For any positive diffusion with minimal regularity, there exists a semimartingale, with uniformly close paths, which is a martingale under an equivalent probability. As a result, in models of asset prices based on such diffusions, arbitrage and bubbles alike disappear under proportional...

We find asymptotically optimal trading policies for long-term investors with constant relative risk aversion, in a multiple-assets market where expected returns and covariances are constant, and the execution price of each asset is linear in the trading intensities of all assets. Trading towards...

We find optimal trading policies for long-term investors with constant relative risk aversion and constant investment opportunities, which include one safe asset, liquid risky assets, and an illiquid risky asset trading with proportional costs. Access to liquid assets creates a diversification...

When trading incurs proportional costs, leverage can scale an asset's return only up to a maximum multiple, which is sensitive to its volatility and liquidity. In a model with one safe and one risky asset, with constant investment opportunities and proportional costs, we find strategies that...

Shortfall aversion reflects the higher utility loss of spending cuts from a reference than the utility gain from similar spending increases. Inspired by Prospect Theory's loss aversion and the peak-end rule, this paper posits a model of utility from spending scaled by past peak-spending. In...

Never selling stocks is optimal for investors with a long horizon and a realistic range of preference and market parameters, if relative risk aversion, investment opportunities, proportional transaction costs, and dividend yields are constant. Such investors should buy stocks when their...

Shortfall aversion reflects the higher utility loss of spending cuts from a reference than the utility gain from similar spending increases. Inspired by Prospect Theory's loss aversion and the peak-end rule, this paper posits a model of utility from spending scaled by past peak-spending. In...