This paper provides a new explanation for closed-end fund (CEF) discounts and premiums using the local martingale theory of asset price bubbles. This is a rational asset pricing model that is shown to be consistent with the existing empirical evidence on CEF discounts/premiums. Additional...

Jensen's alpha is well-known to be a measure of abnormal performance in the evaluation of securities and portfolios where abnormal performance is defined to be an expected return that exceeds the equilibrium risk adjusted rate. It is also well known that in estimating Jensen's alpha, a non-zero...

This paper studies asset price bubbles in a continuous time model using the local martingale framework. Providing careful definitions of the asset's market and fundamental price, we characterize all possible price bubbles in an incomplete market satisfying the "no free lunch with vanishing risk...

This paper develops a new model for studying foreign currency exchange rate bubbles. The model constructed is a modification of the Martingale-based bubble approach of Jarrow, Protter, and Shimbo [12], [13]. This model generates some new insights into our understanding of exchange rate bubbles...

Jensen's alpha is well-known to be a measure of abnormal performance in the evaluation of securities and portfolios where abnormal performance is defined to be an expected return that exceeds the equilibrium risk adjusted rate. It is also well known that in estimating Jensen's alpha, a non-zero...

A traditional model for financial asset prices is that of a solution of a stochastic differential equation, driven by Brownian motion and Lebesgue measure; that is, a standard diffusion. The classic Black-Scholes model is a special case of this rubric. In some situations, however, such a model is...

A parameterized family of financial market models is presented. These models have jumps intrinsic to the price processes yet have strict completeness, equivalent martingale measures, and no arbitrage. For each value of the parameter $\beta (-2\leq\beta 0)$ the model is just as rich as the...