Market Microstructure.

• Position: Program and Working Group Meetings - National Bureau of Economic Research - Conference news

The NBER's Working Group on Market Microstructure met in Cambridge on May 9. Working Group Director Bruce Lehmann of University of California, San Diego; Eugene Kandel, of Hebrew University, Jerusalem; and Avanidhar Subrahmanyam, of University of California, Los Angeles, jointly organized the meeting. These papers were discussed:

Steven L. Heston, University of Maryland; Robert A. Korajczyk, Northwestern University; and Ronnie Sadka, University of Washington, "Intraday Patterns in the Cross-Section of Stock Returns"

Discussant: Julie Wu, Texas A&M University

Shmuel Baruch, University of Utah, "Random Limit-Orders"

Discussant: Ioanid Rosu, University of Chicago

Stefan Frey, University of Tubingen, and Patrik Sandas, University of Virginia, "The Impact of Hidden Liquidity in Limit Order Books"

Discussant: Uday Rajan, University of Michigan

Andrew Ellul, Indiana University, and Marios Panayides, University of Utah, "Do Financial Analysts Restrain Insiders' Informational Advantage?"

Discussant: Paul Irvine, University of Georgia

Amy K. Edwards and Kathleen Weiss Hanley, U.S. Securities and Exchange Commission, "Short Selling in Initial Public Offerings"

Discussant: Rajdeep Singh, University of Minnesota

Alessandro Beber, University of Lausanne; Michael W. Brandt, Duke University and NBER; and Kenneth A. Kavajecz, University of Wisconsin, "What Can Equity Orderflow Tell Us about the Economy?"

Discussant: Shane Underwood, Rice University

Microstructure effects, such as bid/ ask bounce, induce short-run negative autocorrelation patterns in asset returns while longer horizons exhibit momentum effects. Heston and his co-authors study the term structure of microstructure effects using half-hour observation intervals in the post-decimalization period. The microstructure induced reversal is pronounced within 24 hours. Notably, they find significant continuation of returns at intervals that are multiples of a day and this effect lasts for over twenty trading days. Trading volume exhibits similar patterns, but does not explain the return patterns. Additionally, bid/ask spreads and order imbalances do not explain the return pattern. The return continuation at daily frequencies is more pronounced for the first and last half-hour periods. These effects are not driven by firm size, systematic risk premiums, or inclusion in the S&P 500 index. The pattern is also not driven by particular months of the year, days of the week, or turn-of-the-month effects. This...