This paper surveys the field of asset pricing. The emphasis is on the interplay between
theory and empirical work and on the trade‐off between risk and return. Modern research …

The Ellsberg paradox suggests that people's behavior is different in risky situations—when
they are given objective probabilities—from their behavior in ambiguous situations—when …

It is well-known that Control Theory was founded by N. Wiener in 1948 ([349]). After that, this
theory was greatly extended to various complicated setting and widely used in sciences and …

Managed portfolios that take less risk when volatility is high produce large alphas, increase
Sharpe ratios, and produce large utility gains for mean‐variance investors. We document …

In this essay, we discuss the emerging literature in macroeconomics that combines
heterogeneous agent models, nominal rigidities, and aggregate shocks. This literature …

We are concerned with different properties of backward stochastic differential equations and
their applications to finance. These equations, first introduced by Pardoux and Peng (1990) …

This book is intended for readers who are quite familiar with probability and stochastic
processes but know little or nothing about finance. It is written in the definition/theorem/proof …

This is a thoroughly updated edition of Dynamic Asset Pricing Theory, the standard text for
doctoral students and researchers on the theory of asset pricing and portfolio selection in …

The standard theory of decision making under uncertainty advises the decision maker to
form a statistical model linking outcomes to decisions and then to choose the optimal …

This paper investigates the testable restrictions on the time-series behavior of consumption
and asset returns implied by a representative agent model in which intertemporal …