Implications of factor-based asset pricing models for estimation of expecte d returns and for portfolio selection are investigated. In the presence of model mispricing due to a missing factor, the mispricing and the residual covariance matrix are linked together. Imposing a strong form of this...

There are two distinct components to a specialist's price schedule, prices and debths. This paper presents a model of a specialist's problem of choosing prices and debths jointly in order to maximize profits.

New York Stock Exchange specialists disseminate information to market participants by displaying price schedules consisting of quoted prices and depths for both the bid and the ask sides of the market. This paper examines how specialists revise these posted price schedules in response to changes...

We study the problem of going public in the presence of moral hazard, adverse selection and multiple trading periods. In the multiperiod game managers strategically choose the level of extraction of private benefits and can develop a good reputation for expropriating low levels of private...

Anecdotal evidence suggests that top managers of firms that are investigated or charged with criminal fraud lose their jobs. From a theoretical perspective, it is plausible that fraud scandals create incentives to change managers, in an attempt to improve the firm's performance, reinvest in lost...