We study the investment behavior of foreign investors in association with an equity market liberalization, and find a strong link between foreigners trading and local market returns. In the period following the liberalization, net purchases by foreign investors induced a permanent increase in stock prices, suggesting that local firms reduced their cost of equity capital. We also find a strong l...

Most existing portfolio choice models ignore the prevalent periodic market closure and the fact that market volatility is significantly higher during trading periods. We find that market closure and the volatility difference across trading and nontrading periods significantly change optimal trading strategies. In addition, we numerically demonstrate that transaction costs can have a first order...

A major concern with tradable emission permits is that stochastic permit prices may reduce a firm’s incentive to invest in abatement capital or technologies relative to other policies such as a fixed emissions charge. However, under efficient permit trading, the permit price uncertainty is caused by abatement cost uncertainties which affect investment under both permit and charge policies. We d...

In pre-industrial Europe, rising productivity both in agriculture and in industry depended on the expansion of trade, and the expansion of trade depended in turn on the reduction of trading costs. An important component of trading costs—for some goods the most important—was the cost of transportation. This had two elements: the cost of predation and the cost of carriage. This paper examines the...

Trading systems are used widely in the financial industry. A trading system must implement the complex business process correctly, and provide good interoperability with clients and legacy systems in different organizations. In addition, it has to be highly scalable and reliable. How to develop a trading system that meets all these requirements with low cost is a challenging problem. In this pa...

We consider the problem of mean-variance optimal agency execution strategies, when the market liquidity and volatility vary randomly in time. Under specific assumptions for the stochastic processes satisfied by these parameters, we construct a Hamilton-Jacobi-Bellman equation for the optimal cost and strategy. We solve this equation numerically and illustrate optimal strategies for varying risk...