We propose a new measure of market liquidity based on the investors' optimal searching behaviour. Thus, we add a wealth filter on Pagano (1989)'s measure of liquidity to build the strong tie between endogenous market participation and investor wealth, as has been documented by empirical works.

Research in behaviour finance has provided seemingly persuasive evidences that overconfidence affects asset prices. We provide a model with model uncertainty and overconfidence in which overconfidence could have no effect on asset prices.

We discuss some problems with the modelling methods in the overconfidence literature. We argue that overconfidence models should be well constructed such that overconfident investors in the behavioural model could be distinguished clearly from the more informed investors in the rational...

Younger, riskier, less credible firms do not voluntarily supply initial public offering prospectus earnings forecasts. Nondisclosure increases valuation uncertainty risk, thus necessitating higher first-day underpricing and long-run performance as compensation.