Does the Market Anticipate? Can it? Should it?

Kangda Ken Wren

Papers from arXiv.org

Abstract: We explore a nuance to 'no arbitrage': it can be suboptimal to act upon an arbitrage immediately; in such cases optimised trading can suppress the anticipation of predictable risky outcomes, creating an apparent Status Quo Bias. This is shown through continuous-time asset-pricing under model- or event-risk. Unlike standard treatments, we allow pre-horizon risk-outcome disclosures; the technical challenges are overcome by results from the 'weak viability' and 'side/inside information' literature. The tension between 'no arbitrage', 'information efficiency' and 'risk anticipation', and the interplay between the rate of 'signal-to-noise' and of 'current return', are exposed in a concrete, practically relevant, setting.

Date: 2026-03, Revised 2026-08
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://arxiv.org/pdf/2603.02187 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2603.02187

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().