This article combines the continuous arrival of information with the infrequency of trades and investigates the effects on asset price dynamics of positive- and negative-feedback trading. Specifically, the authors model an economy where stocks and bonds are traded by two types of agents:...

A cash-in-advance model of a monetary economy is used to derive a money-based capital asset pricing model (M-CAPM), which allows the authors to implement tests of asset pricing restrictions without consumption data. A test as in Eugene F. Fama and James D. Macbeth (1973) of the model suggests...

If a pricing kernel assigns a premium to a risk variable that differs from the one assigned by the minimum-variance admissible kernel, then the pricing kernel must exhibit more variability than the minimum-variance kernel. Based on this intuition, the authors derive a variance bound that is more...

Recent papers show that predictability calibrated to U.S. data has a large effect on the rebalancing behavior of a multiperiod investor. We find that this continues to be true in the presence of realistic transaction costs. In particular, predictability causes the no-trade region for the...