We analyze myopic trader models of noisy prices in financial markets. Unlike extant analysis, such as De Long et al. (1990a), a classical equilibrium exists in our analysis, e.g., a riskless perpetuity is priced by arbitrage and its price does not vary with noise. A unique noisy equilibrium...

A new algorithm for asset allocation is developed. The algorithm provides consistent approximations to the optimal savings allocations which are dependent upon personal characteristics such as age and income. Numerical analysis is used to solve an individual's lifetime consumption-investment...

Non-systematic volatilities of small firms are special as predictors of stock returns. They are positively related with future returns on all age and size portfolios. They dominate systematic volatility, big-firm volatility and other volatilities. And there is strong evidence that idiosyncratic...

One of the central questions in financial economics is the determination of asset prices, such as the value of a stock. Over the past three decades, research on this topic has converged on a concept called the quot;state-price densityquot;. However, a puzzle has arisen. On the one hand, Cox,...

The equilibrium value of the market portfolio of all assets, i.e. aggregate wealth is calculated within a continuous-time Rubinstein/Lucas model. Aggregate wealth is a function of aggregate consumption and the state of the economy. The exante expected rate of return of the market portfolio...