Trading and Financial Markets

Handbook, Elsevier, 469-504

M. Fleming (1997), The round-the-clock market for U.S. treasury securities, Federal Reserve Bank of New York Economic Policy Review, 9-32

M. Brunnermeier and S. Nagel (2004), Hedge funds and the technology bubble, Journal of Finance 59, 2013-2040

N. Barberis and R. Thaler (2003), A survey of behavioral finance, in Handbook of the Economics of

Finance, Eds. G. Constantinides, M. Harris and R. Stulz, Elsevier

C. Neely (1997), Technical analysis in the foreign exchange market: A layman’s guide, Federal Reserve Bank of St. Louis Review

I. Aldridge (2013), High-frequency trading: A practical guide to algorithmic strategies and trading systems, Wiley

Y. Amihud and H. Mendelson (1986), Asset pricing and the bid-ask spread, Journal of Financial Economics 17, 223-249

Y. Amihud and H. Mendelson (1987), Trading mechanisms and stock returns: An empirical investigation, Journal of Finance 62, 533-553

Y. Amihud, H. Mendelson and M. Murgia (1990), Stock market microstructure and return volatility: Evidence from Italy, Journal of Banking and Finance 14, 423-440

A. Ang and J. Chen (2002), Asymmetric correlations of equity portfolios, Journal of Financial Economics 63, 443-494

J. Bacidore, Algorithmic trading: A practitioner's guide, TBG press

S. Badrinath, J. Kale and T. Noe (1995), Of shepherds, sheep, and the cross- autocorrelations in equity returns, Review of Financial Studies 8, 401-430

W. Bagehot (1971), The only game in town, Financial Analysts Journal 27, 12-14, 22

G. Benston and R. Hagerman (1974), Determinants of bid-asked spreads in the over-the- counter market, Journal of Financial Economics 1, 353-364

M. Brennan and A. Subrahmanyam (1996), Market microstructure and asset pricing: On the compensation for illiquidity in stock returns, Journal of Financial Economics 41, 441-464

M. Brennan, N Jegadeesh and B Swaminathan (1993), Investment analysis and the adjustment of stock prices to common information, Review of Financial Studies 6, 799-824

K. Chan, K. C. Chan and A. Karolyi (1991), Intraday volatility in the stock index and stock index futures markets, Review of Financial Studies 4, 657-684

T. Chordia, R. Roll and A. Subrahmanyam (2002), Order imbalance, liquidity, and market returns, Journal of Financial Economics 65, 111-130

T. Chordia and B. Swaminathan (2000), Trading volume and cross-autocorrelations in stock returns, Journal of Finance 55, 913-935

M. Cooper, O. Dimitrov and R. Rau (2001), A rose.com by any other name, Journal of Finance 56, 2371-2388

D. Cutler, J. Poterba and L. Summers (1989), What moves stock prices?, Journal of Portfolio Management, 15, 4-12

M. Fan and R. Lyons (2003), Customer trades and extreme events in foreign exchange, in Monetary History, Exchange Rates and Financial Markets: Essays in Honor of Charles

Goodhart, Paul Mizen (ed.), Edward Elgar, 160-179

K. French and R. Roll (1986), Stock return variances: The arrival of information and the reaction of traders, Journal of Financial Economics 17, 5-26

L. Frieder and J. Zittrain (2007), Spam works: Evidence from stock touts and corresponding market activity, Working paper, Purdue and Oxford

L. Glosten and L. Harris (1988), Estimating the components of the bid-ask spread, Journal of Financial Economics 21, 123-142

A. Hameed, W. Kang and S. Vishwanathan (2006), Stock market declines and liquidity, Working paper, Duke University

J. Harford and A. Kaul (2005), Correlated order flow: Pervasiveness, sources, and pricing effects, Journal of Financial and Quantitative Analysis 40, 29-55

L. Harris (2003) Trading and exchanges: Market microstructure for practitioners, OUP

J. Hasbrouck (2005), Trading costs and returns for U.S. equities: The evidence from daily data, WP 2005

J. Hasbrouck (2007), Empirical market microstructure: The institutions, economics, and econometrics of securities trading, OUP

T. Hendershott, C. Jones and A. Menkveld (2011), Does algorithmic trading improve liquidity?, Journal of Finance 66, 1-33

S. Kandel, A. Ofer and O. Sarig (1993), Learning from trading, Review of Financial Studies 6, 507-526

D. Keim and A. Madhavan (1995), Anatomy of the trading process: Empirical evidence on the behavior of institutional traders, Journal of Financial Economics 37, 371-398

C. Lee and M. Ready (1991), Inferring trade direction from intraday data, Journal of Finance 46, 733-746

C. Lee, M. Ready and P. Seguin (1994), Volume, volatility, and NYSE trading halts, Journal of Finance 49, 183-214

M. Lewis (2014), Flash boys, Norton

A. Lo and C. MacKinlay (1990), When are contrarian profits due to stock market overreaction?, Review of Financial Studies 3, 175-208

R. Lyons (1995), Tests of microstructural hypotheses in the foreign exchange market, Journal of Financial Economics 39, 321-351

S. Nagel (2012), Evaporating liquidity, Review of Financial Studies 25, 2005-2039

M. O’Hara (1995), Market microstructure theory, Blackwell

P. Pasquariello and C. Vega (2007), Informed and strategic order flow in the bond markets, Review of Financial Studies 20, 1975-2019

L. Pástor and R. Stambaugh (2003), Liquidity risk and expected stock returns; Journal of Political Economy 111, 642-85

D. Rime (2003), New electronic trading systems in foreign exchange markets in the New Economy Handbook, 469-504

R. Roll (1988), R2, The Journal of Finance 43, 541-566

P. Schultz (2001), Corporate bond trading costs: A peek behind the curtain, Journal of Finance 56, 677-698

H. Stoll and R. Whaley (1990), Stock market structure and volatility, Review of Financial Studies 3, 37-71

R. Wermers (1999), Mutual fund herding and the impact on stock prices, Journal of Finance 54, 581-622

The recommended textbook for the course is Trading and Exchanges: Market Microstructure for Practitioners by Larry Harris. I will hand out power point slides, which will be the primar y basis for the class discussion, project and exams. The discussion in the book, while adding depth to the lectures, is dated at several points and fails to provide adequate coverage in areas, and the lectures will fill these gaps

Handbook, Elsevier, 469-504

M. Fleming (1997), The round-the-clock market for U.S. treasury securities, Federal Reserve Bank of New York Economic Policy Review, 9-32

M. Brunnermeier and S. Nagel (2004), Hedge funds and the technology bubble, Journal of Finance 59, 2013-2040

N. Barberis and R. Thaler (2003), A survey of behavioral finance, in Handbook of the Economics of

Finance, Eds. G. Constantinides, M. Harris and R. Stulz, Elsevier

C. Neely (1997), Technical analysis in the foreign exchange market: A layman’s guide, Federal Reserve Bank of St. Louis Review

I. Aldridge (2013), High-frequency trading: A practical guide to algorithmic strategies and trading systems, Wiley

Y. Amihud and H. Mendelson (1986), Asset pricing and the bid-ask spread, Journal of Financial Economics 17, 223-249

Y. Amihud and H. Mendelson (1987), Trading mechanisms and stock returns: An empirical investigation, Journal of Finance 62, 533-553

Y. Amihud, H. Mendelson and M. Murgia (1990), Stock market microstructure and return volatility: Evidence from Italy, Journal of Banking and Finance 14, 423-440

A. Ang and J. Chen (2002), Asymmetric correlations of equity portfolios, Journal of Financial Economics 63, 443-494

J. Bacidore, Algorithmic trading: A practitioner's guide, TBG press

S. Badrinath, J. Kale and T. Noe (1995), Of shepherds, sheep, and the cross- autocorrelations in equity returns, Review of Financial Studies 8, 401-430

W. Bagehot (1971), The only game in town, Financial Analysts Journal 27, 12-14, 22

G. Benston and R. Hagerman (1974), Determinants of bid-asked spreads in the over-the- counter market, Journal of Financial Economics 1, 353-364

M. Brennan and A. Subrahmanyam (1996), Market microstructure and asset pricing: On the compensation for illiquidity in stock returns, Journal of Financial Economics 41, 441-464

M. Brennan, N Jegadeesh and B Swaminathan (1993), Investment analysis and the adjustment of stock prices to common information, Review of Financial Studies 6, 799-824

K. Chan, K. C. Chan and A. Karolyi (1991), Intraday volatility in the stock index and stock index futures markets, Review of Financial Studies 4, 657-684

T. Chordia, R. Roll and A. Subrahmanyam (2002), Order imbalance, liquidity, and market returns, Journal of Financial Economics 65, 111-130

T. Chordia and B. Swaminathan (2000), Trading volume and cross-autocorrelations in stock returns, Journal of Finance 55, 913-935

M. Cooper, O. Dimitrov and R. Rau (2001), A rose.com by any other name, Journal of Finance 56, 2371-2388

D. Cutler, J. Poterba and L. Summers (1989), What moves stock prices?, Journal of Portfolio Management, 15, 4-12

M. Fan and R. Lyons (2003), Customer trades and extreme events in foreign exchange, in Monetary History, Exchange Rates and Financial Markets: Essays in Honor of Charles

Goodhart, Paul Mizen (ed.), Edward Elgar, 160-179

K. French and R. Roll (1986), Stock return variances: The arrival of information and the reaction of traders, Journal of Financial Economics 17, 5-26

L. Frieder and J. Zittrain (2007), Spam works: Evidence from stock touts and corresponding market activity, Working paper, Purdue and Oxford

L. Glosten and L. Harris (1988), Estimating the components of the bid-ask spread, Journal of Financial Economics 21, 123-142

A. Hameed, W. Kang and S. Vishwanathan (2006), Stock market declines and liquidity, Working paper, Duke University

J. Harford and A. Kaul (2005), Correlated order flow: Pervasiveness, sources, and pricing effects, Journal of Financial and Quantitative Analysis 40, 29-55

L. Harris (2003) Trading and exchanges: Market microstructure for practitioners, OUP

J. Hasbrouck (2005), Trading costs and returns for U.S. equities: The evidence from daily data, WP 2005

J. Hasbrouck (2007), Empirical market microstructure: The institutions, economics, and econometrics of securities trading, OUP

T. Hendershott, C. Jones and A. Menkveld (2011), Does algorithmic trading improve liquidity?, Journal of Finance 66, 1-33

S. Kandel, A. Ofer and O. Sarig (1993), Learning from trading, Review of Financial Studies 6, 507-526

D. Keim and A. Madhavan (1995), Anatomy of the trading process: Empirical evidence on the behavior of institutional traders, Journal of Financial Economics 37, 371-398

C. Lee and M. Ready (1991), Inferring trade direction from intraday data, Journal of Finance 46, 733-746

C. Lee, M. Ready and P. Seguin (1994), Volume, volatility, and NYSE trading halts, Journal of Finance 49, 183-214

M. Lewis (2014), Flash boys, Norton

A. Lo and C. MacKinlay (1990), When are contrarian profits due to stock market overreaction?, Review of Financial Studies 3, 175-208

R. Lyons (1995), Tests of microstructural hypotheses in the foreign exchange market, Journal of Financial Economics 39, 321-351

S. Nagel (2012), Evaporating liquidity, Review of Financial Studies 25, 2005-2039

M. O’Hara (1995), Market microstructure theory, Blackwell

P. Pasquariello and C. Vega (2007), Informed and strategic order flow in the bond markets, Review of Financial Studies 20, 1975-2019

L. Pástor and R. Stambaugh (2003), Liquidity risk and expected stock returns; Journal of Political Economy 111, 642-85

D. Rime (2003), New electronic trading systems in foreign exchange markets in the New Economy Handbook, 469-504

R. Roll (1988), R2, The Journal of Finance 43, 541-566

P. Schultz (2001), Corporate bond trading costs: A peek behind the curtain, Journal of Finance 56, 677-698

H. Stoll and R. Whaley (1990), Stock market structure and volatility, Review of Financial Studies 3, 37-71

R. Wermers (1999), Mutual fund herding and the impact on stock prices, Journal of Finance 54, 581-622