Liquidity externalities and adverse selection : evidence from trading after hours

Deskripsi

This paper examines liquidity externalities by analyzing trading costs after hours. There is less than 1/20 as many trades per unit time after hours as during the trading day. The reduced trading activity results in substatially higher trading costs : quoted nd effective spreads are three to four times larger than during the trading day. the higher spreads reflect greater adverse selection and order persistence, but not higher dealer profits..Printed Journal