Financial Markets where Traders Neglect the Informational Content of Prices
We present a model of a financial market where some traders are “cursed” when investing in a risky asset, failing to fully appreciate what prices...
Trading and Information Diffusion in Over-the-Counter Markets
We propose a model of trade in over-the-counter (OTC) markets in which each dealer with private information can engage in bilateral transactions with...
The Effect of Superstar Firms on College Major Choice
We study the effect of superstar firms on an important human capital decision – college students’ choice of major. Past salient, extreme events in an...
Learning from History: Volatility and Financial Crises
We study the effects of stock market volatility on risk-taking and financial crises by constructing a cross-country database spanning up to 211 years...
The Quanto Theory of Exchange Rates
We present a new, theoretically motivated, forecasting variable for exchange rates that is based on the prices of quanto index contracts, and show via...
A Tale of Two Indexes: Predicting Equity Market Downturns in China
Predicting stock market crashes is a focus of interest for both researchers and practitioners. Several prediction models have been developed, mostly...
The Dynamics of Financially Constrained Arbitrage
We develop a model in which financially constrained arbitrageurs exploit price discrepancies across segmented markets. We show that the dynamics of...
Financial Markets where Traders Neglect the Informational Content of Prices
We present a model of a financial market where some traders are “cursed” when investing in a risky asset, failing to fully appreciate what prices...
The Quanto Theory of Exchange Rates
We present a new, theoretically motivated, forecasting variable for exchange rates that is based on the prices of quanto index contracts, and show via...
Financial Choice and Financial Information
We analyze the implications of increases in the selection of, and information about, derivative financial products in a model in which investors...
The Optimal Consumption Function in a Brownian Model of Accumulation. Part C: A Dynamical System Formulation
This Paper continues the study of the Optimal Consumption Function in a Brownian Model of Accumulation, see Part A [2001] and Part B [2014]; a...
Monetary Easing and Financial Instability
We study optimal monetary policy in the presence of financial stability concerns. We build a model in which monetary easing can lower the cost of...
Collateral Constraints and Asset Prices
We study the effects of collateral constraints in an economy populated by investors with nonpledgeable labor incomes and heterogeneous preferences and...
The Anatomy of the CDS Market
Using novel position and trading data for single-name corporate credit default swaps (CDSs), we provide evidence that CDS markets emerge as...
What is the Expected Return on a Stock?
We derive a formula that expresses the expected return on a stock in terms of the risk-neutral variance of the market and the stock’s excess risk...
The Anatomy of the CDS Market
Using novel position and trading data for single-name corporate credit default swaps (CDSs), we provide evidence that CDS markets emerge as...
