We survey theoretical developments in the literature on the limits of arbitrage. This literature
investigates how costs faced by arbitrageurs can prevent them from eliminating mispricings …

NBER WORKING PAPER SERIES BUBBLES, CRISES, AND HETEROGENEOUS BELIEFS
Wei Xiong Working Paper 18905 http://www.nber.org/papers/w1 Page 1 NBER WORKING …

In sharp contrast to most previous crisis episodes, the Treasury market experienced severe
stress and illiquidity during the COVID-19 crisis, raising concerns that the safe-haven status …

I present closed-form solutions for prices, portfolios, and beliefs in a model where four types
of investors trade assets over time: naive investors who learn via a social network,“fanatics” …

We define quality as characteristics that investors should be willing to pay a higher price for.
Theoretically, we provide a tractable valuation model that shows how stock prices should …

Buying is easier than shorting for many equity investors. Combining this arbitrage
asymmetry with the arbitrage risk represented by idiosyncratic volatility (IVOL) explains the …

This study explores the role of investor sentiment in a broad set of anomalies in cross-
sectional stock returns. We consider a setting in which the presence of market-wide …

We study how investor sentiment affects the cross‐section of stock returns. We predict that a
wave of investor sentiment has larger effects on securities whose valuations are highly …

We provide a model that links an asset's market liquidity (ie, the ease with which it is traded)
and traders' funding liquidity (ie, the ease with which they can obtain funding). Traders …

This paper solves explicitly a simple equilibrium model with liquidity risk. In our liquidity-
adjusted capital asset pricing model, a security's required return depends on its expected …