Any admissible portfolio performance measure should satisfy four minimal conditions: it assigns zero performance to each reference portfolio and it is linear, continuous and nontribial. Such an admissible measure exists if and only if the securities market obeys the law of one price. A positive...

This paper develops a cross-market version of factor pricing models. It is shown that exact factor pricing holds across two submarkets with respect to their "common factors" if and only if the unique pricing operator for the first submarket is equal to that for the other submarket with...

This paper examines the information embedded in both the stock and option markets prior to takeover announcements. During normal periods, buyer-seller initiated stock volume imbalances are significant predictors of next-day stock returns and option volume imbalances are uninformative. However,...

Substantial progress has been made in extending the Black-Scholes model to incorporate such features as stochastic volatility, stochastic interest rates and jumps.On the empirical front, however, it is not yet known whether and by how much each generalized feature will improve option pricing and...

This paper provides evidence on the significant impact of illiquidity or non-marketability on security valuation. A typical listed company in China has several types of share outstanding: (i) common shares that are only tradable on stock exchanges, (ii) restricted institutional shares (RIS) that...

In existing theory, wealth is no more valuable than its implied consumption rewards. In reality investors acquire wealth not just for its implied consumption, but for the resulting social status. Max M. Weber refers to this desire for wealth as the spirit of capitalism. We examine, both...