesman A (2000) The capital asset pricing model and the liquidity effect: A theoretical approach. J. Financial Markets 3(1):69–81.CrossrefGoogle Scholar
  • Jegadeesh N (1990) Evidence of predictable behavior in security returns. J. Finance 45(3):881–898.CrossrefGoogle Scholar
  • Jegadeesh N, Titman S (1993) Returns to buying winners and selling losers: Implications for stock market efficiency. J. Finance 48(1):65–92.CrossrefGoogle Scholar
  • Johnson TL, So EC (2018) A simple multimarket measure of information asymmetry. Management Sci. 64(3):1055–1080.LinkGoogle Scholar
  • Jones C (2002) A century of stock market liquidity and trading costs. Unpublished manuscript, Columbia University, New York.Google Scholar
  • Kelly B, Ljungqvist A (2012) Testing asymmetric-information asset pricing models. Rev. Financial Stud. 25(5):1366–1413.CrossrefGoogle Scholar
  • Kim O, Verrecchia R (1994) Market liquidity and volume around earnings announcements. J. Accounting Econom. 17(1–2):41–67.CrossrefGoogle Scholar
  • Kolari J, Pynnönen S (2010) Event study testing with cross-sectional correlation of abnormal returns. Rev. Financial Stud. 23(11):3996–4025.CrossrefGoogle Scholar
  • Krinsky I, Lee J (1996) Earnings announcements and the components of the bid–ask spread. J. Finance 51(4):1523–1535.CrossrefGoogle Scholar
  • Kyle A (1984) Market structure, information, futures markets, and price formation. Storey GG, Schmitz A, Sarris AH, eds. International Agricultural Trade: Advanced Readings in Price Formation, Market Structure, and Price Instability (Westview Press, Boulder, CO), 45–64.Google Scholar
  • Kyle A (1985) Continuous auctions and insider trading. Econometrica 53(6):1315–1335.CrossrefGoogle Scholar
  • Lee C, Radhakrishna B (2000) Inferring investor behavior: Evidence from TORQ data. J. Financial Markets 3(2):88–111.CrossrefGoogle Scholar
  • Lee C, Ready M (1991) Inferring trade direction from intradaily data. J. Finance 46(2):733–746.CrossrefGoogle Scholar
  • Lee C, Mucklow B, Ready M (1993) Spreads, depths, and the impact of earnings information: An intraday analysis. Rev. Financial Stud. 6(2):345–374.CrossrefGoogle Scholar
  • Lo A, MacKinlay C (1990) Data-snooping biases in tests of financial asset pricing models. Rev. Financial Stud. 3(3):431–468.CrossrefGoogle Scholar
  • Madhavan A, Porter D, Weaver D (2005) Should securities markets be transparent? J. Financial Markets 8(3):266–288.CrossrefGoogle Scholar
  • Newey W, West K (1987) A simple positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. Econometrica 55(3):703–708.CrossrefGoogle Scholar
  • Odders-White E (2000) On the occurrence and consequences of inaccurate trade classification. J. Financial Markets 3(3):259–286.CrossrefGoogle Scholar
  • O’Hara M (2015) High frequency market microstructure. J. Financial Econom. 116(2):257–270.CrossrefGoogle Scholar
  • Pástor L, Stambaugh R (2003) Liquidity risk and expected stock returns. J. Political Econom. 113(3):642–685.CrossrefGoogle Scholar
  • Patell J, Wolfson M (1981) The ex ante and ex post price effects of quarterly earnings announcements reflected in option and stock prices. J. Accounting Res. 19(2):434–458.CrossrefGoogle Scholar
  • Pontiff J, Woodgate A (2008) Share issuance and cross-sectional returns. J. Finance 63(2):921–945.CrossrefGoogle Scholar
  • Roll R, Schwartz E, Subrahmanyam A (2010) O/S: The relative trading activity in options and stock. J. Financial Econom. 96(1):1–17.CrossrefGoogle Scholar
  • Sadka R (2006) Momentum and post-earnings-announcement drift anomalies: The role of liquidity risk. J. Financial Econom. 80(2):309–349.CrossrefGoogle Scholar
  • Sloan R (1996) Do stock prices fully reflect information in accruals and cash flows about future earnings? Accounting Rev. 71(3):289–315.Google Scholar
  • So E, Wang S (2014) News-driven return reversals: Liquidity provision ahead of earnings announcements. J. Financial Econom. 114(1):20–35.CrossrefGoogle Scholar
  • Subrahmanyam A (1991) Risk aversion, market liquidity, and price efficiency. Rev. Financial Stud. 4(3):417–441.CrossrefGoogle Scholar
  • United States Government Accountability Office (2005) Decimal pricing has contributed to lower trading costs and a more challenging trading environment. GAO-05-535, submitted to Congressional Requesters, Washington, DC.Google Scholar
  • Yang C, Zhang B, Zhang C (2015) Is information risk priced? Evidence from abnormal idiosyncratic volatility. Working paper, Hong Kong University of Science and Technology, Clear Water Bay.Google Scholar
INFORMS site uses cookies to store information on your computer. Some are essential to make our site work; Others help us improve the user experience. By using this site, you consent to the placement of these cookies. Please read our Privacy Statement to learn more.