the bond old bond spread abstract i document the profits on a trade that is long the old 30 year treasury bond and short the new 30 year treasury bond and is rolled over every auction cycle from june 1995 to november 1999 despite the systematic convergence of the spread over the auction cycle the average profits are close to zero the difference in repo market financing rates between the two bonds is a significant cost of carry in this trade i show that variation in the bond old bond spread is driven by the treasury supply of 30 year bonds as well as aggregate factors affecting investors preference for liquid assets

interbank market liquidity and central bank intervention we develop a simple model of the interbank market where banks trade a long term safe asset when there is a lack of opportunities for banks to hedge idiosyncratic and aggregate liquidity shocks the interbank market is characterized by excessive price volatility in such a situation a central bank can implement the constrained efficient allocation by using open market operations to fix the short term interest rate it can be constrained efficient for banks to hoard liquidity and stop trading with each other if there is sufficient uncertainty about aggregate liquidity demand compared to idiosyncratic liquidity demand

imperfect competition information heterogeneity and financial contagion this study examines how heterogeneity of private information may induce financial contagion using a model of multi asset trading in which the three main channels of contagion through financial linkages in the literature correlated information correlated liquidity and portfolio rebalancing are ruled out by construction i show that financial contagion can still be an equilibrium outcome when speculators receive heterogeneous fundamental information risk neutral speculators trade strategically across many assets to mask their information advantage about one asset asymmetric sharing of information among them prevents rational market makers from learning about their individual signals and trades with sufficient accuracy incorrect cross inference about terminal payoffs and contagion ensue when used to analyze the transmission of shocks across countries my model suggests that the process of generation and disclosure of information in emerging markets may explain their vulnerability to financial contagion jel d82 g14 g15

the liquidity trap and u s interest rates in the 1930s most current literature assumes that a central bank loses the ability to influence interest rates through variations in reserve supply as soon as overnight rates have been driven to zero i argue that reserve supply can be directly related to longer term rates when overnight rates are zero because banks reserve demand is then defined by the role of cash as an asset free of interest rate risk i present evidence that reserve supply affected longerterm interest rates in the u s from 1934 through 1939 while overnight rates were at the zero floor even when the changes in reserve supply reflected factors unlikely to have affected expectations of future overnight rates

the international division of assets as determined by comparative advantage abstract by developing a diagrammatical 2 x 2 model of international asset diversificationm the paper undertakes to build a bridge between trade theory and international finance the firms production possibilities for assets are derived from the manager s risk preferences asset demand is derived from risk preferences of households financial intermediaries modify asset supply by transforming one type of asset into another it is shown how the resulting composition of international gross assets and liabilities within a given net indebtedness is affected by changes in risk preferences and in the efficiency of intermediation

price discovery in the u s treasury market the impact of orderflow and liquidity on the yield curve we examine the role of price discovery in the u s treasury market through the empirical relationship between orderflow liquidity and the yield curve we find that orderflow imbalances excess buying or selling pressure can account for as much as 26 percent of the day to day variation in yields on days without major macroeconomic announcements the effect of orderflow on yields is permanent and strongest when liquidity is low all of the evidence points toward an important role of price discovery in understanding the behavior of the yield curve

a search based theory of the on the run phenomenon we propose a model in which assets with identical cash flows can trade at different prices infinitely lived agents can establish long positions in a search spot market or short positions by first borrowing an asset in a search repo market we show that short sellers can endogenously concentrate in one asset because of search externalities and the constraint that they must deliver the asset they borrowed that asset enjoys greater liquidity a higher lending fee specialness and trades at a premium consistent with no arbitrage we derive closed form solutions for small frictions and provide a calibration generating realistic on the run premia

trade integration and business cycle convergence is the relation robust across time and space in this paper we investigate the relationship between trade intensity and the business cycle correlation using a panel data set taken from 24 countries over the period 1959 2003 most previous studies did not account for the possibility that the business cycle correlation may be influenced by unobservable country pair specific effects our estimates using both fixed and random effects methodologies suggest that trade intensity and the business cycle correlation are positively related to one another however detailed investigation shows that this relationship exists mainly for the european countries

specialization and asymmetries in macroeconomic fluctuations evidence for the european regions pons novell j and tirado fabregat d a 2006 specialization and asymmetries in the macroeconomic fluctuations evidence for the european regions regional studies 40 695 706 this paper examines the hypothesis that there is an inverse relationship between specialization in production and the symmetry of cyclical fluctuations in the regions of europe in so doing an index of asymmetries for the cyclical fluctuations of per capita gross domestic product gdp in the regions of europe is constructed and various geographical patterns are reported from the sample the mediterranean regions show the highest levels of asymmetry in addition an econometric analysis of the determinants of the asymmetries in regional fluctuations is carried out the results show the significance of specialization in production as a determinant of asymmetries in the regions and the importance of the geographical location of a region in accounting for its level of asymmetry furthermore regions whose neighbours show highs lev

a theory of expropriation and deviations from perfect capital mobility there are many reasons why commodity trade fails to equate the rewards to factors of production in different countries consequently there is an incentive for factor movements between countries while movements of factors especially capital are important in the world economy they have not been sufficient to equate factor returns among countries the failure of capital flows to equate returns to capital is frequently attributed to political risks and left outside the sphere of economic analysis specifically investments abroad especially in ldc s are said to be more subject to the risk of expropriation or at least to unpredictable changes in the tax and exchange control regime adopted by the host country fears of foreign investors have often been realised williams i975 estimates that about 20 of the value of foreign investments carried into or made during i956 72 in ldc s was expropriated without compensation in this period in the past researchers in disciplines other than economics have been responsible for most of the analysis of expropriations we argue that an important set of economic considerations affect the nature of these impediments to capital mobility and this paper provides a theory of expropriation based on maximising behaviour by host countries and investors we use this theory to identify industry and national characteristics increasing the threat of expropriation and implying large deviations from equal returns on capital and to examine host country and home country policies minimising distortions from the threat of expropriation three broad conclusions follow from the analysis first the threat of expropriation can significantly distort the international allocation of capital even if the act of expropriation is relatively rare in the extreme acts of expropriation would never occur in a world of perfect foresight and rational decision making yet actions by investors to ensure that countries do not expropriate would be distorting second the ability of a country s government to expropriate foreign investments may actually reduce its welfare furthermore a host may be better off if home governments can retaliate against an expropriating country indeed an increase in the penalty imposed on an expropriating country may increase its welfare a government s power to expropriate after investments are made may alasdair smith and an associate editor made numerous valuable suggestions we would also like to thank g m grossman r w jones l a sjaastad n h stern and j e stiglitz for comments much of eaton s work on this paper was completed while he was a visitor at the graduate institute for international studies geneva an earlier version of this paper appeared under the same title as rpds

imperfect competition in a multi security market with risk neutrality the central purpose of this paper is to develop a model of insider trading i e trading based on private information in the context of an imperfectly competitive multi security market with risk neutral agents imperfect competition allows us to consider strategic behavior and a multi security market lets us study the effect of a correlated environment on equilibrium we employ the informational assumption that market makers can observe all order flows and so portfolio diversification arises in this model for strategic reasons given correlated fundamentals market makers can potentially learn about every security from each order flow this causes even a risk neutral trader who does not face short selling restrictions to refrain from determining the demand for each security independently this contrasts with traditional multi asset models which focus on the incentive to reduce portfolio variance or the effect of short selling restrictions or budget constraints under imperfect competition correlation has two effects one ceteris paribus it allows the uninformed to learn from additional variables since each order flow could potentially have information about all payoffs on the other hand it creates an incentive for informed traders to restrict what others can learn from public information thus our analysis can be viewed as an application to the multi security heterogeneous information model in admati 1985 of the imperfectly competitive equilibrium concept which kyle 1985 first applied to the single security homogeneous information model of grossman and stiglitz 1980 our principal results include an explicit characterization of a linear equilibrium as a function of three general covariance matrices associated with payoffs noise trading and errors in private signals under general covariance structures we show that there always exists an equilibrium in which the relationship between the vector of prices and the vector of order flows is governed by a symmetric positive definite matrix the plan of the paper is as follows in section 2 we introduce our model we derive the equilibrium in section 3 and section 4 comments on the properties of the equilibrium the proofs of the results are in the appendix

explaining the absence of international factor price convergence abstract as capital markets have become integrated factor prices have not converged as expected this paper provides an explanation the key observation is that non specific output risks are borne by capital making international portfolio diversification a dominant strategy capital market integration can elicit many patterns of factor price response under this circumstance factor prices will move in parallel if countries are identical when countries differ factor prices may diverge or even have their relative sizes reversed the integration of capital markets affects welfare through changes in risk and in overall returns to savings welfare need not improve

deutsche mark dollar volatility intraday activity patterns macroeconomic announcements and longer run dependencies this paper provides a detailed characterization of the volatility in the deutsche mark dollar foreign exchange market using an annual sample of five minute returns the approach captures the intraday activity patterns the macroeconomic announcements and the volatility persistence arch known from daily returns the different features are separately quantified and shown to account for a substantial fraction of return variability both at the intraday and daily level the implications of the results for the interpretation of the fundamental driving forces behind the volatility process is also discussed the efficient market hypothesis contends that financial asset prices provide rational assessments of fundamental values and future payoffs by implication price changes should reflect the arrival and processing of all relevant new information however the proportion of return variability that can be ascribed to public news announcements is low for example cutler poterba and summers 1989 find that even the largest daily price changes in the stock market generally cannot be associated with any significant economic news 1 moreover proxies for the flow of public information e g the number of news items released by reuter s news service berry and hiowe 1994 or dow jones company mitchell and mulherin 1994 explain little of the overall variation thus if private information is ruled out proponents of rational price formation have to assert the existence of important news items

international capital movements under uncertainty in this paper we analyze the determinants of international movements of physical capital in a model with uncertainty and international trade in goods and securities in our model the world allocation of capital is governed to some extent by the asset preferences of risk averse consumer investors in a one good variant in the spirit of the macdougall model we find that relative factor abundance relative labor force size and relative production riskiness have separate but interrelated influences on the direction of equilibrium capital movements these same factors remain important in a two good version with heckscher ohlin production structure in this case the direction of physical capital flow is determinate unlike in a world of certainty and may hinge on the identity of the factor that is used intensively in the industry with random technology

government intervention and strategic trading in the u s treasury market we study the impact of permanent open market operations pomos by the federal reserve on u s treasury market liquidity using a parsimonious model of speculative trading we conjecture that i this form of government intervention improves market liquidity contrary to conclusions drawn by existing literature and ii the extent of this improvement depends on the market s information environment evidence from a novel sample of federal reserve pomos during the 2000s indicates that bid ask spreads of on the run treasury securities decline when pomos are executed by an amount increasing in proxies for information heterogeneity among speculators fundamental volatility and pomo policy uncertainty consistent with our model

factor trade and goods trade world equilibria with trade in both goods and some factors are studied when international factor endowment differences are the cause of trade a generalized heckscher ohlin theorem is presented the goods trade patterns with and without factor trade are compared factor trade and goods trade tend to be substitutes complements if traded and non traded factors are cooperative non cooperative

the heckscher ohlin and travis vanek theorems under uncertainty abstract the heckscher ohlin theorem is valid under uncertainty of the special benchmark sort modelled by helpman razin their pessimism over its validity is vanquished by more structure rational expectations are imposed on consumers and identical and constant relative aversion to income risk is assumed under these circumstances with free commodity trade the heckscher ohlin theorem holds for the international exchange of equities

the advantage to hiding one s hand speculation and central bank intervention in the foreign exchange market abstract we analyze an asymmetric information model of sterilized intervention in the foreign exchange market we characterize an equilibrium in which a central bank with inside information about its exchange rate target trades with risk averse speculators who have private information about future spot rates the model identifies circumstances in which perverse responses to intervention will be observed i e the domestic currency depreciates when the central bank purchases it and it provides conditions under which the exchange rate will be highly sensitive to intervention the model also provides an explanation for two forms of policy secrecy i secrecy about the scale of an intervention operation is always desirable ii secrecy about the target is sometimes desirable

market microstructure effects of government intervention in the foreign exchange market as asymmetric information model of the bid ask spread is developed for a foreign exchange market subject to occasional government interventions traditional tests of the unbiasedness of the forward rate as a predictor of the future spot rate are shown to be inconsistent when the rates are measured as the average of their respective bid and ask quotes larger bid ask spreads on fridays are documented reliable evidence of asymmetric bid ask spreads for all days of the week albeit more pronounced on fridays are presented the null hypothesis that the forward rate is an unbiased predictor of the future spot rate continues to be rejected the regression slope coefficients increase toward unity however indicating a less variable risk premium

cheap talk and the fed a theory of imprecise policy announcments this paper examines the problem faced by the federal reserve in announcing its private information about its future policies because it would like to manipulate expectations and pursue a time inconsistent policy the fed cannot reveal its policy objectives precisely and credibly it can however communicate some information about its goals through the cheap talk mechanism of vincent crawford and joel sobel making announcements that are imprecise and only giving ranges within which these goals may lie copyright 1989 by american economic association

transactions volume and volatility we show that the positive volatility volume relation documented by numerous researchers actually reflects the positive relation between volatility and the number of transactions thus it is the occurrence of transactions per se and not their size that generates volatility trade size has no information beyond that contained in the frequency of transactions our results suggest that theoretical research needs to entertain scenarios in which 1 both the frequency and size of trades are endogenously determined yet 2 the size of trades has no information content beyond that contained in the number of transactions article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

the response of interest rates to us and uk quantitative easing we analyse declines in government bond yields following announcements by the federal reserve and the bank of england of plans to buy longer term debt using dynamic term structure models we decompose us and uk yields into expectations about future short term interest rates and term premiums we find that declines in us yields mainly reflected lower expectations of future short term interest rates while declines in uk yields appeared to reflect reduced term premiums thus the relative importance of the signalling and portfolio balance channels of quantitative easing may depend on market institutional structures and central bank communication policies

quantitative easing auctions of treasury bonds abstract the federal reserve uses reverse auctions to implement its purchases of treasury bonds in quantitative easing qe to evaluate dealers offers across multiple bonds the fed relies on its internal yield curve model fitted to secondary market bond prices from november 2010 to september 2011 a one standard deviation increase in the cheapness of a treasury bond how much the market price of the bond is below a model implied value increases the fed s purchase quantity of that bond by 276 million and increases the auction costs on that bond by 2 6 cents per 100 par value controlling for standard covariates our results suggest that the fed harvests gains from trades by purchasing undervalued bonds but strategic dealers extract some profits because the fed s relative values can be partly inferred from price data

nonlinear equilibrium correction in u s real money balances 1869 1997 several theoretical models of money demand imply nonlinear functional forms for the aggregate demand for money characterized by smooth adjustment toward long run equilibrium in this paper we propose a nonlinear equilibrium correction model of u s money demand that is shown to be stable over the sample period from 1869 to 1997

on the volatility and comovement of u s financial markets around macroeconomic news announcements the objective of this paper is to provide a deeper insight into the links between financial markets and the real economy to that end we study the short term anticipation and response of u s stock treasury and corporate bond markets to the first release of surprise u s macroeconomic information specifically we focus on the impact of these announcements not only on the level but also on the volatility and comovement of those assets returns we do so by estimating several extensions of the parsimonious multivariate garch dcc model of engle 2002 for the excess holding period returns on seven portfolios of these asset classes we find that both the process of price formation in each of those financial markets and their interaction appear to be driven by fundamentals yet our analysis reveals a statistically and economically significant dichotomy between the reaction of the stock and bond markets to the arrival of unexpected fundamental information we also show that the conditional mean volatility and comovement among stock treasury and corporate bond returns react asymmetrically to the information content of these surprise announcements overall the above results shed new light on the mechanismsbywhichnewinformationisincorporatedintopriceswithinandacrossu s financial markets

factor proportions and the growth of world trade abstract most of the expansion of global trade since 1980 has been of the north south kind between capital abundant developed and labour abundant developing countries based on this observation i argue that the recent growth of world trade is best understood from a factor proportions perspective using data on trade barriers and estimates of capital labour ratios for a group of 45 economies between 1980 and 2008 i find that a calibrated factor proportions model can generate significant trade growth during this period amounting to 90 of the observed rise in north south trade the opening up of china alone accounts for three quarters of the predicted increase in line with the model i present evidence that china s liberalisation has raised the exports and imports of capital abundant countries relative to more labour abundant economies overall my findings suggest that factor proportions theory may be useful for interpreting several quantitative and qualitative aspects of growing world trade in a period during which the group of large open economies has become significantly less homogenous

the on the run liquidity phenomenon abstract we test the implications of a model of multi asset speculative trading in which liquidity differentials between on the run and off the run u s treasury bonds ensue from endowment shocks in the presence of two realistic market frictions information heterogeneity and imperfect competition among informed traders and a public signal our evidence suggests that i off on the run liquidity differentials are economically and statistically significant even after controlling for several of the bonds intrinsic characteristics such as duration convexity repo rates or term premiums and ii off on the run liquidity differentials are smaller immediately following bond auction dates and larger when the uncertainty surrounding the ensuing auction allocations is high when the dispersion of beliefs across informed traders is high and when macroeconomic announcements are noisy consistent with our model

the market microstructure of central bank intervention abstract how quickly do central bank intervention operations impact the foreign exchange market and do intra daily market conditions influence the effectiveness of central bank interventions this paper uses high frequency intra daily data to examine the relationship between the efficacy of intervention operations and the state of the market at the moment that the operation is made public the results indicate that some traders typically know that the fed is intervening at least 1 h prior to the public release of the information in newswire reports also the evidence suggests that the timing of intervention operations matters interventions that occur during heavy trading volume that are closely timed to scheduled macro announcements and that are coordinated with another central bank are the most likely to have large effects

an empirical analysis of stock and bond market liquidity this article explores cross market liquidity dynamics by estimating a vector autoregressive model for liquidity bid ask spread and depth returns volatility and order flow in the stock and treasury bond markets innovations to stock and bond market liquidity and volatility are significantly correlated implying that common factors drive liquidity and volatility in these markets volatility shocks are informative in predicting shifts in liquidity during crisis periods monetary expansions are associated with increased liquidity moreover money flows to government bond funds forecast bond market liquidity the results establish a link between macro liquidity or money flows and micro or transactions liquidity a number of important theorems in finance rely on the ability of investors to trade any amount of a security without affecting the price however there exist several frictions 1 such as trading costs short sale restrictions and circuit breakers that impact price formation the influence of market imperfections on security pricing has long been recognized liquidity in particular has attracted a lot of attention from traders regulators

the demand for money from the great depression to the present myths and legends about the great depression have dominated the public s perception of the business cycle they have shaped government policy and until recently they have even held powerful sway among economists in the immediate aftermath of the great depression many economists came to question the fundamental concept of economic equilibrium velocity was thought to be highly unstable as in the case of the liquidity trap so that the quantity of money supplied was consistent with any level of nominal income in the real sector there was the frightening specter of underemployment

price pressure in the government bond market what determines the term structure of interest rates standard economic theory links the interest rate for maturity t to the willingness of a representative agent to substitute consumption between times 0 and t the standard model contrasts sharply with a more informal view based on investors preferred habitat proposed by john culbertson 1957 and franco modigliani and richard sutch 1966 according to the preferred habitat view there are investor clienteles with preferences for specific maturities and the interest rate for a given maturity is influenced by the demand of the corresponding clientele and the supply of bonds with that maturity for example the typical clientele for long term bonds are pension funds an increase in their demand would be expected to raise prices of long term bonds and thus lower long term interest rates in short preferred habitat implies that there is price pressure in the bond market while the preferred habitat view has intuitive appeal it has not entered into the academic mainstream typically being relegated to a paragraph in mba level textbooks one reason for this is the mixed findings in early empirical studies of the term structure specifically between 1962 and 1964 the us treasury and federal reserve raised the supply of short term government debt while simultaneously lowering the supply of long term debt this program known as operation twist aimed to raise shortterm interest rates and so improve the balance of payments while also lowering long term rates to stimulate private investment a number of papers evaluated operation twist and while they reached different conclusions none found strong evidence that the operation was effective in flattening the term structure e g modigliani price pressure in the government bond market

the federal reserve s large scale asset purchase programmes rationale and effects we provide empirical estimates of the effect of large scale asset purchases lsaps on longer term us treasury yields within a framework that allows for several transmission channels including the scarcity channel associated with the preferred habitat literature and the duration channel associated with interest rate risk we also clarify lsaps role in the broader context of historical monetary policy strategy results indicate that lsap style operations mainly impact longer term rates via the nominal term premium within that premium the response is predominantly embodied in the real term premium the scarcity and duration channels both seem to be of considerable importance

a transaction level study of the effects of central bank intervention on exchange rates abstract we study the effects of sterilised intervention operations executed on behalf of the swiss national bank snb using tick by tick transactions data between 1986 and 1995 we extend the preliminary analysis of economic journal 109 1999 662 by matching these data with indicative intra day exchange rate quotes and news wire reports of central bank activity using an event study approach we find that intervention has important short run effects on exchange rate returns in particular among various results we find that i intervention has a stronger impact when the snb moves with the market and when its activity is concerted with that of other central banks and ii exchange rate returns move in the 15 min interval prior to interventions

international price behavior and the demand for money oil prices commodity prices and american monetary policy the last operating through a variety of channels have all figured prominently in explanations of the international inflation process in the late 1960s and early 70s out major purpose in this paper is to test these various hypotheses we do so in the context of a reduced form rational expectations price equation which we estimate for the united states and seven other industrial countries using quarterly data for the period 1955 through 1976 the principal conclusion that emerges from this exercise is that movements in domestic money in these countries served as the key link in the inflation process the factors that produced these monetary changes however differed among countries price shocks of various sorts were clearly of secondary importance the other important set of conclusions concerns the demand for money in place of a traditional stock adjustment model we used gls with a second order correction for autocorrelation we believe this produced more plausible estimates of the parameters of the long run demand function and of the adjustment process itself

monetary policy and the twin crises abstract after presenting a brief overview of the recent financial crisis and the european debt crisis that followed in its wake this paper goes on discuss monetary policy in the united states the united kingdom and the euro bloc prior to and during the course of the two crises the paper presents historical evidence for the three areas on the relationships linking the volatilities of output inflation and monetary growth in all three these relations are strongly positive there is therefore no tradeoff between inflation and output volatility the two move up and down together both moreover move up and down with the volatility of monetary growth viewed from this perspective the increased volatilities of money supplies and the monetary base in the united states the united kingdom and the euro bloc over the last half decade pose problems

risk sharing and industrial specialization regional and international evidence the authors provide empirical evidence that risk sharing enhances specialization in production to the best of their knowledge this well established and important theoretical proposition has not been tested before the empirical procedure is summarized as follows first the authors construct a measure of specialization in production and calculate an index of specialization for each of the european community ec and non ec oecd countries u s states canadian provinces japanese prefectures latin american countries and regions of italy spain and the united kingdom then they estimate the degree of capital market integration a measure of risk sharing within each of these groups of regions the ec countries the non ec oecd countries the united states canada japan italy spain and the united kingdom and rely on another author s estimate for latin america finally they perform a regression of the specialization index on the degree of risk sharing controlling for relevant economic variables they find a positive and significant relation between the degree of specialization of individual members of a group of countries provinces states or prefectures and the amount of risk that is shared within the group the authors perform regressions using variables such as shareholder rights and the size of the financial sector relative to gdp as instruments for the amount of inter regional risk sharing these regressions confirm that risk sharing facilitated by a favorable legal environment and a developed financial system is a direct causal determinant of industrial specialization this abstract was borrowed from another version of this item

a manipulator can aid prediction market accuracy prediction markets are low volume speculative markets whose prices offer informative forecasts on particular policy topics observers worry that traders may attempt to mislead decision makers by manipulating prices we adapt a kyle style market microstructure model to this case adding a manipulator with an additional quadratic preference regarding the price in this model when other traders are uncertain about the manipulator s target price the mean target price has no effect on prices and raising the variance of the target price can increase average price accuracy by boosting the returns to informed trading and thereby incentives for traders to become informed

when do central bank interventions influence intra daily and longer term exchange rate movements this paper examines dollar interventions by the g3 since 1989 and the reasons that trader reactions to these interventions might differ over time and across central banks market microstructure theory provides a framework for understanding the process by which sterilized central bank interventions are observed and interpreted by traders and how this process in turn might influence exchange rates using intra daily and daily exchange rate and intervention data the paper analyzes the influence of interventions on exchange rate volatility finding evidence of both within day and daily impact effects but little evidence that interventions influence longer term volatility

risk aversion market liquidity and price efficiency a model of a noncompetitive speculative market is analyzed in which privately informed traders and market makers are risk averse market liquidity is found to be nonmonotonic in the number of informed traders their degree of risk aversion and the precision of their information it is also shown that increased liquidity trading leads to reduced price efficiency and that under endogenous information acquisition market liquidity may also be nonmonotonic in the variance of liquidity trades article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies