Transactions, market orders and limit orders are three major factors which affect a specialist's information set and her inventory position. In modeling a specialist's quote updating process, before any exclusion of any of these factors, one should first address the fundamental question of their...

This paper examines the optimal consumption and investment problem for a "large" investor, whose portfolio choices affect the instantaneous expected returns on the traded assets.

Previous tests for liquidity constraints using consumption Euler equations have frequently split the sample on the basis of welath arguing that low wealth consumers are more likely to be constrained. We propose alternative tests using different and more direct information on borrowing...

In recent years, the number of downgrades in corporate bond ratings has exceeded the number or upgrades. This fact has led some to conclude that the credit quality of US corporate debt has declined. However, declining credit quality is not the only possible explanation.