About

Chester Spatt is the Pamela R. and Kenneth B. Dunn Professor of Finance at the Tepper School of Business. His role involves research and academic leadership in the field of finance, with a focus on how artificial intelligence and machine learning connect with business, management science, and organizational behavior. As part of the Tepper School's strategic vision, he contributes to thought leadership that emphasizes data-informed, human-driven approaches to innovation and problem solving for the future of business education.

Research topics

• Political Science
• Finance
• Economics
• Business
• Financial system
• Market economy
• Data Mining
• Computer Science
• Microeconomics
• Data science
• Accounting
• Financial economics
• Monetary economics
• Keynesian economics

Selected publications

• What’s not there: Odd lots and market data

  Review of Financial Studies · 171 citations

  • Computer Science
  • Political Science
  • Finance

  Big data is revolutionizing the finance industry and has the potential to significantly shape future research in finance. This special issue contains papers following the 2019 NBER-RFS Conference on Big Data. In this introduction to the special issue, we define the “big data” phenomenon as a combination of three features: large size, high dimension, and complex structure. Using the papers in the special issue, we discuss how new research builds on these features to push the frontier on fundamental questions across areas in finance—including corporate finance, market microstructure, and asset pricing. Finally, we offer some thoughts for future research directions.

  DOI

• Payment for Order Flow and Option Internalization

  Review of Financial Studies · 2026-02-20

  articleOpen accessSenior author

  Abstract Option wholesalers specialize in purchasing and executing against retail option order flow. Orders are internalized via auctions (which provide price improvement) and the limit order book. Designated market makers (DMMs) have a key advantage in internalizing limit order book trades: they obtain the first five contracts of any order they bring to an exchange where they are a DMM. We exploit variation in DMM assignments and allocation rules to highlight how these rules create a barrier to entry in option wholesaling that does not exist for equity wholesaling, protecting wholesaler profits and high option PFOF.

  PublisherDOI

• Dark Crypto

  SSRN Electronic Journal · 2025-01-01

  preprintOpen access
  PublisherDOI

• Regulating Market Microstructure

  Annual Review of Financial Economics · 2025-07-08 · 1 citations

  articleOpen accessSenior author

  This article provides an overview of the regulation of market microstructure, particularly in equity and option markets. We emphasize the motives for regulation and restrictions on the trading process, including the distinctive regulatory environments (and regulators) for different financial instruments as well as the role of brokers in routing trades, and market makers who intermediate trade. Our article highlights such central features of the design of markets as best execution responsibilities; order protection (trade-through) restrictions (Regulation NMS); payment for order flow, tick size, and access fees; and the role of auctions, transparency, and short-selling restrictions. We point to some of the distinctive features of fixed-income trading and market design and the emerging role of litigation in determining regulatory outcomes.

  PublisherDOI

• The Role of Pilot Studies in Financial Regulation

  The Review of Corporate Finance Studies · 2025-09-19

  articleSenior author

  Abstract Financial regulators considering the desirability of a new rule or regulation sometimes use pilot studies for evidence-based decision making. Although pilot studies can generate new knowledge, they also can be expensive and subject to serious selection biases, spillover problems, and the infeasibility of a blind design. Alternatively, regulators can often evaluate a proposed regulation’s impact by analyzing archival data or applying theory based on well-accepted economic principles. We discuss why pilot studies can be useful, but also why regulators and industry participants sometimes favor pilot studies with little scientific value. We illustrate these issues by discussing various SEC pilot studies. (JEL G18, G28, G38, K22, L51)

  PublisherDOI

• Would Order‐By‐Order Auctions Be Competitive?

  The Journal of Finance · 2025-05-13 · 3 citations

  article

  ABSTRACT We model two methods of executing segregated retail orders: brokers' routing, whereby brokers allocate orders using the market maker's overall performance, and order‐by‐order auctions, where market makers bid on individual orders, a recent U.S. Securities and Exchange Commission proposal. Order‐by‐order auctions improve allocative efficiency, but face a winner's curse reducing retail investor welfare, particularly when liquidity is limited. Additional market participants competing for retail orders fail to improve total efficiency and investor welfare when entrants possess information superior to incumbent wholesalers. Our results hold when new entrants are less informed or the information structure differs. We also examine the cross‐subsidization of brokers' routing.

  PublisherDOI

• Creating Controversy in Proxy Voting Advice

  The Journal of Finance · 2025-03-16 · 3 citations

  articleOpen accessSenior authorCorresponding

  ABSTRACT We analyze how a profit‐maximizing proxy advisor designs vote recommendations and research reports. The advisor benefits from producing informative, unbiased reports, but only partially informative recommendations, biased against the a priori likely alternative. Such recommendations induce close votes, increasing controversy and thereby the relevance and value of proxy advice. Our results suggest shifting from an exclusive emphasis on recommendations, highlighting the importance of both reports and recommendations in proxy advisors' information provision. They rationalize the one‐size‐fits‐all approach and help reinterpret empirical patterns of voting behavior, suggesting that proxy advisors' recommendations may not be a suitable benchmark for evaluating shareholders' votes.

  PublisherOA PDFDOI

• The Next Chapter of Big Data in Finance

  Review of Financial Studies · 2024-11-28 · 6 citations

  article

  Abstract The second special issue on big data in finance showcases advancements in research related to data of large size, high dimension, and complex structure since the first NBER/RFS big data conference. The papers published in this next chapter address some questions that were proposed in the initial special issue in 2021. Other papers are more directly connected to recent developments in the markets. We discuss some new research directions, following on the papers published here. They include evaluating market microstructure reforms, understanding medium-frequency trading, improving missing data imputations, and deepening data valuation. We look forward to more developments to follow.

  PublisherDOI

• Why Did Retail Liquidity Programs Fail?

  SSRN Electronic Journal · 2024-01-01 · 3 citations

  articleOpen access
  PublisherDOI

• COVID-19 and the Principles of Economics

  Medical Research Archives · 2023-01-01

  articleOpen access1st authorCorresponding

  Several fundamental principles in economics help enhance our understanding of COVID-19, including opacity and externalities. COVID-19 is a contagious disease whose spread has been difficult to manage due to opacity, as the disease is contagious prior to the presence of symptoms and in some instances testing results for the disease require a considerable time lag before they become available. This highlights the importance of alternative testing strategies to limit the extent of opacity and to manage the costs associated with accurate testing. In addition to individual tests, such strategies would include testing employees in small groups and testing for concentration of the disease in wastewater. Diminishing returns to scale, depreciation, and shocks to the underlying disease also all play an important role in understanding the effectiveness of vaccines. Externalities are central to the mechanism for transmitting contagious diseases. The strength of the externality can be reduced potentially by various preventive measures such as social distancing and masking, though quantitative studies of the efficacy of such measures can be enhanced. Further, efforts to undertake randomized trial studies of various questions related to vaccines and prevention would be helpful, especially in light of the magnitude of economic costs that have been imposed by contagious disease, such as COVID-19. COVID-19 and other contagious diseases also have had considerable effects on the structure of the economy. This has resulted in great development of technologies to support online meetings and work and the ability to work remotely, which in turn highlights dramatic challenges to the five-day work week, the potential for stay-at-home work, the relationship between residential and office real estate and the value of contractual flexibility in the face of dramatic shocks. Some of the effects arise during the period of acute societal disease, while other aspects reflect long-term learning. The nature of societal shocks to work and income generation also has led to important questions regarding the use of societal resources and potential shocks to the overall macroeconomy.

  PublisherOA PDFDOI

Recent grants

• Cross-Commodity Equilibrium Pricing: Theoretical Implications and Empirical Tests of Forward and Option Prices

  NSF · $235k · 1999–2002

Frequent coauthors

• Duane J. Seppi

  Carnegie Mellon University

  150 shared

• Mark A. Chen

  Georgia State University

  148 shared

• Cindy Alexander

  144 shared

• Hendrik Bessembinder

  Arizona State University

  100 shared

• Jarrad Harford

  98 shared

• Wayne E. Ferson

  98 shared

• Paul Schultz

  98 shared

• Ronald W. Masulis

  UNSW Sydney

  98 shared

Education

• Ph.D., Economics

  University of Chicago

  1982

• M.A., Economics

  University of Chicago

  1978

• B.A., Economics

  University of Chicago

  1975