Investigation Bandwidth


1. Motivation Time is dimensionless in modern asset pricing theory. e.g., the canonical Euler equation: \begin{align} P_t &= \widetilde{\mathrm{E}}_t[ \, P_{t+1} + D_{t+1} \, ] \label{eqn:euler} \end{align} says that the price of an asset at … [Continue reading]

The Secrets N Prices Keep


1. Introduction Prices are signals about shocks to fundamentals. In a world where there are many stocks and lots of different kinds of shocks to fundamentals, traders are often more concerned with identifying exactly which shocks took place than … [Continue reading]

Constraining Effort Not Bandwidth


1. Introduction Imagine trying to fill up a $5$ gallon bucket using a hand-powered water pump. You might end up with a half-full bucket after $1$ hour of work for either of $2$ reasons. First, the spigot might be too narrow. i.e., even though you … [Continue reading]