We characterize generalized disappointment aversion (GDA) risk preferences that can overweight lower-tail outcomes relative to expected utility. We show in an endowment economy that recursive utility with GDA risk preferences generates effective risk aversion that is countercyclical. This...

The authors study a model where firms may possess free cash flow and takeovers may be disruptive. They show that the possibility of a takeover, combined with defensive mechanisms and the ability to pay greenmail, can solve the free cash flow problem in an efficient way. The payment of greenmail...

We present a method to estimate the gains from trade in limit-order markets and provide empirical evidence that the limit-order market is a good market design. Using observations on order submissions and execution and cancellation histories, we estimate both the distribution of traders'...

The authors characterize the conditions under which efficient portfolios put small weights on individual assets. These conditions bound mean returns with measures of average absolute covariability between assets. The bounds clarify the relationship between linear asset pricing models and...

The authors examine the effect of segmented commodity markets on the relation between forward future spot exchange rates in a dynamic economy. They calculate the slope coefficient in their theoretical economy from regressing exchange rate changes on forward premia. With reasonable parameter...