We develop a bid‐ask spread estimator from daily high and low prices. Daily high (low) prices are almost always buy (sell) trades. Hence, the high–low ratio reflects both the stock's variance and its bid‐ask spread. Although the variance component of the high–low ratio is proportional to the return interval, the spread component is not. This allows us to derive a spread estimator as a function of high–low ratios over 1‐day and 2‐day intervals. The estimator is easy to calculate, can be applied in a variety of research areas, and generally outperforms other low‐frequency estimators.

Seasoned o¡ers were underpriced by an average of 2.2 percent during the 1980s and 1990s, with the discount increasing substantially over time. The increase appears to be related to Rule 10b-21 and to economic changes a¡ecting both IPOs and SEOs. Consistent with temporary price pressure, underpricing is positively related to o¡er size especially for securities with relatively inelastic demand. Underpricing is also positively related to price uncertainty and, after Rule 10b-21, to the magnitude of preo¡er returns. Additionally, I ¢nd that underpricing is signi¢cantly related to underwriter pricing conventions such as price rounding and pricing relative to the bid quote.

We examine syndicates for 1,638 IPOs from January 1997 through June 2002. We find strong evidence of information production by syndicate members. Offer prices are more likely to be revised in response to information when the syndicate has more underwriters and especially more co-managers. More co-managers also result in more analyst coverage and additional market makers following the IPO. Relationships between underwriters are critical in determining the composition of syndicates, perhaps because they mitigate free-riding and moral hazard problems. While there appear to be benefits to larger syndicates, we discuss several factors that may limit syndicate size. Copyright 2005 by The American Finance Association.

We study order f low and liquidity around NYSE trading halts. We find that market and limit order submissions and cancellations increase significantly during trading halts, that a large proportion of the limit order book at the reopen is composed of orders submitted during the halt, and that the market-clearing price at the reopen is a good predictor of future prices. Depth near the quotes is unusually low around trading halts, though specialists and0or f loor traders appear to provide additional liquidity at these times. Finally, specialists appear to "spread the quote" prior to imbalance halts to convey information to market participants. THE COSTS AND BENEF ITS ASSOCIATED with New York Stock Exchange trading halts are the subject of continuous debate. The stated purpose of trading halts is to allow investors a chance to react to new information and to facilitate the orderly emergence of a new equilibrium price~see, e.g., NYSE~1999!!. However, little is known about the extent or nature of investor reactions to trading halts. Furthermore, it is unclear whether these reactions support or confound attempts to reach a new equilibrium price. To address these issues, we use nonpublic NYSE data on all SuperDOT~electronic! orders to analyze the effects of trading halts on order f low, spreads, and the limit order book. We also examine the relationships between the limit order book and the reopening price and between liquidity and post-halt volatility.Information on order f low is an important missing element in the ongoing debate about the usefulness of trading halts. One argument against trading halts is that they impede price formation because trading aggregates information that is distributed across market participants. However, submissions and cancellations of orders during a halt may provide an alternative source of information that, combined with published indications of possible reopening prices, may assist with price formation. An argument in favor of trading halts is that when traders are given an opportunity to cancel orders 1771 during extreme market changes, they may be more willing to supply liquidity during normal conditions. Our analysis allows us to examine whether traders take advantage of this opportunity to reposition their trading interest.Whereas analysis of order f low provides insight into the actions of traders during halts, the net effect of this activity on liquidity is ref lected in spreads and the limit order book. The limit order book competes with specialists and the trading f loor for order f low and provides a pool of trading interest that can dampen temporary price f luctuations. Thus, changes in the limit order book may impact spreads and volatility. We characterize the limit order book and bid-ask spreads before, during, and after trading halts to provide new evidence about changes in liquidity around halts and the impact of the limit order book on volatility and price discovery around halts. 1 We find that limit order submissions and cancellations are extremely high during halts an...

While limited attention has been analyzed in a variety of economic and psychological settings, its impact on financial markets is not well understood. In this paper, we examine individual NYSE specialist portfolios and test whether liquidity provision is affected as specialists allocate their attention across stocks. Our results indicate that specialists allocate effort toward their most active stocks during periods of increased activity, resulting in less frequent price improvement and increased transaction costs for their remaining assigned stocks. Thus, the allocation of effort due to limited attention has a significant impact on liquidity provision in securities markets. Copyright (c) 2008 The American Finance Association.