Empirical research on the microstructure of exchanges ordinarily uses intraday price and trade data. However, the format and quality of the data differ greatly by exchange and data source. For measuring quoted spreads, a record of simultaneous bid and ask quotes is needed. In dealership or hybrid markets (with a designated specialist or market-makers with quote obligations), such data are sometimes available. However, one needs to be careful because the quotes may only be indicative (as they are, for example, in the foreign exchange markets) or there may be better prices available from a competing order book.

For the other measures discussed, prices of actual transactions are needed, and typically one also needs to know whether the transaction was initiated by the buyer (‘buy’) or by the seller (‘sell’). For some markets, this classification into buys and sells is easy to establish, since trading is at best quotes or the best prices available in the limit order book (LOB). An important exception is the NYSE, where trading can be within the specialist’s quotes, because either the specialist improves on his quoted price, or trading is with the LOB. Moreover, the NYSE data sources (notably the TAQ database) have two separate files for trades and quotes and the timing is not exactly simultaneous.

This sometimes makes it difficult to classify a trade as buy or sell. Lee and Ready (1991) developed a classification method that has become the standard measure for the TAQ data. In recent years, many high-quality data sets have become available from electronic limit order book markets, where all trades are cleared against the limit order book. This permits unambiguous classification of trades as buys or sells.

I made a point of explaining what a beginning wealth builder shouldn’t do.

1. First, when figuring your investable net worth, you really shouldn’t count the equity in your present home unless you plan to sell it and buy a less expensive home during retirement. And even if you do that, you can count only the difference between what your house is currently worth, the mortgage, and what it will cost you to buy another house that you’ll be happy with. Using the example of our dissatisfied conference attendee, he admitted that there was little or no hope of finding a nice retirement home in a community he liked for less than the equity he had in his present house.

2. Next, you shouldn’t be investing in stocks and options if your investable net worth is less than $25,000. In our example, the gentleman was playing the stock market with his entire savings: $18,000. Think about the risk this guy was taking!

The complexity of purchase may lead you to rely on a salesperson. Government bonds are purchased from brokers, banks, and directly from the federal government. Buying from brokers and banks can bring up issues of trust. Whereas you may have a great degree of confidence that government bonds are secure and the tax consequences predictable, you may not trust that the product you are being sold benefits you as much as it benefits the salesperson. Buying treasuries directly from the federal government might also create fear. You may believe that with a salesperson holding your hand, you would find a better product at a better price.

Government notes and bonds are often sold in bundles as managed mutual funds, unmanaged index funds and trusts, or as closed-end mutual funds. Here the issues get more complex. Built-in resentment and regret are inevitable. Fees and commissions must be paid to mutual fund managers, brokers, and closed-end fund managers. These funds rarely do better than notes and bonds bought by an individual and held to maturity. It is easy to regret the fees paid for poorly performed services. Yet some savers feel the need to use professionals to pick bonds for them. They would have free-floating fear and worry if they were to construct a portfolio of bonds on their own. You must ask yourself how you are likely to react.

During ownership, some savers also experience a sense of regret. High inflation in the 1970s reduced the purchasing power of savings and was not compensated for by interest paid. When real estate was hot in the early 1980s, savers regretted they were not participating. The stock bubble of the late 1990s also led to regrets and jealousy. However, savers who hold out experience a sense of satisfaction when bubbles burst and speculators scramble to place their remaining funds in savings instruments.

When CDs mature and must be rolled over, savers experience a mixed set of emotions. Higher interest rates can lead to joy unless inflation has risen such that purchasing power will be lost. Lower rates can lead to regret that a long-term investment was not made.

Liquidating savings often triggers many emotions. A source of security is dying. When savings must be substantially liquidated, a grieving process begins. The saver may experience a wide range of emotions including sadness, regret, anger, resentment, helplessness, confusion, and free-floating fear. Generally, the cause of liquidation will compound the emotional mix. A divorce often requires a non-working spouse to both watch her savings dwindle as she reenters the work force and grieves the loss of her marriage.