We develop a model in which investors have heterogeneous beliefs about both the mean and the risk of future signals and the final stock payoff. As investors who perceive the lowest risk vary across different periods, the overall perception of the market risk is reduced in an economy with dynamic...

This paper tests agency theory on explicit and implicit incentives using a special sample. Specifically, we investigate the productivity (total number of papers) and impact (citations of papers) of the economics and finance faculty from top twenty-five schools and find that these academics'...

This article develops an integrated model of asset pricing and moral hazard. It is demonstrated that the expected dollar return of a stock is independent of managerial incentives and idiosyncratic risk, but the equilibrium price of the stock depends on them. Thus, the expected rate of return is...

Previous analysis of equilibrium asset prices often ignore the effects of delegated portfolio management and those of delegated portfolio management problems often ignore information and equilibrium asset prices. This paper develops a dynamic model that simultaneously considers optimal...

This paper endogenizes information acquisition and portfolio delegation in a one-period strategic trading model. The equilibrium concept constrains prices, demands, and contracts to be linear functions. We find that when the informed portfolio manager is relatively risk tolerant (averse), price...

We solve a liquidation problem for an agent with preferences consistent with the prospect theory of Kahneman and Tversky (1978). We find that the agent is willing to hold a risky project with a relatively inferior Sharpe ratio if the project is currently making losses, and intends to liquidate...