A wealth-process set is abstractly defined to consist of nonnegative cadlag processes containing a strictly positive semimartingale and satisfying an intuitive re-balancing property. Under the condition of absence of arbitrage of the first kind, it is established that all wealth processes are...

This paper addresses the question of how to invest in a robust growth-optimal way in a market where the instantaneous expected return of the underlying process is unknown. The optimal investment strategy is identified using a generalized version of the principal eigenfunction for an elliptic...

Do wealth shocks affect the health of the elderly in developed countries? The economic literature is skeptical about such effects which have so far only been found for poor retirees in poor countries. In this paper I show that wealth shocks also matter for the health of wealthy retirees in the...

We study the land and stock markets in Japan circa 1990 and in 2013. While the Nikkei stock average in the late 1980s and its -48% crash in 1990 is generally recognized as a financial market bubble, a bigger bubble and crash was in the land market. The crash in the Nikkei which started on the...

We perform a comprehensive test of order choice theory from a sample period when the NYSE trades in decimals and allows automatic executions. We analyze the decision to submit or cancel an order or to take no action. For submitted orders we distinguish order type (market vs. limit), order side...

Financial market liquidity has become increasingly fragmented across multiple trading platforms. We propose an intuitive welfare-based market quality metric that can properly aggregate local market conditions across both securities and trading venues. Our analysis rests on a general equilibrium...

Market liquidity is typically characterized by a number of ad hoc metrics, such as depth, volume, bid-ask spreads etc. No general coherent denition seems to exist, and few attempts have been made to justify the existing metrics on welfare grounds. In this paper we propose a welfare-based...

Theory suggests that reputations, developed in repeated face-to-face interactions, allow nonanonymous, floor-based trading venues to attenuate adverse selection in the trading process. We identify instances when stocks listed on the New York Stock Exchange (NYSE) experience a non-trivial...

We provide an axiomatic foundation for the representation of numéraire-invariant preferences of economic agents acting in a financial market. In a static environment, the simple axioms turn out to be equivalent to the following choice rule: the agent prefers one outcome over another if and only...

Speculative industries exploit novel technologies subject to two risks. First, there is uncertainty about the fundamental value of the innovation: is it strong or fragile? Second, it is difficult to monitor managers, which creates moral hazard. Because of moral hazard, managers earn agency rents...