Market frictions, which exist even in efficient markets and change over time, impede trade but also offer profit opportunities. To provide a framework for understanding market frictions, the authors classify frictions into five categories.

In this paper, I study the behavior of an investor with unit risk aversion who maximizes a utility function defined over the mean and the variance of a portfolio's return. Conditioning information is accessible without cost and an unconditionally riskless asset is available in the market. ; The...

The notion that financial asset returns are predictors of future economic activity is widespread, but detailed analyses provide little support for financial markets’ ability to reveal future economic activity. Even though the evidence on various indicators used by different researchers is...

In this paper, I study the behavior of an investor with unit risk aversion who maximizes a utility function defined over the mean and the variance of a portfolio's return. Conditioning information is accessible without cost and an unconditionally riskless asset is available in the market. ; The...