Related papers: Characteristics-driven returns in equilibrium
In this article we revisit the classic problem of tatonnement in price formation from a microstructure point of view, reviewing a recent body of theoretical and empirical work explaining how fluctuations in supply and demand are slowly…
We show that, in a market economy, the aggregate production level depends not only on the aggregate variables but also on the distribution of individual characteristics (e.g., productivity, credit limit, ...). We prove that, due to…
When learning is used to inform decisions about humans, such as for loans, hiring, or admissions, this can incentivize users to strategically modify their features, at a cost, to obtain positive predictions. The common assumption is that…
We examine identification of differentiated products demand when one has "micro data" linking individual consumers' characteristics and choices. Our model nests standard specifications featuring rich observed and unobserved consumer…
We study the existence of equilibrium when agents' preferences may not beconvex. For some specific utility functions, we provide a necessary and sufficientcondition under which there exists an equilibrium. The standard approach cannot be…
We propose a dynamical theory of market liquidity that predicts that the average supply/demand profile is V-shaped and {\it vanishes} around the current price. This result is generic, and only relies on mild assumptions about the order flow…
Skills are a natural unit for describing what a language model can do and how its behavior can be changed. However, existing characterizations rely on human-written taxonomies, textual descriptions, or manual profiling pipelines--all…
Firms are more likely to introduce products in markets where they anticipate stronger demand. They also possess information that is unobserved to researchers. This creates endogenous selection bias in the estimation of demand parameters.…
We develop a general equilibrium model in which, at each instant, a short-run competitive equilibrium arises. Heterogeneity in factor allocation generates differential profit rates across sectors, prompting firms to move between them under…
By incorporating market impact and momentum traders into an agent-based model, we investigate the conditions for the occurrence of self-reinforcing feedback loops and the coevolutionary mechanism of prices and strategies. For low market…
Most inverse optimization models impute unspecified parameters of an objective function to make an observed solution optimal for a given optimization problem with a fixed feasible set. We propose two approaches to impute unspecified…
The recent trend for acquiring big data assumes that possessing quantitatively more and qualitatively finer data necessarily provides an advantage that may be critical in competitive situations. Using a model complex adaptive system where…
We consider adaptive decision-making problems where an agent optimizes a cumulative performance objective by repeatedly choosing among a finite set of options. Compared to the classical prediction-with-expert-advice set-up, we consider…
Natural selection acts on traits at different scales, often with opposing consequences. This article identifies the particular forces that act at each scale and how those forces combine to determine the overall evolutionary outcome. A…
We describe a bottom-up framework, based on the identification of appropriate order parameters and determination of phase diagrams, for understanding progressively refined agent-based models and simulations of financial markets. We…
We explore a decomposition in which returns on a large class of portfolios relative to the market depend on a smooth non-negative drift and changes in the asset price distribution. This decomposition is obtained using general continuous…
In this paper we explain the wild fluctuations of financial prices from the intrinsic amplifying feedback of speculative supply and demand. Formally, we show that an asset return follows a multiplicative random growth with exogenous input,…
The major perspective of this paper is to provide more evidence into the empirical determinants of capital structure adjustment in different macroeconomics states by focusing and discussing the relative importance of firm-specific and…
An agent-based model with interacting low frequency liquidity takers inter-mediated by high-frequency liquidity providers acting collectively as market makers can be used to provide realistic simulated price impact curves. This is possible…
We present empirical evidence on the relationship between demand shocks and price changes, conditional on returns to scale. We find that in industries with decreasing returns to scale, demand increases (which raise costs) correspond to…