Price improvement is the difference between the execution price of an order and the quoted bid or ask when the order was submitted. We show that expected price improvement falls off dramatically as the size of the order approaches the quoted depth, and becomes negative for larger orders. This is particularly important for small firms because the quoted depths are low. Using quoted spreads and depths and our estimate of expected price improvement, we show that trading strategies that attempt to exploit the weekly predictability of small-firm returns would be swamped by transaction costs.

[Price improvement is the difference between the execution price of an order and the quoted bid or ask when the order was submitted. We show that expected price improvement falls off dramatically as the size of the order approaches the quoted depth, and becomes negative for larger orders. This is particularly important for small firms because the quoted depths are low. Using quoted spreads and depths and our estimate of expected price improvement, we show that trading strategies that attempt to exploit the weekly predictability of small-firm returns would be swamped by transaction costs.]

[Mutual fund attrition can create problems for a researcher because funds that disappear tend to do so due to poor performance. In this article we estimate the size of the bias by tracking all funds that existed at the end of 1976. When a fund merges we calculate the return, taking into account the merger terms. This allows a precise estimate of survivorship bias. In addition, we examine characteristics of both mutual funds that merge and their partner funds. Estimates of survivorship bias over different horizons and using different models to evaluate performance are provided.]

[Any admissible portfolio performance measure should satisfy four minimal conditions: it assigns zero performance to each reference portfolio and it is linear, continuous, and nontrivial. Such an admissible measure exists if and only if the securities market obeys the law of one price. A positive admissible measure exists if and only if there is no arbitrage. This article characterizes the (infinite) set of admissible performance measures. It is shown that performance evaluation is generally quite arbitrary. A mutual fund data set is also used to demonstrate how the measurement method developed here can be applied.]

Mutual fund attrition can create problems for a researcher because funds that disappear tend to do so due to poor performance. In this article we estimate the size of the bias by tracking all funds that existed at the end of 1976. When a fund merges we calculate the return, taking into account the merger terms. This allows a precise estimate of survivorship bias. In addition, we examine characteristics of both mutual funds that merge and their partner funds. Estimates of survivorship bias over different horizons and using different models to evaluate performance are provided.

[Hellwig's (1980) model is used to analyze the value of improving trading opportunities by more frequent trading in the underlying asset, or by trading in a derivative asset. With multiple trading sessions, uninformed investors behave as rational trend followers, while more informed investors follow a contrarian strategy. As trading becomes continuous, Pareto efficiency is achieved. With trading in an appropriate derivative security, Pareto efficiency may be achieved in only a single round of trading. All derivative claims are then priced on Black and Scholes (1973) principles and, in the absence of further supply shocks, no trading will take place in subsequent trading rounds.]

[We provide experimental evidence that nonbinding preplay communication between bidders in auctions of shares facilitates the adoption of equilibrium strategies: collusive strategies in uniform-price auctions, and the unique equilibrium in undominated strategies in discriminatory auctions. When communication between bidders is introduced, clearing prices and auctioneer profits in uniform-price auctions fall below those observed in discriminatory auctions. This evidence suggests that uniform-price auctions of Treasury securities may result in lower revenues than the currently employed discriminatory procedure.]

Any admissible portfolio performance measure should satisfy four minimal conditions: it assigns zero performance to each reference portfolio and it is linear, continuous, and nontrivial. Such an admissible measure exists if and only if the securities market obeys the law of one price. A positive admissible measure exists if and only if there is no arbitrage. This article characterizes the (infinite) set of admissible performance measures. It is shown that performance evaluation is generally quite arbitrary. A mutual fund data set is also used to demonstrate how the measurement method developed here can be applied.

Hellwig’s (1980) model is used to analyze the value of improving trading opportunities by more frequent trading in the underlying asset, or by trading in a derivative asset. With multiple trading sessions, uninformed investors behave as rational trend followers, while more informed investors follow a contrarian strategy. As trading becomes continuous, Pareto efficiency is achieved. With trading in an appropriate derivative security, Pareto efficiency may be achieved in only a single round of trading. All derivative claims are then priced on Black and Scholes (1973) principles and, in the absence of further supply shocks, no trading will take place in subsequent trading rounds.

We provide experimental evidence that nonbinding preplay communication between bidders in auctions of shares facilitates the adoption of equilibrium strategies: collusive strategies in uniform-price auctions, and the unique equilibrium in undominated strategies in discriminatory auctions. When communication between bidders is introduced, clearing prices and auctioneer profits in uniform-price auctions fall below those observed in discriminatory auctions. This evidence suggests that uniform-price auctions of Treasury securities may result in lower revenues than the currently employed discriminatory procedure.