In a binary prediction market in which risk-neutral traders have heterogeneous prior beliefs and are allowed to invest a limited amount of money, the static rational expectations equilibrium price is demonstrated to underreact to information. This effect is consistent with a favorite-longshot bias, and is more pronounced when prior beliefs are more heterogeneous. Relaxing the assumptions of ris...

We develop a dynamic stochastic general equilibrium model to examine how monetary policy shocks affect income inequality and the equity premium. The features Ricardian non-Ricardian households shows that tightening causes an endogenous redistribution of from non-Ricardians Ricardians. Ricardians’ consumption comoves more strongly with asset returns, giving rise high premia. extend our several f...

Recent literature shows how the destabilising e¤ect of portfolio insurance activity on the price of the underlying asset depends on the liquidity of the asset market. We build a simple model where market timers shift capital around asset markets in order to exploit gains from temporary excess-volatility of asset prices. In this way, market timers increase the liquidity of asset markets reducing...

using the treynor and mazoy model (expanded by fama to evaluate management performance for asset allocation among investment units), this paper examines the management’s performance in funds and investment companies in tehran stock exchange during 2004-2010. the results do not support the application of management market timing during the study period and managers were only able to create addit...

This issue is devoted in large part to summaries of the sessions of our conference on “Financial Frictions and Segmented Asset Markets.” Different approaches have been used to incorporate financial market imperfections into tractable general equilibrium models, emphasizing different frictions in asset markets: lack of commitment in financial contracts, limited participation and market segmentat...

This paper considers an economy where agents face limited commitment and must transfer a durable asset as collateral to borrow. Rehypothecation allows lenders to re-sell this pledged asset or re-use it as collateral to sustain further borrowing. As such, it increases the ultimate supply of durable asset in the economy along collateralized credit chains. However, limited commitment now affects r...

We investigate the possibility that limited participation in asset markets, and the stock market in particular, might explain the lack of correspondence between the sample moments of the intertemporal marginal rate of substitution and asset returns in U.K. data. We estimate ownership probabilities to separate “likely” shareholders from nonshareholders, enabling us to control for changing compos...