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In this paper, we consider a dynamic asset pricing model in a cross-sectional economy with two firms where a controlling shareholder cannot divert output in one firm with perfect investor protection for minority shareholders and where he…
Empirical evidence is given for a significant difference in the collective trend of the share prices during the stock index rising and falling periods. Data on the Dow Jones Industrial Average and its stock components are studied between…
Decisions taken in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market therefore provides a rich environment to study how people take…
The paper presents a step forward into the development of the theory of meaning. Stock and financial markets are examined from communication-theoretical perspective on the dynamics of information and meaning. This study focuses on the link…
We investigate the random walk of prices by developing a simple model relating the properties of the signs and absolute values of individual price changes to the diffusion rate (volatility) of prices at longer time scales. We show that this…
The analysis which assumes that tick by tick data is linear may lead to wrong conclusions if the underlying process is multiplicative. We compare data analysis done with the return and stock differences and we study the limits within the…
This study presents empirical evidence to support the validity of new definitions in financial markets. The author develops a new method to determine investors' risk attitudes in financial markets. The risk attitudes of investors in US…
The importance of predicting stock market prices cannot be overstated. It is a pivotal task for investors and financial institutions as it enables them to make informed investment decisions, manage risks, and ensure the stability of the…
The price of a stock will rarely follow the assumed model and a curious investor or a Regulatory Authority may wish to obtain a probability model the prices support. A risk neutral probability ${\cal P}^*$ for the stock's price at time $T$…
We run experimental asset markets to investigate the emergence of excess trading and the occurrence of synchronised trading activity leading to crashes in the artificial markets. The market environment favours early investment in the risky…
We uncover a new anomaly in asset pricing that is linked to the remuneration: the more a company spends on salaries and benefits per employee, the better its stock performs, on average. Moreover, the companies adopting similar remuneration…
It is known that the impact of transactions on stock price (market impact) is a concave function of the size of the order, but there exists little quantitative theory that suggests why this is so. I develop a quantitative theory for the…
We study dynamics of a simulated world with stock and money, driven by the externally given processes which we refer to as sentiments. The considered sentiments influence the buy/sell stock trading attitude, the perceived price uncertainty,…
This paper examines a heterogeneous beliefs model in which there is a process that is only partially observed by the agents. The economy contains a risky asset producing dividends continuously in time. The dividends are observed by the…
The dynamics of market prices is described as the evolution of opinions in the trading community regarding future market behavior. The price then is a function of the voting process of the market players in favor to raise or reduce the…
Dividend yields have been widely used in previous research to relate stock market valuations to cash flow fundamentals. However, this approach relies on the assumption that dividend yields are stationary. Due to the failure to reject the…
Long term investment is one of the major investment strategies. However, calculating intrinsic value of some company and evaluating shares for long term investment is not easy, since analyst have to care about a large number of financial…
The price clustering phenomenon manifesting itself as an increased occurrence of specific prices is widely observed and well-documented for various financial instruments and markets. In the literature, however, it is rarely incorporated…
We review the nature of some well-known phenomena such as volatility smiles, convexity adjustments and parallel derivative markets. We propose that the market is incomplete and postulate the existence of intrinsic risks in every contingent…
Through a novel approach, this paper shows that substantial change in stock market behavior has a statistically and economically significant impact on equity risk premium predictability both on in-sample and out-of-sample cases. In line…