Limit orders face mispricing risk - the risk of executing at a stale limit price after an innovation in public valuation, because limit-order traders generally do not continuously monitor market conditions. We analyze the impact of pegged limit orders that automatically adjust the limit price in...

Correlations of stock returns change randomly through time. The variations in correlations are themselves correlated across pairs of stocks. In an equilibrium model, investor uncertainty regarding the growth rate of the economy is the factor driving systematic variations in R square, pairwise...

One of the central questions in financial economics is the determination of asset prices, such as the value of a stock. Over the past three decades, research on this topic has converged on a concept called the quot;state-price densityquot;. However, a puzzle has arisen. On the one hand, Cox,...

We analyze myopic-trader models of noisy prices in financial markets. Unlike extant analysis, such as De Long et al. (1990a), a classical equilibrium exists in our analysis, e.g., a riskless perpetuity is priced by arbitrage and it's price does not vary with noise. Only when (a) noise traders'...