The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Working Orders in Limit Order Markets and Floor Exchanges
Published: 08/14/2007 | DOI: 10.1111/j.1540-6261.2007.01252.x
KERRY BACK, SHMUEL BARUCH
We analyze limit order markets and floor exchanges, assuming an informed trader and discretionary liquidity traders use market orders and can either submit block orders or work their demands as a series of small orders. By working their demands, large market order traders pool with small traders. We show that every equilibrium on a floor exchange must involve at least partial pooling. Moreover, there is always a fully pooling (worked order) equilibrium on a floor exchange that is equivalent to a block order equilibrium in a limit order market.
Multimarket Trading and Liquidity: Theory and Evidence
Published: 09/04/2007 | DOI: 10.1111/j.1540-6261.2007.01272.x
SHMUEL BARUCH, G. ANDREW KAROLYI, MICHAEL L. LEMMON
We develop a new model of multimarket trading to explain the differences in the foreign share of trading volume of internationally cross‐listed stocks. The model predicts that the trading volume of a cross‐listed stock is proportionally higher on the exchange in which the cross‐listed asset returns have greater correlation with returns of other assets traded on that market. We find robust empirical support for this prediction using stock return and volume data on 251 non‐U.S. stocks cross‐listed on major U.S. exchanges.