Discussion Papers

We study the value of information in a competitive economy in which agents trade in asset markets to reallocate risk. We characterize the kinds of...

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

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

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

The purpose of this paper is to explore financial instability in this case due to a housing crisis and defaults on mortgages. The model incorporates...

Until recently, financial services regulation remained largely segmented along national lines. The integration of financial markets, however, calls...

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

We study technology adoption, risk and expected returns using a dynamic equilibrium model with production. The central insight is that optimal...

In this paper, we investigate whether U.S. bank holding companies (BHCs) with strong and independent risk management functions had lower aggregate...

We study flows between investment funds and their effects on asset prices in a simple two-period version of Vayanos and Woolley (2010, VW). As in VW...

This paper provides empirical evidence that managers adjust firm advertising expenditures to influence investor behavior and short-term stock prices...

This paper proposes and tests an investment-flow based explanation for three empirical findings on return predictability – the persistence of mutual...