Public choice theorists generally assume that bureaucrats seek to maximize their own utility functions, subject to externally imposed constraints. Changes in constraint values may, therefore, be expected to result in predictable changes in the behavior of most organizations, not just businesses....

We propose a dynamic asset-market equilibrium model in which (1) an "innovative" asset with as-yet-unknown average payoff is traded, and (2) investors delegate investment to experts. Experts secretly renege on investors' orders and take on leveraged positions in the asset to manipulate...

This paper studies recursive exchange economies with short sales. Agents maximize discounted expected utility. The asset structure is general and includes real securities, infinite-lived stocks, options, and other derivatives. The main result shows the existence of a competitive equilibrium...

We model a scenario in which there are three types of investors: fundamentalists, speculators, and trend-followers and an intermediary who cares about his reputation. Fundamentalists are rational investors with long horizons who are interested in the dividend stream. Speculators are rational...

We study a competitive model in which market incompleteness implies that debt-financed firms may default in some states of nature and default may lead to the sale of the firms' assets at fire sale prices when markets are illiquid. This incompleteness is the only friction in the model and the...

We explore how the demand for a risky asset can be decomposed into an investment effect and a hedging effect by all risk-averse investors. This question has been shown to be complex when considered outside of the mean-variance framework. We restrict dependence among returns on the risky assets...

We develop a behavioral theory of real options that relaxes the informational and behavioral assumptions underlying applications of financial options theory to real assets. To do so, we augment real option theory's focus on uncertain future asset values (prospective uncertainty) with feedback...

We show that aversion to risk and ambiguity leads to information inertia when investors process public news about assets. Optimal portfolios do not always depend on news that is worse than expected; hence, the equilibrium stock price does not reflect this bad news. This informational inefficiency...

We study how statutory-law changes relate to disclosure, pricing, and liquidity in the used-car market. Federal odometer laws mandated disclosure of mileage on car titles upon ownership transfer and thereby enhanced enforcement of odometer-fraud prohibitions. Exploiting time variations in state...

We survey the textual sentiment literature, comparing and contrasting the various information sources, content analysis methods, and empirical models that have been used to date. We summarize the important and influential findings about how textual sentiment impacts on individual, firm-level and...