We propose a simplified approach to mean-variance portfolio problems by changingtheir parametrisation from trading strategies to final positions. This allows us to treat,under a very mild no-arbitrage-type assumption, a whole range of quadratic optimisationproblems by simple mathematical tools...

The Markowitz problem consists of finding in a financial market a self-financingtrading strategy whose final wealth has maximal mean and minimal variance. Westudy this in continuous time in a general semimartingale model and under coneconstraints: Trading strategies must take values in a...

We study mean-variance hedging under portfolio constraints in a general semi-martingale model. The constraints are formulated via predictable correspondences,meaning that the trading strategy is restricted to lie in a closed convex set whichmay depend on the state and time in a predictable way....

For an investor with constant absolute risk aversion and a long horizon, who trades in amarket with constant investment opportunities and small proportional transaction costs, weobtain explicitly the optimal investment policy, its implied welfare, liquidity premium, andtrading volume. We...

In a market with one safe and one risky asset, an investor with a long horizon, constantinvestment opportunities, and constant relative risk aversion trades with small proportionaltransaction costs. We derive explicit formulas for the optimal investment policy, its impliedwelfare, liquidity...

We develop an econometric methodology to infer the path of risk premia from large unbalancedpanel of individual stock returns. We estimate the time-varying risk premia implied by conditional linearasset pricing models where the conditioning includes instruments common to all assets and asset...

The paper is the first one outside the high-frequency domain to use sentiment-signednews to directly compare news and no-news stock returns. This is done by estimatingwhether returns on positive, neutral and negative news days are significantly differentfrom the average daily return for a large...

We explore the effects of information propagation in a centralized financialmarket. Specifically, we embed search frictions within the Grossman andStiglitz (1980) framework, relying on information percolation as modeled inDuffie, Malamud, and Manso (2009). First, we show that information...

We explore the pricing of variance risk by decomposing stocks' total variance into systematicand idiosyncratic return variances. While systematic variance risk exhibits a negative priceof risk, common shocks to the variances of idiosyncratic returns carry a large positive riskpremium. This...

We investigate whether a bank’s performance during the 1998 crisis, which was viewed at the timeas the most dramatic crisis since the Great Depression, predicts its performance during the recentfinancial crisis. One hypothesis is that a bank that has an especially poor experience in a...