This paper presents an information-theoretic model of IPO pricing in the presence of adverse selection and multiple trading periods. Initially investors produce information to reduce the information asymmetry and are compensated by the owner-manager. Some new investors enter and all investors...

We analyze the optimal investment strategy of a firm that can complete a project either in one stage at a single freely chosen time point or in incremental steps at distinct time points. The presence of economies of scale gives rise to the following trade-off: lumpy investment has a lower total...

Mean-variance criteria remain prevalent in multi-period problems, and yet not much is known about their dynamically optimal policies. We provide a fully analytical characterization of the optimal dynamic mean-variance portfolios within a general incomplete-market economy, and recover a simple...

The real options literature has provided new insights on how to manage irreversible capital investments whose payoffs are always uncertain. Two of the most important predictions from such theory are: (i) greater risk delays a firm's investment timing, and (ii) greater risk increases the option...

We investigate the dynamics of the displayed part of the Island ECN limit order book for the equity index-linked securities market around macroeconomic news releases. Our results indicate that the quality of the electronic market, measured by spread and depth, deteriorates during the releases....

Behavioral finance has emerged as a new paradigm in financial economics. It deals primarily with the influences of psychology on market finance and with market inefficiencies. The field of psychology, already very present in organizational psychology and decision-making, is slowly opening up...

In this paper, we introduce a new approach for finding robust portfolios when there is model uncertainty. It differs from the usual worst case approach in that a (dynamic) portfolio is evaluated not only by its performance when there is an adversarial opponent (quot;naturequot;), but also by its...

This paper examines strategic investment in the context of a duopolistic continuous-time real options game. Our contribution is twofold, economic and methodological. The former is the recognition that, under fixed costs of investment and time-to-build, the firm pays a fraction of the implicit...

In an environment with stocks and short-term debt, random changes in the risk-reward frontier produce hedging demands for equities, implying that portfolio policies supporting optimal life-cycle consumption are rarely mean-variance efficient. Pursuing optimal life-cycle portfolio policies is...

Lines of credit (LOCs) are widely used by consumers. Here, we try to understand the major motives of such prevalent use. We model LOCs as instruments of consumption smoothing across states and time periods. A fundamental feature of insurance contracts is that insurance premiums are payable at...