This article presents a microstructure model of liquidity provision in which a specialist with market power competes against a competitive limit order book. General solutions, comparative statics and examples are provided first with uninformative orders and then when order flows are informative. The model is also used to address two optimal market design issues. The first is the effect of "tick" size–for example, eighths versus decimal pricing–on market liquidity. Institutions trading large blocks have a larger optimal tick size than small retail investors,but both prefer a tick size strictly greater than zero. Second, a hybrid specialist/limit order market (like the NYSE) provides better liquidity to small retail and institutional trades, but a pure limit order market (like the Paris Bourse) may offer better liquidity on mid-size orders.

Journal Article Liquidity Provision with Limit Orders and a Strategic Specialist Get access Duane J. Seppi Duane J. Seppi Carnegie Mellon University Address correspondence to Duane Seppi, Graduate School of Industrial Administration, Carnegie Mellon University, Pittsburgh, PA 15213. Search for other works by this author on: Oxford Academic Google Scholar The Review of Financial Studies, Volume 10, Issue 1, January 1997, Pages 103–150, https://doi.org/10.1093/rfs/10.1.103 Published: 04 June 2015

[I investigate the empirical importance of information revelation in the pricing of block trades. In particular, I examine whether block prices are correlated with the unexpected part of firms' quarterly earnings. For my sample of block trades, information revelation does indeed appear to be a significant factor shortly before earnings announcements.]

The author investigate the empirical importance of information revelation in the pricing of block trades. In particular, he examine whether block prices are correlated with the unexpected part of firms' quarterly earnings. For his sample of block trades, information revelation does indeed appear to be a significant factor shortly before earnings announcements. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

We present a microstructure model of competition for order flow between exchanges based on liquidity provision. We find that neither a pure limit order market (PLM) nor a hybrid specialist/limit order market (HM) structure is competition-proof. A PLM can always be supported in equilibrium as the dominant market (i.e., where the hybrid limit book is empty), but an HM can also be supported, for some market parameterizations, as the dominant market. We also show the possible coexistence of competing markets. Order preferencing—that is, decisions about where orders are routed when investors are indifferent—is a key determinant of market viability. Welfare comparisons show that competition between exchanges can increase as well as reduce the cost of liquidity.

We present a microstructure model of competition for order flow between exchanges based on liquidity provision. We find that neither a pure limit order market (PLM) nor a hybrid specialist/limit order market (HM) structure is competition-proof. A PLM can always be supported in equilibrium as the dominant market (i.e., where the hybrid limit book is empty), but an HM can also be supported, for some market parameterizations, as the dominant market. We also show the possible coexistence of competing markets. Order preferencing—that is, decisions about where orders are routed when investors are indifferent—is a key determinant of market viability. Welfare comparisons show that competition between exchanges can increase as well as reduce the cost of liquidity.

This paper investigates financial attention using novel panel data on daily investor online account logins. We find support for selective attention to portfolio information. Account logins fall by 9.5% after market declines. Investors also pay less attention when the VIX volatility index is high. The level of attention and the attention/return correlation are strongly related to investor demographics (gender, age) and financial position (wealth, holdings). Using a new statistical decomposition, we show how aggregate and individual household trading are related to investor attention.

[This article examines the information content and consequences of third-party voting advice that arrives as news at an interim stage in corporate proxy contests. We first document significant stock returns around announcements of proxy vote recommendations. We then develop a multi-equation empirical procedure for disentangling the price impact of prediction effects (changes in contest outcome probabilities) from the price impact of certification effects (changes in outcome-contingent valuations). Both effects are present in the data: Voting advice is both predictive about contest outcomes and informative about the ability of dissidents to add value. Consequently, proxy advice plays a dual informational role.]

This article examines the information content and consequences of third-party voting advice that arrives as news at an interim stage in corporate proxy contests. We first document significant stock returns around announcements of proxy vote recommendations. We then develop a multi-equation empirical procedure for disentangling the price impact of prediction effects (changes in contest outcome probabilities) from the price impact of certification effects (changes in outcome-contingent valuations). Both effects are present in the data: Voting advice is both predictive about contest outcomes and informative about the ability of dissidents to add value. Consequently, proxy advice plays a dual informational role.

This paper investigates financial attention using novel panel data on daily investor online account logins. We find support for selective attention to portfolio information. Account logins fall by 9.5% after market declines. Investors also pay less attention when the VIX volatility index is high. The level of attention and the attention/return correlation are strongly related to investor demographics (gender, age) and financial position (wealth, holdings). Using a new statistical decomposition, we show how aggregate and individual household trading are related to investor attention.