This paper studies the effect of bid-ask spread on asset pricing. We analyze a model in which investors with different expected holding periods trade assets relative spreads. The resulting testable hypothesis is that market-observed expexted return an increasing and concave function spread. test this hypothesis, empirical results are consistent predictions model.

ABSTRACT This paper examines the effects of mechanism by which securities are traded on their price behavior. We compare behavior open‐to‐open and close‐to‐close returns NYSE stocks, given differences in execution methods applied opening closing transactions. Opening found to exhibit greater dispersion, deviations from normality a more negative significant autocorrelation pattern than returns. study bid‐ask spread price‐adjustment process estimated return variances covariances discuss...

This paper examines the value effects of improvements in trading mechanism. Selected stocks on Tel Aviv Stock Exchange were transferred gradually from a daily call auction to mechanism where was followed by iterated continuous sessions. event associated with positive and permanent price appreciation. The cumulative average market-adjusted return over period that started five days prior announcement ended 30 after new method approximately 5.5%. In addition, we find liquidity externalities...

Consider a system that is modeled as an M/M/1 queueing with multiple user classes. Each class characterized by its delay cost per unit of time, expected service time and demand function. This paper derives pricing mechanism which optimal incentive-compatible in the sense arrival rates execution priorities jointly maximize net value while being determined, on decentralized basis, individual users. A closed-form expression for resulting price structure presented studied.

ABSTRACT The effects of asset liquidity on expected returns for assets with infinite maturities (stocks) are examined bonds (Treasury notes and bills matched less than 6 months). yield to maturity is higher notes, which have lower liquidity. differential between a decreasing convex function the time maturity. results provide robust confirmation effect in pricing.

ABSTRACT Merton's [26] recent extension of the CAPM proposed that asset returns are an increasing function their beta risk, residual and size a decreasing public availability information about them. Associating latter with liquidity following Amihud Mendelson's [2] proposition increase illiquidity (measured by bid‐ask spread), we jointly estimate effects these four factors on stock returns.

This article studies the effects of queueing delays, and users' related costs, on management control computing resources. It offers a methodology for setting price, utilization, capacity, taking into account value time, it examines implications alternative structures, determined by financial responsibility assigned to data processing manager.

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ABSTRACT We study the joint effect of trading mechanism and time at which transactions take place on behavior stock returns using data from Japan. The Tokyo Stock Exchange employs a periodic clearing procedure twice day, opening both morning afternoon sessions. This enables us to discern overnight halt. While beginning day is noisy inefficient, midday transaction appears be no worse than two closing transactions.

This paper studies optimal pricing and capacity decisions for a service facility in an environment where users' delay cost is important. The model assumes general nonlinear structure incorporates the tradeoff between cost. We find necessary sufficient conditions optimality of rule that charges out resources at their marginal examine issue budgetary balance net-value maximization entails budget deficit facility; is, should be evaluated as “deficit center.” results provide guidelines under...

This paper studies an organizational architecture that I call information-age architecture. define a measure of IQ and test whether it is related to financial market success using data from the fast-moving information technology industry. Higher associated with higher profitability growth. relationship stronger in business environments are characterized by faster clockspeeds.

This paper studies the interaction between dealer markets and a relatively new form of exchange, passive crossing networks, where buyers sellers trade directly with one another. We find that network is characterized by both positive (‘liquidity’) negative (‘crowding’) externalities, we analyze effects its introduction on market. Traders who use market as ‘market last resort’ can induce dealers to widen their spread lead more efficient subsequent prices, but traders only provide...

Abstract Merton (1987) proposes that an increase in a firm's investor base increases the value. In Japan, companies can reduce their stock's minimum trading unit—the number of shares “round lot”—which facilitates stock by small investors. We find reduction unit greatly individual investors and its liquidity, is associated with significant price. Further, price appreciation positively related to shareholders.

(1991). Liquidity, Asset Prices and Financial Policy. Analysts Journal: Vol. 47, No. 6, pp. 56-66.

This paper studies the impact of market consolidation or fragmentation on its performance, examining four alternative models exchange: a consolidated clearing house, fragmented houses, monopoly dealer market, and an interdealer market. The effects mechanism expected quantity traded, price variance faced by individual traders, quality signals, gains from trade, exchange implementation costs are studied.

We model concept testing in new product development as a search for the most profitable solution to design problem. When allocating resources, developers must balance cost of multiple designs against potential profits that may result. propose extreme-value theory mathematical abstraction concept-testing process. investigate trade-off between benefits and costs parallel derive closed-form solutions case follow distributions. analyze roles scale tail-shape parameters profit distribution well...

One of the most fundamental market mechanisms is clearing house, where orders are accumulated over time and cleared periodically. The issue addressed in this study statistical behavior under neutral mechanism framework a tractable stochastic model which captures underlying uncertainties indivisibilities demand supply schedules. Applying renewal theory, we derive closed-form results for prices quantities, pursue implications possibility no-trade multiplicity market-clearing prices.

We argue that industries and industry segments are characterized by a clockspeed gauges the velocity of change in external business environment sets pace their firms' internal operations. Using data from electronics industry, we develop validate an integrated metric for takes into account both demand- supply-side factors. show after controlling product complexity other factors, higher is associated with faster execution development manufacturing (e.g., shorter time, quicker stabilization...

This paper presents evidence on ways in which firms the IT industry respond to increased business dynamics. We show that use of internal and external communication technologies adoption informational “focus” strategies increase with “clockspeed,” or dynamics, environment. Our results support information processing view firm.

This paper studies alternative price-service mechanisms for a provider that serves customers whose delay cost depends on their service valuations. We propose generalized structure augments the standard additive model with multiplicative component, capturing interdependence between and values. derive compare revenue-maximizing socially optimal equilibria under uniform pricing, preemptive, nonpreemptive priority auctions an admission price. find has paramount effect system behavior. The...