Adding a size-discovery trading protocol, where a break in the limit order book occurs to match orders at a fixed price, can increase allocative efficiency in markets with slow trading frequency. A high trading frequency spreads liquidity, resulting in a strong incentive to wait for a size-discovery session. This incentive to delay trade is smaller in slower markets, and its negative effect on efficiency can be offset in slower markets by the positive effect of size discovery. This result rationalizes the empirical fact that size-discovery protocols only exist in slower markets. Potential conflicts of interest between traders and platform operators are identified but seem unlikely to drive the existence of size-discovery trading protocols.



with Alan Crane, Kevin Crotty, and David De Angelis

We develop a structural empirical framework to study voting outcomes and the role of proxy advisors for shareholder proposals. Voting errors occur when bad proposals pass (false positives) and good proposals fail (false negatives). 6.5% of voting outcomes for shareholder proposals are mistakes, the majority being false positives. Recommendations by proxy advisor ISS are incorrect roughly half the time. ISS makes more mistakes when they support proposals (70%), but investors rely less on those recommendations than when ISS is not in favor. Errors in voting outcomes are more sensitive to proxy advisor informativeness and influence than to proposal quality.


Trading by corporate insiders is the subject of significant regulatory and market scrutiny.  Informed trade by insiders can benefit efficiency of prices and corporate investment, but these benefits come at the cost of adversely selecting other shareholders.   We examine the extent of informed trade using a method that accounts for skill and luck in the performance of corporate insiders' trades.  The estimation explicitly accounts for the noisiness of insiders' own performance histories.  About 30% of insiders make informed trades, on average. Out-of-sample tests show that trades made by insiders we identify ex ante as most likely to have traded on information are predictive of future stock returns. The fraction of informed insiders is fairly constant over time, but their information is impounded more quickly into prices in the most recent decade.  We complement existing methods designed to identify informed trade by insiders, but we are able to classify all trades disclosed by corporate insiders.  For individual trades, about 10% of insider purchases and 4% of sales are informed, and these fractions vary systematically with the insider's ex ante propensity to trade on information. 


Over the last two decades, computer-based trading has become the dominant method of trade in financial markets. However, most markets continue to operate with trading hour restrictions established for human traders long before the emergence of computers, which calls into question the continued need for and effects of such restrictions. I show that introducing a `nighttime' – a non-trading period – enhances liquidity, predominantly at the end of the day, which helps minimize the excess inventory costs incurred. Liquidity begets liquidity as nighttime helps concentrate and coordinate liquidity, which otherwise would have been spread out too thinly throughout the day.

* Denotes a presentation that is yet to occur.

** Denotes a presentation done by a coauthor.