Starting from basic hypotheses on how footprints from hidden orders are interpreted by short-term traders, we derive a fair price model that predicts market impact for non-uniform participation rate schedules. We use this model to derive an optimal execution schedule for a risk-averse trader....

There is a continuum of agents, each of whom trades a divisible asset via demand function competition. Individual valuations are determined by multiple idiosyncratic and common shocks, regarding which the agent observes multi-dimensional signals. The only assumptions are that the signals are...

We study an economy with incomplete information in which two agents are uncertain and disagree about the length of business cycles. That is, the agents do not question whether the economy is growing or not, but instead continuously estimate how long economic cycles will last — i.e., they learn...

We study information acquisition in dealer markets. We first identify a one-sided strategic complementarity in information acquisition: the more informed traders are, the larger market makers' gain from becoming informed. When quotes are observable, this effect in turn induces a strategic...

Periods of technological revolution are usually associated with overvaluation of and over-investment by innovating firms. This paper develops a model that explains this behavior in a frictionless rational setting. When fully rational innovating firms face uncertainty about the returns to scale...

For US investors, international equity exposure has never been so readily available at such a low cost. Nonetheless, surveys indicate US investors typically allocate 80–85% of their equity holdings to US equities, much higher than their proportion of global market value. In this note we...

We propose a model to study firm relationships that endogenously determine the correlation structure of asset cash flows. Forming a relationship makes firms face the following trade-off in their valuations: On the one hand, collaboration generates an additional payoff component with a positive...

We study a dynamic voluntary disclosure setting where the manager's information and the firm's value evolve over time. The manager is not limited in her disclosure opportunities but disclosure is costly. The results show that the manager discloses even if this leads to a price decrease in the...

There has been considerable research into dynamic global tactical asset allocation (GTAA) strategies driven by simple measures of Valuation and Momentum applied to a baseline balanced portfolio of equities and fixed income (see Blitz and van Vliet 2008, Wang and Kochard 2011, Gnedenko and Yelnik...

We assess the ability of an information aggregation mechanism that operates in the over-the-counter market for financial derivatives to reduce valuation uncertainty among market participants. The analysis is based on a unique dataset of price estimates for S&P 500 index options that major...