Market Liquidity: Equilibrium Prices and Portfolio Choice

This lecture covers the efficient market hypothesis, event studies, return predictability, mutual fund performance, and empirical evidence on active mutual fund performance. It discusses the underperformance of mutual fund managers, the persistence of fund performance, and the impact of expenses on fund returns. The lecture also explores the role of market liquidity, equilibrium prices, and optimal portfolio choice with transaction costs, using models like Kyle's model of trading with asymmetric information. It delves into the implications of market liquidity, price impact, and the incorporation of private information into prices.