Erik R. Sirri

The Global Financial System: A Functional Perspective

Leading financial scholars present essays examining the performance of the basic financial functions underlying global financial systems: payments, lending and investing, pooling funds, allocating risk, providing information, and dealing with incentive issues - with particular emphasis on how their performance is changing and implications for the future.

Evaluation of the biases in execution cost estimation using trade and quote data

We use order data to assess the accuracy of execution cost estimation with trade and quote data. For our sample, estimates of the effective spread overstate actual execution costs by up to 17%. The biases result fromerrors in the inference of the trade direction and errors in the assignment of the benchmark quote. We find the accuracy of two popular trade direction algorithms improve marginally when trades are not lagged 5 seconds. Evaluation of the biases in execution cost measurement reveal the Ellis et al. (Journal of Financial and Quantitative Analysis (2000) 529) trade direction algorithm, combined with assigning benchmark quotes contemporaneous with trades, provides the least amount of bias. In general, biases are lower for relative effective spread estimates than effective spread estimates. r 2002 Elsevier Science B.V. All rights reserved. JEL classification: G10

Order Submission Strategy and the Curious Case of Marketable Limit Orders

We provide empirical evidence on order submission strategy of investors with similar commitments to trade by comparing the execution costs of market orders and marketable limit orders (i.e., limit orders with the same trading priority as market orders). The results indicate the unconditional trading costs of marketable limit orders are significantly greater than market orders. We attribute the difference in costs to a selection bias and provide evidence suggesting the order submission strategy decision is based on prevailing market conditions and stock characteristics. After correcting for the selection bias, the results show the average trader chooses the order type with lower conditional trading costs.

Statement of the financial economists roundtable, April 2015: : The structure of trading in bond markets

The Financial Economists Roundtable, a group of distinguished senior financial economists, discusses the current structure of the corporate and municipal bond markets and offers suggestions regarding the regulation of these markets. Editor’s note: Larry Harris may have a commercial interest in the topics discussed in this article. Editor’s note: This article was reviewed and accepted by Executive Editor Robert Litterman. Authors’ note: This statement is an outcome of the Financial Economists Roundtable discussion at its annual meeting on 19–21 July 2014 in Quebec City. It reflects a consensus of more than two-thirds of the attending members. Although the statement provides suggestions to the US Securities and Exchange Commission for how to improve bond market quality, the issues involved affect bond markets throughout the world. If adopted, these suggestions would improve all global bond markets.

Dialog with Erik Sirri

ROBERT SCHWARTZ: Welcome to this session with Erik Sirri and Bob Pisani. Like all the other great sessions here today, I am looking forward to this next one with much anticipation. I have known Erik and Bob for a long time. Erik and I have co-authored a Harvard Business School case together. In the process, I learned a lot from Erik about writing a convincing business school case. And, of course, you are all familiar with Bob Pisani of CNBC.