will not continue to be a useful abstraction for financial analysis. The model may indeed provide the best description of the financial system in the long run. It does, however, suggest that researchers be cognizant of the insensitivity of this model to institutional complexities and explicitly assess the limits of precision that can be reasonably expected from its predictions about the nature and timing of financial behavior. Moreover, I believe that even modest recognition of institutional structures and information costs can go a long way toward explaining financial behavior that is otherwise seen as anomalous to the standard frictionless-market model. To illustrate this thesis, I now turn to the development of a simple model of capital market equilibrium with incomplete information-7- will not continue to be a useful abstraction for financial analysis. The model may indeed provide the best description of the financial system in the long run.8 It does, however, suggest that researchers be cognizant of the insensitivity of this model to institutional complexities and explicitly assess the limits of precision that can be reasonably expected from its predictions about the nature and timing of financial behavior. Moreover, I believe that even modest recognition of institutional structures and information costs can go a long way toward explaining financial behavior that is otherwise seen as anomalous to the standard frictionless-market model. To illustrate this thesis, I now turn to the development of a simple model of capital market equilibrium with incomplete information