regulatory capital requirements can place an effective constraint on the number of opportunities that these professionals may undertake at a given point in time. Hence, these institutional factors may cause the short-run marginal cost of capital for these financial firms to vary dramatically over short time intervals. Therefore, to abstract from these factors may be to neglect an order-one influence on the short-run behavior of security prices Similarly, models that posit the usual tatonnement process for equilibrium asset-price formation do not explicitly provide a functional role for the complicated and dynamic system of dealers, market makers and traders observed in the real world. It would, thus, be no surprise that such models generate limited insights into market activities and price formation on this time scale. The expressed recognition of a nontatonnement process for speculative- price formation is probably only important in studies of very short-run behavior. The limitations of the perfect-market model are not however confined solely to such analyses The acquisition of information and its dissemination to other economic units are, as we all know, central activities in all areas of finance, and especially so in capital markets. As we also know, asset pricing models typically assume both that the diffusion of every type of publicly available Information takes lace instantaneously among all investors and that investors act on the information as soon as it is received. Whether so simple an Information structure is adequate to describe empirical asset-price behavior depends on both the nature of the information and the time scale of the anal. It may, for example, be reasonable to expect rapid reactions in prices to the announcement through standard channels of new data (e.g,-4- regulatory capital requirements can place an effective constraint on the number of opportunities that these professionals may undertake at a given point in time. Hence, these institutional factors may cause the short-run marginal cost of capital for these financial firms to vary dramatically over short time intervals. Therefore, to abstract from these factors may be to neglect an order-one influence on the short-run behavior of security prices. Similarly, models that posit the usual tatonnement process for equilibrium asset-price formation do not explicitly provide a functional role for the complicated and dynamic system of dealers, market makers and traders observed in the real world. It would, thus, be no surprise that such models generate limited insights into market activities and price formation on this time scale. The expressed recognition of a nontatonnement process for speculative￾price formation is probably only important in studies of very short-run behavior. The limitations of the perfect-market model are not however confined solely to such analyses. The acquisition of information and its dissemination to other economic units are, as we all know, central activities in all areas of finance, and especially so in capital markets. As we also know, asset pricing models typically assume both that the diffusion of every type of publicly available information takes -,Mace instantaneously among all investors and that investors act on the information as soon as it is received. Whether so simple an information structure is adequate to describe empirical asset-price behavior depends on both the nature of the information and the time scale of the analysis. It may, for example, be reasonable to expect rapid reactions in prices to the announcement through standard channels of new data (e.g