This article combines the continuous arrival of information with the infrequency of trades and investigates the effects on asset price dynamics of positive- and negative-feedback trading. Specifically, the authors model an economy where stocks and bonds are traded by two types of agents:...

We model a two-asset economy populated by `speculators', who are always present in the market, and `noise traders', who infrequently reallocate their portfolios in a discrete fashion. Noise traders' markets orders are filled at prices which support the speculators' equilibrium consumption path,...

We find that in 1989-1996, when U.S. monetary policy tightly targeted overnight fed funds rates, the volatility and persistence of spreads between target and term fed funds levels were larger for longer-maturity loans. We show that such patterns are consistent with an expectational model where...

We explore the effects of official targeting policy on the term-structure of nominal interest rates, adapting relevant insights from theoretical work on "peso problems" to account for realistic infrequency of target changes. Our analysis of daily U.S. interest rates and newly available...

A price barrier is a price level at which a large number of investors either buy or sell securities. We analyze the dynamics of asset prices in an economy in which price barriers exist. Our analysis suggests that asset prices and volatility can exhibit jumps when the price barrier is reached....

We assume that the instantaneous riskless rate reverts toward a central tendency which, in turn, is changing stochastically over time. As a result, current short-term rates are not sufficient to predict future short-term rate movements, as it would be the case if the central tendency were...