Publications

This chapter offers a new understanding of how financial markets work. The key departure from conventional theory is to recognize that investors do...

In a moral hazard setting with a performance additive in effort and a symmetrically distributed noise term, I show that compensation contracts which...

We investigate the effect of the ability of “non-traditional” funds to short-sell the equity of their debtors. This enables the funds to vote on the...

We examine whether a bidder can use tender o§er terms to signal post-takeover security benefits. Neither restricted bids nor cash-equity offers allow...

We survey theoretical developments in the literature on the limits of arbitrage. This literature investigates how costs faced by arbitrageurs can...

In this paper we develop a simple theoretical model to analyze the impact of institutional herding on asset prices. A growing empirical literature has...

In principle, credit rating agencies are supposed to be impartial observers that bridge the gap between private information of issuers and the...

How does economic theory need to adjust in light of the global financial crisis? This column presents a new insight on how innovation leads to rent...

Broad money and its credit counterparts played a key role in the conduct of British monetary policy in the period 1976 to 1987. This paper examines...

The major financial crises of the last 30 years are analyzed and some common features brought to light: lax supervision, easy money, risk appetite...

By connecting stocks through common active mutual fund ownership, we forecast cross-sectional variation in return covariance, controlling for...

The advent of the financial crisis in August 2007, and its subsequent intensification, has largely eroded the hitherto apparently sharp distinction...

Risk is endogenous. Equilibrium risk is the fixed point of the mapping that takes perceived risk to actual risk. When risk-neutral traders operate...