This paper develops a pragmatic theory of finance where in markets are considered to be centres of communicative action in the face of uncertainty. This contrasts with the conventional approach in economics that portrays markets as centres of strategic action in the face of scarcity. Our...

This paper argues that the fundamental principle of contemporary financial economics is balanced reciprocity, not the principle of utility maximisation that is important in economics more generally. The argument is developed by analysing the mathematical Fundamental Theory of Asset Pricing with...

This article considers how the supply of liquid capital affects the liquidity of asset markets. The article views the former notion as a technological property of real investments and the latter as an endogenous property of financial market equilibrium, and describes a channel by which the two...

Momentum effects in stock returns need not imply investor irrationality, heterogeneous information, or market frictions. A simple, single-firm model with a standard pricing kernel can produce such effects when expected dividend growth rates vary over time. An enhanced model, under which...

Recent work by <link rid="b7">Diether, Malloy, and Scherbina (2002)</link> has established a negative relationship between stock returns and the dispersion of analysts' earnings forecasts. I offer a simple explanation for this phenomenon based on the interpretation of dispersion as a proxy for unpriced information...