ONE-DAY IN THE LIFE OF A VERY COMMON-STOCK

Using the model structure of Easley and O'Hara (Journal of Finance, 47 , 577-604), we demonstrate bow the parameters of the market-maker's be liefs can be estimated from trade data. We show how to extract informa tion from both trade and no-trade intervals, and how intraday and inte rday data provide information. We derive and evaluate tests of model s pecification and estimate the information contest of differential trad e sizes. Our work provides a framework; for testing extant microstruct ure models, shows how to extract the information contained in the trad ing process, and demonstrates the empirical importance of asymmetric i nformation models for asset prices.