We asked subjects to self-select into one of two contests, "coin" or "die." The winner in each of the contests is the person with most correct guesses of 20 coin flips or 20 rolls of a die, respectively. Most subjects reported that they believed that most people would go to the "coin" group....

Focusing on capital asset returns governed by a factor structure, the Arbitrage Pricing Theory (APT) is a one-period model, in which preclusion of arbitrage over static portfolios of these assets leads to a linear relation between the expected return and its covariance with the factors. The APT,...

By design, the Bitcoin protocol has a low throughput. The Lightning Network (LN) is a layer-two solution built to increase throughput by cryptographically securing commitments to transactions and only occasionally converting cumulative balances into on-chain transactions. LN channels enable...

The author constructs an intertemporal model in which investors trade shares of a firm. All trading is done through competitive market makers. After the initial period and before the end of the planning horizon, information is asymmetrically distributed among traders, and the prices of investors...

The Value Line investment record is frequently interpreted as evidence of market inefficiency. This article reconciles the record with market efficiency as one implication of a model that assumes a semistrong form of market efficiency and autoregressive state variables, which need not be...

Compared with existing payment systems, Bitcoin’s throughput is low. Designed to address Bitcoin’s scalability challenge, the Lightning Network (LN) is a protocol allowing two parties to secure bitcoin payments and escrow holdings between them. In a lightning channel, each party commits...

Combining survey responses and trading records of clients of a German retail broker, this paper examines some of the causes for the apparent failure to buy and hold a well-diversified portfolio. The subjective investor attributes gleaned from the survey help explain the variation in actual...

A liquidity trader wishes to trade a fixed number of shares within a certain time horizon and to minimize the mean and variance of the costs of trading. Explicit formulas for the optimal trading strategies show that risk-averse liquidity traders reduce their order sizes over time and execute a...

Building on recent developments in behavioral asset pricing, we develop a model in which dispersion of investor beliefs under short-selling constraints drives a firm's stock price above its fundamental value. Managers optimally respond to the stock market bubble by issuing new equity. The bubble...

A bilateral moral-hazard problem provides a rationale for "up-or-ou t" employment contracts. The employer sets a wage higher than opportunit y cost to induce the worker to invest in firm-specific capital. If the individual does not make the grade, it is in the firm's interest ex post to fire...