Curse of the Benchmarks
Obsession with short-term performance against market cap benchmarks preordains the dysfunctionality of asset markets. The problems start when trustees...
The Dynamics of Financially Constrained Arbitrage
We develop a model of financially constrained arbitrage, and use it to study the dynamics of arbitrage capital, liquidity, and asset prices...
Asset Management Contracts and Equilibrium Prices
We study the joint determination of fund managers’ contracts and equilibrium asset prices. Because of agency frictions, investors make managers’ fees...
The Great Risk/Return Inversion - Who Loses Out?
Risk and return go hand in hand as companion variables central to the teaching and practice of economics and finance. Standard theory and common sense...
Liquidity Risk and the Dynamics of Arbitrage Capital
We develop a dynamic model of liquidity provision, in which hedgers can trade multiple risky assets with arbitrageurs. We compute the equilibrium in...
Bond market clienteles, the yield curve, and the optimal maturity structure of government debt
Review of Financial Studies, 26 (8). pp. 1914-1961.
An institutional theory of momentum and reversal
Review of Financial Studies, 26 (5). pp. 1087-1145.
Taming the finance monster
The best way to resolve global financial instability is for the owners of capital to assert themselves, with sovereign funds well positioned to take...
Market Liquidity - Theory and Empirical Evidence
In this paper we survey the theoretical and empirical literature on market liquidity. We organize both literatures around three basic questions: (a)...
Liquidity and Asset Returns under Asymmetric Information and Imperfect Competition
We analyze how asymmetric information and imperfect competition affect liquidity and asset prices. Our model has three periods: agents are identical...
Liquidity and asset returns under asymmetric information and imperfect competition
Review of Financial Studies, 25 (5). pp. 1339-1365.
New light on choice of investment strategy
According to classical economics, there are no gains to be made in an efficient market. Yet markets are often far from efficient and the gains are...
Making Europe Safer
Open letter by the international Euro-nomics academic group (www.euro-nomics.com), composed of Markus Brunnermeier, Luis Garicano, Philip R. Lane...
Preferred-Habitat Investors and the US Term Structure of Real Rates
We estimate structurally a model of the term structure of interest rates that is consistent with no arbitrage but allows for demand pressures. The...
Bond Market Clienteles, the Yield Curve and the Optimal Maturity Structure of Government Debt
We propose a clientele-based model of the yield curve and optimal maturity structure of government debt. Clienteles are generations of agents at...
