A Theory of the Dynamics of Security Returns Around Market Closures,

Authors

  • Steve L. Slezak University of Michigan

DOI:

https://doi.org/10.1016/1057-0810(95)90041-1

Abstract

Numerous empirical studies document patterns in the means and variances of security returns measured over periods that are punctuated by market closures. This article develops a multiperiod model in which closures delay the resolution of uncertainty, thereby redistrib- uting risk across time and agents. Since agents are risk averse in the model, this redistribution affects the equilibrium price, altering risk premia, liquidity costs, and the degree of infor- mational asymmetry. As a consequence, closures alter both the means and variances of returns. The article demonstrates that closures can generate a variety of mean and variance effects, including those that mirror the empirical phenomena. The Journal of Finance, September 1994,49(4): 1163-l 2 11. (Reprinted with permission of The Journal of Finance.)

Published

1995-06-30

How to Cite

Slezak , S. L. (1995). A Theory of the Dynamics of Security Returns Around Market Closures,. Financial Services Review, 4(1), 68–69. https://doi.org/10.1016/1057-0810(95)90041-1

Issue

Vol. 4 No. 1 (1995): Financial Services Review

Section

Abstracts of Articles on Individual Financial Management

License

Copyright (c) 1995 JAI Press Inc.

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