An analysis of whether investors consider the length of the settlement delay between the time a stock trade is executed and the security is delivered. By modeling stock returns and conducting regression tests, the author concludes that stock prices do reflect the effects of the settlement delay.

Market frictions, which exist even in efficient markets and change over time, impede trade but also offer profit opportunities. To provide a framework for understanding market frictions, the authors classify frictions into five categories.

Direct investment plans (commonly known as DRIPs) let investors bypass traditional investment channels and avoid problems such as high transactions costs and the relatively large dollar amounts necessary to purchase certain assets. While no one expects these plans to answer all of the modern...