Almost all real assets trade in decentralized markets, where trading frictions could inhibit the efficiency of asset allocations and depress asset prices. In this paper, I investigate how trading frictions vary as asset markets get thicker, and what implications market thickness has for asset allocations and prices. Intuitively, it is easier to sell assets that have a thicker market. As a resul...

We propose a Fundamental Theorem of Asset Pricing and a Super-Replication Theorem in a modelindependent framework. We prove these theorems in the setting of finite, discrete time and a market consisting of a risky asset S as well as options written on this risky asset. As a technical condition, we assume the existence of a traded option with a super-linearly growing payoff-function, e.g., a pow...

This study examines the disclosure of labor-related costs by US firms, and estimates the proportion of these costs that are valued as an asset (human capital) by the market. Separate identification of labor-related costs in US financial reports is voluntary, and is made consistently only by about 10% of all US Compustat firms. The probability of disclosure is found to be positively related to f...

TIAA-CREF Institute is a part of TIAA-CREF and the views expressed herein are those of the author(s) and not necessarily those of TIAA-CREF. In the context of the late 1990s stock market bubble and its aftermath, Peter Bernstein and others have suggested that volatile short-term trends and the availability of a wider range of asset classes may call for a more fluid asset allocation strategy tha...

For many kinds of assets, the growth rate of the real asset stock is a nonlinear function of the economic owner’s decision whether to invest or extract the asset. Examples within the economy are primarily biological assets, both privately owned (such as those found in aquaculature and agriculture) and publicly owned or regulated (such as fish stocks, and in some case, timber stocks.) Optimal ex...

This study adopts derivative pricing as an indicator of market expectations, with those results suggesting that general investors can use market expectations to predict the final settlement value of underlying assets. Most investment textbooks note that one of the major functions of futures is price discovery. Similarly, the implied volatility associated with option prices can be used to discov...

by Mordecai Kurz and Maurizio Motolese A very preliminary draft: February 2, 2010 Summary: Why do risk premia vary over time? We examine this problem theoretically and empirically by studying the effect of market belief on risk premia. Individual belief is taken as a fundamental, primitive, state variable. Market belief which is the distribution of individual beliefs is observable, it is centra...