The theory of fair geometric returns, F theory for short, rejects the generally accepted notion that volatility is the risk of risky assets. Instead, it claims that capital market volatility, in turn, constitutes the maximum achievable geometric return. In order to get to the point, F theory, in...

Parameter learning strongly amplifies the impact of macro shocks on marginal utility when the representative agent has a preference for early resolution of uncertainty. This occurs as rational belief updating generates subjective long-run consumption risks. We consider general equilibrium models...

We extend Kyle's (1985) model of insider trading to the case where liquidity provided by noise traders follows a general stochastic process. Even though the level of noise trading volatility is observable, in equilibrium, measured price impact is stochastic. If noise trading volatility is...

Using a comprehensive sample of trades by Schedule 13D filers, who possess valuable private information when they accumulate stocks of targeted companies, this paper studies whether several liquidity measures reveal the presence of informed trading. The evidence suggests that when Schedule 13D...

We evaluate the importance of "Limits to Arbitrage" to explain profitability of momentum strategies. Specifically, when the availability of arbitrage capital is in short supply, momentum cycles last longer, and breaks in momentum cycles are shorter. We demonstrate the robustness of our findings...

We analyze a model of informed trading where an activist shareholder accumulates shares in an anonymous market and then expends costly effort to increase the firm value. We find that equilibrium prices are affected by the position accumulated by the activist, because the level of effort...

We measure investors' short- and long-term stock-return expectations using both options and survey data. These expectations at different horizons reveal what investors think their own short-term expectations will be in the future, or forward return expectations. While contemporaneous short-term...

This article shows that a sizable component of emerging market sovereign yield spreads is due to factors other than default risk, such as liquidity. The author estimates the non-default component of the yield spreads as the basis between the actual credit default swap (CDS) premium and the...

Structured financial products and derivatives were one of the major financial innovations since 18th century, which improve market completeness by transforming risk-sharing mechanisms. Since then, thousands of derivative types were created, and its market has grown to over six-times greater than...

A growing body of research shows that religious culture can influence both macroeconomic and firm-specific outcomes. In this study, we examine how religiosity influences the liquidity of cross-listed stocks. These tests are important given the literature that shows that firms choose (in part) to...