We study price pressures, i.e., deviations from the efficient price due to risk-averse intermediaries supplying liquidity to asynchronously arriving investors. Empirically, New York Stock Exchange intermediary data reveals economically large price pressures, 0.49% on average with a half life of...

We study an economy populated by three groups of myopic agents: constrained agents subject to a portfolio constraint that limits their risk taking, unconstrained agents subject to a standard nonnegative wealth constraint, and arbitrageurs with access to a credit facility. Such credit is valuable...

We study asset-pricing implications of innovation in a general-equilibrium overlapping-generations economy. Innovation increases the competitive pressure on existing firms and workers, reducing the profits of existing firms and eroding the human capital of older workers. Due to the lack of...

We propose a general equilibrium model to study the link between the cross section of expected returns and book-to-market characteristics. We model two primitive assets: value assets and growth assets that are options on assets in place. The cost of option exercise, which is endogenously...

We develop a new approach to approximating asset prices in the context of continuous-time models. For any pricing model that lacks a closed-form solution, we provide a closed-form approximate solution, which relies on the expansion of the intractable model around an “auxiliary” one. We...

I identify a “slope” factor in the cross section of commodity futures returns: high-basis commodity futures have higher loadings on this factor than low-basis commodity futures. Combined with a level factor (an index of commodity futures), this slope factor explains most of the average...

We document significant “time series momentum” in equity index, currency, commodity, and bond futures for each of the 58 liquid instruments we consider. We find persistence in returns for one to 12 months that partially reverses over longer horizons, consistent with sentiment theories of...

The imminent failure of prime brokers during the 2008 financial crisis caused a sudden decrease in the leverage afforded hedge funds. This decrease resulted from the asymmetrical payoff to rehypothecation lenders—the ultimate financiers, through prime brokers, to hedge funds. Seemingly...

We study the exposure of the US corporate bond returns to liquidity shocks of stocks and Treasury bonds over the period 1973–2007 in a regime-switching model. In one regime, liquidity shocks have mostly insignificant effects on bond prices, whereas in another regime, a rise in illiquidity...

Regulatory restrictions and market frictions can constrain the aggregate quantity of long and short positions in a security. When these constraints bind, we refer to the security as scarce, and its price becomes distorted relative to its value in a frictionless market. We show that an otherwise...