We study the disagreement of foreign exchange (FX) dealers using proprietary survey data on dealers' price quotes of short- and long-tenor currency derivatives. Dispersion among dealers is the highest at short tenors, where heterogeneous information is of great relevance, and is much lower at...

The paper develops a model of bubbles that can be taken to the data and explain the behavior of asset prices and their statistics. We depart from the rational expectations framework and assume that investors are only boundedly rational. They observe the price process, but do not fully understand...

We demonstrate the asset pricing implications of investors' belief heterogeneity in the frequency of news arrival and its joint impact with heterogeneous beliefs about news content. Investors trade volatility derivatives against each other to speculate on the rate of news arrival: greater...

We demonstrate the asset pricing implications of investors' belief heterogeneity in the frequency of news arrival and its joint impact with heterogeneous beliefs about news content. Investors trade volatility derivatives against each other to speculate on the rate of news arrival: greater...

We evaluate the impact of portfolio constraints on financial markets in a dynamic equilibrium pure exchange economy with one consumption good and two CRRA investors that may differ in risk aversions, beliefs regarding the dividend process and portfolio constraints. Despite numerous applications,...

plausible economic environments. We also show that our results can be applied to portfolio management with tracking-error.

We provide a novel theoretical analysis of how index investing affects capital market equilibrium. We consider a dynamic exchange economy with heterogeneous investors and two Lucas trees and find that indexing can either increase or decrease the correlation between stock returns and in general...