We develop a framework to investigate time-varying informed and uninformed trading activities and the relationship between them. Informed traders may match the level of the uninformed arrival rate with certain probability so as to make better use of the camouflage provided by the uninformed...

In this paper we present a theory and some empirical evidence on stock price manipulation in the United States. Extending the framework of Allen and Gale (1992), we consider what happens when a manipulator can trade in the presence of other traders who seek out information about the stock's true...

If investors are not fully rational, what can smart money do? This paper provides an example in which smart money can strategically take advantage of investors' behavioral biases and manipulate the price process to make profit. The paper considers three types of traders, behavior-driven...

How important is Merton's intertemporal risk for asset allocation decisions? To address this question we jointly estimate and test a conditional asset pricing model which includes long term interest rate risk as a potentially priced factor for four broad classes of assets - large stocks, small...

We jointly estimate and test a conditional asset pricing model which includes long term interest rate risk as a potentially priced factor for four broad classes of assets - large stocks, small stocks, long term Treasury bonds and corporate bonds. We find that the premium for long bond risk is...

Building upon the seminal work of Easley, Kiefer, O'Hara and Paperman (1996), we develop a framework to investigate the relationship between the behavior of uninformed investors and the time-varying informed trading activities. We allow the arrival rates for uninformed traders to follow a Markov...

Volatility in equity markets is asymmetric: contemporaneous return and conditional return volatility are negatively correlated. In this paper we develop an asymmetric volatility model where dividend growth and dividend volatility are the two state variables of the economy. The model allows both...

In this paper, we extend the research on state price density (SPD) to a bivariate setting. This extention allows us to price derivative securities whose value depends on several state variables. As an example, we examine a bivariate SPD of stock price and discount rate. We propose a...