TOPICS IN ASSET PRICING Course Outline and Readings

Transcription

1 BUS Ioanid Rosu Topics in Asset Pricing Office: HPC 512 Spring 2006 (773) TOPICS IN ASSET PRICING Course Outline and Readings Course Outline Week 1 Introduction and Motivation Definition of market structure and asset pricing Empirical regularities and puzzles Open questions Week 2 Transactions Costs and Asset Returns One risky asset, proportional or fixed costs Constantinides (1986), Dumas and Luciano (1991), Lo, Mamaysky and Wang (2004) Investment horizon, clientele effects Amihud and Mendelson (1986) Multiple risky assets Vayanos (1998), Liu (2004), Lo, Rosu and Wang (2005) Transaction costs and the illiquidity premium Brennan and Subrahmanyam (1996), Brennan, Chordia and Subrahmanyam (1998) Week 3 Time-Varying Liquidity, Illiquidity Premium, Liquidity Puzzles Liquidity risk and asset pricing: theory Acharya and Pedersen (2005) Liquidity risk and asset pricing: empirical Pastor and Stambaugh (2003), Novy-Marx (2004) Illiquidity premium for stocks and bonds Krishnamurthi (2002), Amihud and Mendelson (1991), Goldreich, Hanke and Nath (2005), Chen and Xiong (2001) The closed-end fund puzzle, the downward-sloping demand puzzle Cherkes, Sagi, Stanton (2006), Lee, Shleifer, Thaler (1991), Shleifer (1986), Petajisto (2005) 1

2 Week 4 Classical Market Microstructure: Price Formation and Trading Why do prices change? Why do people trade? Inventory models Amihud and Mendelson (1980), Ho and Stoll (1981) The informational role of prices and rational expectations equilibria (REE) Grossman and Stiglitz (1980), Grossman (1976), Hellwig (1980), Romer (1993) Asymmetric information, different order sizes, discriminating noise traders Kyle (1985), Kyle (1989), Easley and O Hara (1987), Admati and Pfleiderer (1988) Asymmetric information: dynamic trading, information revelation Glosten and Milgrom (1985), Vayanos (2001) Week 5 Market Microstructure: Different Aspects of Liquidity Informed trading risk Wang (1993), Kyle (1985) Temporary liquidity shocks, liquidation risk, predatory trading Grossman and Miller (1988), Huang (2003), Brunnermeier and Pedersen (2005) Funding constraints, flight to quality, bank runs, corporate sector, productivity Brunnermeier and Pedersen (2005), Vayanos (2004), Diamond and Dybvig (1983), Holmstrom and Tirole (2001), Eisfeldt (2004) Counterparty risk, insider trading Gallmeyer, Hollifield and Seppi (2004), Fishman and Hagerty (1995) Week 6 Market Microstructure: Liquidity and Market Design Block-trading markets Keim and Madhavan (1996), Holthausen, Leftwich, Mayers (1987, 1990) Search models, over-the-counter markets Duffie, Garleanu and Pedersen (2005) Limit order markets Biais, Hillion and Spatt (1995), Glosten (1994), Rosu (2006) Market making, competition with limit order books Biais, Martimort and Rochet (2000), Seppi (1997) 2

3 Week 7 Empirical Measures of Liquidity and Market Frictions Components of the bid-ask spread Glosten and Harris (1988), Roll (1984), Huang and Stoll (1997) Probability of informed trading (PIN) Easley, Kiefer and O Hara (1997), Easley, Hvidkjaer and O Hara (2004) Information content of prices: permanent and temporary components Hasbrouck (1991) Price impact function Hausman, Lo, and MacKinlay (1992), Chen, Stanzl and Watanabe (2004) Week 8 Trading Volume and Volatility Trading volume and serial correlation of returns Cambpbell, Grossman and Wang (1993) Trading volume: asymmetric information, factor structure, explanations Hong and Wang (2000), Wang (1994), Lo and Wang (2001), Lo and Wang (2006), Nagel (2005) Trading volume and the illiquidity premium Lo, Mamaysky and Wang (2004) Volatility and market microstructure Vayanos (2004), Bandi and Russell (2005), Maheu and McCurdy (2004) Week 9 Market Efficiency, Limits of Arbitrage, Noise Trader Risk Market efficiency, mean reversion, price reaction to news Summers (1985, 1986), Poterba and Summers (1987), Chan (2003), Vega (2005) Noise trader risk DeLong, Shleifer, Summers and Waldman (1989, 1990), Kogan, Ross, Wang and Westerfield (2006) Limits to arbitrage, financial constraints Shleifer and Vishny (1997), Duffie, Garleanu, Pedersen (2002), Gromb and Vayanos (2002), Ofek, Richardson and Whitelaw (2006) Differeces of opinions Hong and Stein (2000), Harris and Raviv (1993), Kandel and Pearson (1995), Banerjee and Kremer (2005) 3

4 Week 10 Bubbles, Crashes, Momentum, Post-Announcement Drift Liquidity, crashes, contagion Genotte and Leland (1990), Kyle and Xiong (2001), Morris and Shin (2004) Bubbles and crashes Scheinkman and Xiong (2003), Abreu and Brunnermeier (2003), Bulow and Klemperer (1994), Allen, Morris and Postlewaite (1993) Momentum, price reaction to news Hong and Stein (1999), Peng and Xiong (2006) Post-Earnings Announcement Drift Frazzini (2006), Shin (2005) Course Readings This is an extensive list of references on some selected topics that might be discussed in class. The actual reading list will be given each week after lecture, since it depends on how the class progresses. Articles marked with represent required reading, while articles market with represent recommended reading. Week 1: Introduction to Market Structure and Asset Pricing (Surveys) Amihud, Y., H. Mendelson, and L. Pedersen (2005), Liquidity and Asset Prices, Foundations and Trends in Finance 1, Biais, B., L. Glosten, and C. Spatt (2005), Market Microstructure: A Survey of Microfoundations, Empirical Results, and Policy Implications, Journal of Financial Markets 8, Madhavan, A. (2000), Market Microstructure: A Survey, Journal of Financial Markets 3, Stoll, H. (2003), Market Microstructure, Handbook of the Economics of Finance 1, Ch. 9, Shleifer, A., and L. Summers (1990), The Noise Trader Approach to Finance, Journal of Economic Perspectives 4, Scheinkman, J., and W. Xiong (2004), Heterogeneous Beliefs, Speculation and Trading in Financial Markets, Working Paper, Princeton University. Week 2: Transactions Costs Aiyagari, R., and M. Gertler (1991), Asset Returns with Transaction Costs and Uninsured Individual Risk, Journal of Monetary Economics 27, Amihud, Y., and H. Mendelson (1986), Asset Pricing and the Bid-Ask Spread, Journal of Financial Economics 17,

5 Brennan, M., and A. Subrahmanyam (1996), Market Microstructure and Asset Pricing: On the Compensation for Illiquidity in Stock Returns, Journal of Financial Economics 41, Constantinides (1986), Capital Market Equilibrium with Transaction Costs, Journal of Political Economy 94, Dumas, B., and E. Luciano (1991), An Exact Solution to a Dynamic Portfolio Choice Problem under Transaction Costs, Journal of Finance 56, Grossman, S., and G. Laroque (1990), Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods, Econometrica 58, He, H., and D. Modest (1995), Market Frictions and Consumption-Based Asst Pricing, Journal of Political Economy 103, Heaton and Lucas (1996), Evaluating the Effects of Incomplete Markets on Risk Sharing and Asset Pricing, Journal of Political Economy 104, Liu, H. (2004), Optimal Consumption and Investment with Transaction Costs and Multiple Risky Assets, Journal of Finance 59, Lo, A.W., Mamaysky H., and J. Wang (2004), Asset Prices and Trading Volume Under Fixed Transactions Costs, Journal of Political Economy 112, Lo, A., I. Rosu, and J. Wang (2005), A CAPM with Price Impact, Working Paper, MIT. Shreve, S., and H. Soner (1994), Optimal Investment and Consumption with Transaction Costs, Annals of Applied Probability 4, Vayanos, D. (1998), Transaction Costs and Asset Prices: A Dynamic Equilibrium Model, Review of Financial Studies 11, Vayanos, D., and J.-L. Vila (1999), Equilibrium Interest Rate and Liquidity Premium With Transaction Costs, Economic Theory 13, Week 3: Time-Varying Liquidity, Illiquidity Premium, Liquidity Puzzles Acharya and Pedersen (2005), Asset Pricing with Liquidity Risk, Journal of Financial Economics 77, Amihud, Y. (2002), Illiquidity and Stock Returns, Journal of Financial Markets 5, Amihud, Y., and H. Mendelson (1991), Liquidity, Maturity, and the Yields on U.S. Treasury Securities, Journal of Finance 46, Bekaert, G., C. Harvey, and C. Lundblad (2005), Liquidity and Expected Returns: Lessons from Emerging Markets, Working Paper, Duke University. Brennan, M., T. Chordia, and A. Subrahmanyam (1998), Alternative Factor Specifications, Security Characteristics, and the Cross-Section of Expected Stock Returns, Journal of Financial Economics 49, Cherkes, M., J. Sagi, and R. Stanton (2006), A Liquidity-Based Theory of Closed-End Funds, Working Paper, University of California, Berkeley. Chordia, T., R. Roll, and A. Subrahmanyam (2000), Commonality in Liquidity, Journal of Financial Economics 56, Datar, V., N. Naik, and R. Radcliffe (1998), Liquidity and Stock Returns: An Alternative Test, Journal of Financial Markets 1, Easley, D., S. Hvidkjaer, and M. OHara (2002), Is Information Risk a Determinant of Asset Returns? Journal of Finance 57,

6 Eleswarapu, V., and M. Reinganum (1993), The Seasonal Behavior of the Liquidity Premium in Asset Pricing, Journal of Financial Economics 34, Goldreich, D., B. Hanke, and P. Nath (2005), The Price of Future Liquidity: Time- Varying Liquidity in the U.S. Treasury Market, Review of Finance 9, Hopman, C. (2002), Are Supply and Demand Driving Stock Prices?, Working Paper, MIT. Huberman, G., and D. Halka (2001), Systematic Liquidity, Journal of Financial Research 24, Jones, C. (2002), A Century of Market Liquidity and Trading Costs, Working Paper, Columbia University. Lee, C., A. Shleifer and R. Thaler (1991), Investor Sentiment and the Closed-End Fund Puzzle, Journal of Finance 46, Krishnamurthy, A. (2002), The Bond/Old-Bond Spread, Journal of Financial Economics 66, Longstaff, F. (2004), The Flight-to-Liquidity Premium in U.S. Treasury Bond Prices, Journal of Business 77, Lo, A., I. Rosu, and J. Wang (2005), A CAPM with Price Impact, Working Paper, MIT. Novy-Marx, R. (2006), Excess Returns to Illiquidity, Working Paper, University of Chicago. Petajisto, A. (2005), Why Do Demand Curves for Stocks Slope Down? Working Paper, Yale University. Pastor and Stambaugh (2003), Liquidity Risk and Expected Stock Returns, Journal of Political Economy 111, Shleifer, A. (1986), Do Demand Curves for Stocks Slope Down? Journal of Finance 41, Week 4: Market Microstructure: Price Formation and Trading Admati, A., and P. Pfleiderer (1988), A Theory of Intraday Patterns: Volume and Price Variability, Review of Financial Studies 1, Amihud, Y., and H. Mendelson (1980), Dealership Markets: Market Making with Inventory, Journal of Financial Economics 8, Campbell, J., and A. Kyle (1993), Smart Money, Noise Trading and Stock Price Behavior, Review of Economic Studies 60, Chakravarty, S. (2001), Stealth Trading: Which Traders Trades Move Prices?, Journal of Financial Economics 61, Copeland, T., and D. Galai (1983), Information Effects and the Bid-Ask Spread, Journal of Finance 38, Diamond and Verrecchia (1981), Information Aggregation in a Noisy Rational Expectations Economy, Journal of Financial Economics 9, Easley, D and M. OHara (1987), Price, Trade Size, and Information in Securities Markets, Journal of Financial Economics 19, Foster, D., and S. Viswanathan (1990), A Theory of the Intraday Variations in Volume, Variance, and Trading Costs in Securities Markets, Review of Financial Studies 3, Garman, M. (1976), Market Microstructure, Journal of Financial Economics 3,

7 Glosten, L., and P. Milgrom (1985), Bid, Ask, and Transaction Prices in a Specialist Market with Heterogeneously Informed Traders, Journal of Financial Economics 14, Grossman, S., and J. Stiglitz (1980), On the Impossibility of Informationally Efficient Markets, American Economic Review 70, Grossman, S. (1981), An Introduction to the Theory of Rational Expectations under Asymmetric Information, Review of Economic Studies 4, Grundy, B. and M. McNichols, (1989), Trade and Revelation of Information through Prices and Direct Disclosure, Review of Financial Studies 2, Hasbrouck, J., and G. Sofianos (1993), The Trades of Market Makers: An Empirical Analysis of NYSE Specialists, Journal of Finance 48, Hellwig, M. (1980), On the Aggregation of Information in Competitive Markets, Journal of Economic Theory 22, Hellwig, M. (1982), Rational Expectations Equilibrium with Conditioning on Past Prices: A Mean-Variance Example, Journal of Economic Theory 26, Ho, T., and H. Stoll (1981), Optimal Dealer Pricing Under Transactions and Return Uncertainty, Journal of Financial Economics 9, Kyle, A. (1985), Continuous Auctions and Insider Trading, Econometrica 53, Kyle, A. (1989) Informed Speculation with Imperfect Competition, Review of Economic Studies 56, Madhavan, A., M. Richardson, and M. Roomans (1997), Why Do Security Prices Change? A Transaction-Level Analysis of NYSE Stocks, Review of Financial Studies 6, Madhavan, A., and S. Smidt (1993), An Intraday Analysis of Daily Changes in Specialists Inventories and Quotations, Journal of Finance 48, Manaster, S., and S. Mann (1996), Life in the Pits: Competitive Market Making and Inventory Control, Review of Financial Studies 6, Milgrom, P., and N. Stokey (1982), Information, Trade and Common Knowledge, Journal of Economic Theory 26, Spiegel, M., and A. Subrahmanyam (1995), On Intraday Risk Premia, Journal of Finance 50, Stoll, H. (1976), Dealer Inventory Behavior: An Empirical Investigation of Nasdaq Stocks, Journal of Financial and Quantitative Analysis 11, Vayanos, D. (2001), Strategic Trading in a Dynamic Noisy Market, Journal of Finance 56, Wang, J. (1993), A Model of Intertemporal Asset Prices Under Asymmetric Information, Review of Economic Studies 60, Week 5: Market Microstructure: Different Aspects of Liquidity Allen, F. and D. Gale (1992), Stock-price manipulation, Review of Financial Studies 4, Allen, F. and G. Gorton (1992), Stock-price manipulation, market microstructure and asymmetric information, European Economic Review 36, Brunnermeier, M., and L. Pedersen (2005), Predatory Trading, Journal of Finance 60,

8 Brunnermeier, M., and L. Pedersen (2006), Market Liquidity and Funding Liquidity, Working Paper, Princeton University. Easley, D and M. OHara (1987), Price, Trade Size, and Information in Securities Markets, Journal of Financial Economics 19, Eisfeldt, A. (2004), Endogenous Liquidity in Asset Markets, Journal of Finance 59, Fishman, M., and K. Hagerty (1995), The Mandatory Disclosure of Trades and Market Liquidity, Review of Financial Studies 8, Gallmeyer, M., B. Hollifield, and D. Seppi (2005), Demand Discovery and Asset Pricing, Working Paper, Carnegie Mellon University. Glosten, L., and P. Milgrom (1985), Bid, Ask, and Transaction Prices in a Specialist Market with Heterogeneously Informed Traders, Journal of Financial Economics 14, Grossman, S., and M. Miller (1988), Liquidity and Market Structure, Journal of Finance 43, Holmstrom, B., and J. Tirole (2001), LAPM: A Liquidity-Based Asset Pricing Model, Journal of Finance 56, Huang, M. (2003), Liquidity Shocks and Equilibrium Liquidity Premia, Journal of Economic Theory 109, Keim, D. and A. Madhavan (1996), The Upstairs Market for Large-Block Transactions: Analysis and Measurement of Price Effects, Review of Financial Studies 9, Kyle, A. (1985), Continuous Auctions and Insider Trading, Econometrica 53, Vayanos, D. (2005), Flight to Quality, Flight to Liquidity, and the Pricing of Risk, Working Paper, MIT. Wang, J. (1993), A Model of Intertemporal Asset Prices Under Asymmetric Information, Review of Economic Studies 60, Week 6: Market Microstructure: Liquidity and Market Design Biais, B. (1993), Price Formation and Equilibrium Liquidity in Fragmented and Centralized Markets, Journal of Finance 48, Biais, B., T. Foucault, and F. Salanié (1998), Floors, Dealer Markets and Limit Order Markets, Journal of Financial Markets 1, Biais, B., P. Hillion, and C. Spatt (1995), An Empirical Analysis of the Limit Order Book and the Order Flow in the Paris Bourse, Journal of Finance 50, Biais, B., D. Martimort, and J-C. Rochet (2000), Competing Mechanisms in a Common Value Environment, Econometrica 68, Duffie, D., N. Garleanu, and L. Pedersen (2005), Over-The-Counter Markets, Econometrica 73, Foucault, T., O. Kadan, and E. Kandel (2005), Limit Order Book as a Market for Liquidity, Review of Financial Studies 18, Glosten, L. (1994), Is the Electronic Open Limit Order Book Inevitable?, Journal of Finance 49, Goettler, R., C. Parlour, and U. Rajan (2005), Equilibrium in a Dynamic Limit Order Market, Journal of Finance 60,

9 Hollifield, B., R. Miller, and P. Sandas (2004), Empirical Analysis of Limit Order Markets, Review of Economic Studies 71, Holthausen, R., R. Leftwich, and D. Mayers (1987), The Effect of Large Block Transactions on Security Prices: A Cross-Sectional Analysis, Journal of Financial Economics 19, Holthausen, R., R. Leftwich, and D. Mayers (1990), Large-Block Transactions, the Speed of Response, and Temporary and Permanent Stock-Price Effects, Journal of Financial Economics 26, Jain, P. (2002), Institutional Design and Liquidity at Stock Exchanges around the World, Working Paper, Indiana University. Jain, P. (2005), Financial Market Design and Equity Premium: Electronic Versus Floor Trading, Working Paper, University of Memphis. Keim, D. and A. Madhavan (1996), The Upstairs Market for Large-Block Transactions: Analysis and Measurement of Price Effects, Review of Financial Studies 9, Lo, A., C. MacKinlay, and J. Zhang (2002), Econometric Models of Limit-Order Executions, Journal of Financial Economics 65, Parlour, C. (1998), Price Dynamics in Limit Order Markets, Review of Financial Studies 11, Rosu, I. (2006), A Dynamic Model of the Limit Order Book, Working Paper, University of Chicago. Rust, J., and G. Hall (2003), Middlemen versus Market Makers: A Theory of Competitive Exchange, Journal of Political Economy 111, Sandas, P. (2001), Adverse Selection and Competitive Market Making: Empirical Evidence from a Limit Order Market, Review of Financial Studies 14, Seppi, D. (1990), Equilibrium Block Trading and Asymmetric Information, Journal of Finance 45, Seppi, D. (1992), Block Trading and Information Revelation around Quarterly Earnings Announcements, Review of Financial Studies 5, Seppi, D. (1997), Liquidity Provision with Limit Orders and a Strategic Specialist, Review of Financial Studies 10, Vayanos, D., and T. Wang (2006), Search and Endogenous Concentration of Liquidity in Asset Markets, Working Paper, London School of Economics. Week 7: Empirical Measures of Liquidity and Market Frictions Amihud, Y. (2002), Illiquidity and Stock Returns, Journal of Financial Markets 5, Chalmers, J., and G. Kadlec (1998), An Empirical Examination of the Amortized Spread, Journal of Financial Economics 48, Chen, Z., W. Stanzl, and M. Watanabe (2004), Price Impact Costs and the Limit of Arbitrage, Working Paper, Yale University. Chordia, T., R. Roll, and A. Subrahmanyam (2001), Market Liquidity and Trading Activity, Journal of Finance 56, Domowitz, I., J. Glen, and A. Madhavan (2001), Liquidity, Volatility and Equity Trading Costs Across Countries and Over Time, International Finance 4, Easley, D., S. Hvidkjaer, and M. OHara (2002), Is Information Risk a Determinant of Asset Returns? Journal of Finance 57,

10 Easley, D., N. Kiefer, and M. OHara (1997), One Day in the Life of a Very Common Stock, Review of Financial Studies 10, Easley, D., N. Kiefer, M. OHara, and J. Paperman (1996), Liquidity, Information and Less Frequently Traded Stocks, Journal of Finance 51, George, T., G. Kaul, and M. Nimalendran (1991), Estimation of the Bid-Ask Spread and its Components: A New Approach, Review of Financial Studies 4, Glosten, L., and L. Harris (1988), Estimating the Components of the Bid-Ask Spread, Journal of Financial Economics 21, Harris, L. (1990), Statistical Properties of the Roll Serial Covariance Bid/Ask Spread Estimator, Journal of Finance 65, Hasbrouck, J. (1991), Measuring the Information Content of Stock Trades, Journal of Finance 46, Hasbrouck, J. (1991), The Summary Informativeness of Stock Trades: An Econometric Analysis, Review of Financial Studies 4, Hausman, J., A. Lo, and C. MacKinlay (1992), An Ordered Probit Analysis of Transaction Stock Prices, Journal of Financial Economics 31, Huang, R., and H. Stoll (1997), The Components of the Bid-Ask Spread: A General Approach, Review of Financial Studies 10, Koren, M., and A. Szeidl (2002), Portfolio Choice with Illiquid Assets, Working Paper, Harvard University. Lesmond, D., J. Ogden, and C. Trzcinka (1999), A New Estimate of Transaction Costs, Review of Financial Studies 12, McInish, T., and R. Wood (1992), An Analysis of Intraday Patterns in Bid/Ask Spreads for NYSE Stocks, Journal of Finance 47, Pastor and Stambaugh (2003), Liquidity risk and expected stock returns, Journal of Political Economy 111, Petersen, M., and D. Fialkowski (1994), Posted versus Effective Spreads, Journal of Financial Economics 35, Roll, R. (1984), A Simple Implicit Measure of the Effective Bid-Ask Spread in an Efficient Market, Journal of Finance 39, Stoll, H. (1989), Inferring the Components of the Bid-Ask Spread: Theory and Empirical Tests, Journal of Finance 44, Week 8: Trading Volume and Volatility Brennan, M., T. Chordia, and A. Subrahmanyam (1998), Alternative Factor Specifications, Security Characteristics, and the Cross-Section of Expected Stock Returns, Journal of Financial Economics 49, Campbell, J., S. Grossman, and J. Wang (1993), Trading Volume and Serial Correlation in Stock Returns, Quarterly Journal of Economics 108, Chordia, T., R. Roll, and A. Subrahmanyam (2002), Order Imbalance, Liquidity and Market Returns, Journal of Financial Economics 65, Chordia, T., A. Sarkar, and A. Subrahmanyam (2006), An Empirical Analysis of Stock and Bond Market Liquidity, Review of Financial Studies, forthcoming. Chordia, T., and A. Subrahmanyam (2004), Order Imbalance and Individual Stock Returns: Theory and Evidence, Journal of Financial Economics 72,

11 Chordia, T., A. Subrahmanyam, and R. Anshuman (2001), Trading Activity and Expected Stock Returns, Journal of Financial Economics 59, French, K., W. Schwert, and R. Stambaugh (1987), Expected Stock Returns and Volatility, Journal of Financial Economics 19, George, T., G. Kaul, and M. Nimalendran (1994), Trading Volume and Transaction Costs in Specialist Markets, Journal of Finance 49, Glosten, L., R. Jagannathan, and D. Runkle (1993), On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks, Journal of Finance 68, Hasbrouck, J., and D. Seppi (2001), Common Factors in Prices, Order Flows and Liquidity, Journal of Financial Economics 59, Hong, H., and J. Wang (2000), Trading and Returns under Periodic Market Closures, Journal of Finance 55, Jain, P. and G. Joh (1988), The Dependence Between Hourly Prices and Trading Volume, Journal of Financial and Quantitative Analysis 23, Jones, C., G. Kaul, and M. Lipson (1994), Transactions, Volume, and Volatility, Review of Financial Studies 7, Kavajecz, K., and E. Odders-White (2001), Volatility and Market Structure, Journal of Financial Markets 4, Llorente, G., R. Michaely, G. Saar, and J. Wang (2002), Dynamic Volume-Return Relation of Individual Stocks, Review of Financial Studies 15, Lo, A., and J. Wang (2000), Trading Volume: Definitions, Data Analysis, and Implications of Portfolio Theory, Review of Financial Studies 13, Lo, A., and J. Wang (2006), Trading Volume: Implications of an Intertemporal Capital Asset Pricing Model, Journal of Finance, forthcoming. Lo, A., Mamaysky H., and J. Wang (2004), Asset Prices and Trading Volume Under Fixed Transactions Costs, Journal of Political Economy 112, Maheu, J., and T. McCurdy (2004), News Arrival, Jump Dynamics, and Volatility Components for Individual Stock Returns, Journal of Finance 59, Nagel, S. (2005), Trading Styles and Trading Volume, Working Paper, Stanford University. Odean, T. (1999), Do Investors Trade Too Much?, American Economic Review 89, Pagano, M. (1989), Endogenous Market Thinness and Stock Price Volatility, Review of Economic Studies 56, Pagano, M. (1989), Trading Volume and Asset Volatility, Quarterly Journal of Economics 104, Vayanos, D. (2004), Flight to Quality, Flight to Liquidity, and the Pricing of Risk, Working Paper, MIT. Wang, J. (1994), A Model of Competitive Stock-Trading Volume, Journal of Political Economy 102, Week 9: Market Efficiency, Limits of Arbitrage, Noise Trader Risk Chan, W. (2003), Stock Price Reaction to News and No-News: Drift and Reversal after Headlines, Journal of Financial Economics 70,

12 Chevalier, J., and G. Ellison (1997), Risk taking by mutual funds as a response to incentives, Journal of Political Economy 105, Chevalier, J., and G. Ellison (1999), Career concerns of mutual fund managers, Quarterly Journal of Economics 114, Coval, J., and E. Stafford (2005), Asset Fire Sales (and Purchases) in Equity Markets, Working Paper, Harvard Business School. D Avolio, G. (2002), The market for borrowing stock, Journal of Financial Economics 66, De Long, B., A. Shleifer, L. Summers, and R. Waldman (1990), Noise Trader Risk in Financial Markets, Journal of Political Economy 98, De Long, B., A. Shleifer, L. Summers, and R. Waldman (1991), The Survival of Noise Traders in Financial Markets, Journal of Business 64, Duffie, D. (1996), Special Repo Rates, Journal of Finance 51, Duffie, D., N. Garleanu, and L. Pedersen (2002), Securities Lending, Shorting, and Pricing, Journal of Financial Economics 66, Evans, R., C. Geczy, D. Musto, and A. Reed, Impediments to Short-Selling and Option Prices, Working Paper, Wharton. Geczy, C., D. Musto, and A. Reed, Stocks are Special Too: An Analysis of the Equity Lending Market, Journal of Financial Economics 66, Gromb, D., and D. Vayanos (2002), Equilibrium and Welfare in Markets with Financially Constrained Arbitrageurs, Journal of Financial Economics 66, Harris, M., and A. Raviv (1993), Differences of Opinion Make a Horse Race, Review of Financial Studies 6, Harrison, M., and D. Kreps (1978), Speculative investor behavior in a stock market with heterogeneous expectations, Quarterly Journal of Economics 92, Hong, H., and J. Stein (2003), Differences of Opinion, Short-Sales Constraints, and Market Crashes, Review of Financial Studies 16, Kandel, E., and N. Pearson (1995), Differential Interpretation of Public Signals and Trade in Speculative Markets, Journal of Political Economy 103, Kogan, L., S. Ross, J. Wang, and M. Westerfield (2006), The Survival and Price Impact of Irrational Traders, Journal of Finance 61, Miller, E. (1977), Risk, Uncertainty, and Divergence of Opinion, Journal of Finance 32, Mitchell, M., T. Pulvino, and E. Stafford (2002), Limited Arbitrage in Equity Markets, Journal of Finance 57, Odean, T. (1998), Volume, Volatility, Price, and Profit When All Traders Are above Average, Journal of Finance 53, Ofek, E., M. Richardson and R. Whitelaw (2006), Limited Arbitrage and Short Sales Restrictions: Evidence from the Options Markets, Journal of Financial Economics, forthcoming. Poterba, J., and L. Summers (1988), Mean Reversion in Stock Prices: Evidence and Implication, Journal of Financial Economics 22, Scharfstein, D., and J. Stein (1990), Herd behavior and investment, American Economic Review 80, Shleifer, A. and R. Vishny (1997), The Limits of Arbitrage, Journal of Finance 52,

13 Stein, J. (2005), Why Are Most Funds Open-End? Competition and the Limits of Arbitrage, Quarterly Journal of Economics 120, Summers, L. (1986), Does the Stock Market Rationally Reflect Fundamental Values?, Journal of Finance 41, Summers, L. (1985), On Economics and Finance, Journal of Finance 40, Vega, C. (2005), Stock Price Reaction to Public and Private Information, Journal of Financial Economics, forthcoming. Week 10: Bubbles, Crashes, Momentum, Post-Announcement Drift Abreu, D., and M. Brunnermeier (2003), Bubbles and Crashes, Econometrica 71, Allen, F., and D. Gale (2000), Bubbles and Crises, Economic Journal 110, Allen, F. and G. Gorton (1993), Churning Bubbles, Review of Economic Studies 60, Allen, F., S. Morris, and A. Postlewaite (1993), Finite Bubbles with Short Sale Constraints and Asymmetric Information, Journal of Economic Theory 61, Bikhchandani, S., D. Hirshleifer, and I. Welch (1992), A Theory of Fads, Fashion, Custom, and Cultural Change as Informational Cascades, Journal of Political Economy 100, Bulow, J., and P. Klemperer (1994), Rational Frenzies and Crashes, Journal of Political Economy 102, Blanchard, O., and M. Watson (1982), Bubbles, Rational Expectations and Financial Markets, NBER Working Paper #945. Frazzini, A. (2006), The Disposition Effect and Underreaction to News, Journal of Finance, forthcoming. Gennotte, G. and H. Leland (1990), Market Liquidity, Hedging and Crashes, American Economic Review 80, Hong, H., and J. Stein (1999), A Unified Theory of Underreaction, Momentum Trading, and Overreaction, Journal of Finance 54, Hou, K., L. Peng, and W. Xiong (2006), A Tale of Two Anomalies: The Implication of Investor Attention for Price and Earnings Momentum, Working Paper, Princeton University. Kyle, A., and W. Xiong (2001), Contagion as a Wealth Effect, Journal of Finance 56, Morris, S. (1996), Speculative investor behavior and learning, Quarterly Journal of Economics 110, Morris, S., and H. Shin (2004), Liquidity Black Holes, Review of Finance 8, Pastor, L., and P. Veronesi (2006), Was There a Nasdaq Bubble in the Late 1990s?, Journal of Financial Economics, forthcoming. Pastor, L., and P. Veronesi (2005), Technological Revolutions and Stock Prices, Working Paper, University of Chicago. Peng, L., and W. Xiong (2005), Investor Attention, Overconfidence, and Category Learning, Journal of Financial Economics, forthcoming. Sadka, R. (2005), Momentum and Post-Earnings-Announcement Drift Anomalies: The Role of Liquidity Risk, Journal of Financial Economics, forthcoming. 13

14 Scheinkman, J., and W. Xiong (2003), Overconfidence and Speculative Bubbles, Journal of Political Economy 111, Shin, H. (2005), Disclosure Risk and Price Drift, Working Paper, London School of Economics. Tirole, J. (1985), Asset Bubbles and Overlapping Generations, Econometrica 53, Veronesi, P. (1999), Stock Market Overreaction to Bad News in Good Times: A Rational Expectations Equilibrium, Review of Financial Studies 12,