This study provides an explanation for the emergence of power laws in asset trading volume and returns. We consider a two-state model with binary actions, where traders infer other traders' private signals regarding the value of an asset from their actions and adjust their own behavior...

This paper explores whether affine models with volatility jumps estimated on intradaily S&P 500 futures data over 1983-2008 can capture major daily outliers such as the 1987 stock market crash. I find that intradaily jumps in futures prices are typically small, and that self-exciting but...