This paper examines the optimal consumption and investment problem for a "large" investor, whose portfolio choices affect the instantaneous expected returns on the traded assets.

Working in a complete-markets setting, a property of asset demands in identified that is inconsistent with the investor's preference being based on probabilities. In this way, a market counterpart of the Ellsberg Paradox is provided.

This article provides an overview of the empirical evidence on the magnitude and determinants of equity trading costs. The focus is primarily on the trades of institutional investors.