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We study the role of active and passive investors in an investment market with uncertainties. Active investors concentrate on a single or a few stocks with a given probability of determining the quality of them. Passive investors spread…

This article summarizes recent research in financial economics about why information, such as earnings announcements, moves stock prices. The article does not presume any prior exposure to finance beyond what you might read in newspapers.

This note explores the consequences of nonlinear price impact functions on price dynamics within the chartist-fundamentalist framework. Price impact functions may be nonlinear with respect to trading volume. As indicated by recent empirical…

We show that infinite divisibility of a trading commodity leads to a self-sustained price bubble when traders use adaptive investment strategies. The adaptive strategy can be viewed as a psychological response of a trader to the situation…

This paper investigates the effect of cross-shareholding on stock price synchronicity, as a measure of price informativeness, of the listed firms in the Chinese stock market. We gauge firms' levels of cross-shareholdings in terms of…

We study a financial model with a non-trivial price impact effect. In this model we consider the interaction of a large investor trading in an illiquid security, and a market maker who is quoting prices for this security. We assume that the…

The dynamics of a stock market with heterogeneous agents is discussed in the framework of a recently proposed spin model for the emergence of bubbles and crashes. We relate the log returns of stock prices to magnetization in the model and…

Stock price prediction is a rich research topic that has attracted interest from various areas of science. The recent success of machine learning in speech and image recognition has prompted researchers to apply these methods to asset price…

Preferences for mixing can reveal ambiguity perception and attitude on a single event. The validity of the approach is discussed for multiple preference classes including maxmin, maxmax, variational, and smooth second-order preferences. An…

I study the economic effects of testing during the outbreak of a novel disease. I propose a model where testing permits isolation of the infected and provides agents with information about the prevalence and lethality of the disease.…

We attempt to explain stock market dynamics in terms of the interaction among three variables: market price, investor opinion and information flow. We propose a framework for such interaction and apply it to build a model of stock market…

One the one hand, rough volatility has been shown to provide a consistent framework to capture the properties of stock price dynamics both under the historical measure and for pricing purposes. On the other hand, market price of volatility…

The paper concerns primal and dual representations as well as time consistency of set-valued dynamic risk measures. Set-valued risk measures appear naturally when markets with transaction costs are considered and capital requirements can be…

We describe a simple model for speculative trading based on adaptive behavior of economic agents.The adaptive behavior is expressed through a feedback mechanism for changing agents' stock-to-bond ratios, depending on the past performance of…

The distribution of price returns for a class of uncorrelated diffusive dynamics is considered. The basic assumptions are (1) that there is a "consensus" value associated with a stock, and (2) that the rate of diffusion depends on the…

Price limit trading rules are adopted in some stock markets (especially emerging markets) trying to cool off traders' short-term trading mania on individual stocks and increase market efficiency. Under such a microstructure, stocks may hit…

Whether or not stocks are predictable has been a topic of concern for decades.The efficient market hypothesis (EMH) says that it is difficult for investors to make extra profits by predicting stock prices, but this may not be true,…

We consider the problem of maximizing portfolio value when an agent has a subjective view on asset value which differs from the traded market price. The agent's trades will have a price impact which affect the price at which the asset is…

We consider the robust utility maximization using a static holding in derivatives and a dynamic holding in the stock. There is no fixed model for the price of the stock but we consider a set of probability measures (models) which are not…

We present results on simulations of a stock market with heterogeneous, cumulative information setup. We find a non-monotonic behaviour of traders' returns as a function of their information level. Particularly, the average informed agents…