Hedging short gamma exposure requires trading in the direction of price movements, thereby creating momentum. Using intraday returns on over 60 futures equities, bonds, commodities, and currencies between 1974 2020, we find strong market momentum everywhere. The return during last 30 minutes before close is positively predicted by rest day (from previous to minutes). predictive power economical...

Housing markets experience substantial price volatility, short term price change momentum and mean reversion of prices over the long run. Together these features, particularly at their most extreme, produce the classic shape of an asset bubble. In this paper, we review the stylized facts of housing bubbles and discuss theories that can potentially explain events like the boom-bust cycles of the...

I present an asymmetric information model of financial markets in which there is uncertainty and learning not only about fundamentals but also the proportion informed-to-noise traders market. Extreme news leads to increase both types uncertainty, while it decreases price informativeness. Uncertainty market composition constitutes a type liquidity risk associated with high expected returns. The ...

We propose a model in which investors cannot costlessly process information from asset prices. At the trading stage, are boundedly rational, and their interpretation of prices injects noise into price, generating source endogenous trading. Our setup predicts price momentum yields excessive return volatility volume. In an overall equilibrium, optimally choose sophistication levels by balancing b...

Abstract Factor momentum produces robust average returns that exhibit a similar economic magnitude as stock price momentum. To the extent post-earnings announcement drift (PEAD) factor captures mispricing, winner factors earn profits from being long on underpriced stocks and short overpriced stocks. Conversely, loser-factors’ negative exposure to PEAD suggests loser capture mispricing by Option...

Use of trading strategies to mislead other market participants, commonly termed market manipulation, has been identified as a major problem faced by present day stock markets. Although some mathematical models of market manipulation have been previously developed, this work presents a framework for manipulation in the context of a realistic computational model of a limit-order market. In this w...

This paper analyzes how asset prices in a binary market react to information when traders have heterogeneous prior beliefs. We show that the competitive equilibrium price underreacts to information when there is a bound to the amount of money traders are allowed to invest. Underreaction is more pronounced when prior beliefs are more heterogeneous. Even in the absence of exogenous bounds on the ...

The price dispersion means different prices for same goods. In the Internet economy, many economists reckon that the price dispersion in the e-commerce markets should descend along with the dropping of search cost. However, the correlative empirical studies reach a contrary opinion: there not only exist price dispersion in the e-commerce market, but also has larger dispersion degree than the tr...

Quality-Adjusted Life Years (QALYs) are the most widely-used measure of health in cost– effectiveness analysis and cost–benefit analysis. Within a welfarist framework QALYs are consistent with people’s preferences under stringent assumptions. Several authors have argued that QALYs are a valid measure of health within an extra-welfarist framework. This paper studies the applicability of QALYs wi...

Tradable permits are celebrated as a political instrument since they allow (i) firms to equalize marginal abatement costs through trade and (ii) the government to distribute the burden of the policy in a politically fair and feasible way. These two concerns, however, conflict in a dynamic setting. Anticipating that high-cost firms will receive more permits in the future, firms purchase excessiv...