In our model, we treat a market game where traders are heterogeneous not only with respect to their rationality level but also with the formation of their subjective beliefs for the strategy of their opponents. Under these conditions, the market mechanism results a statistical equilibrium, where...

In this paper we provide a systematic study of the robustness of probability limits and central limit theory for realised multipower variation when we add finite activity and infinite activity jump processes to an underlying Brownian semimartingale.

Financial assets` quoted prices normally change through frequent revisions, or jumps. For markets where quotes are almost always revised by the minimum price tick, this paper proposes a new estimator of Quadratic Variation which is robust to microstructure effects. It compares the number of...

We examine the shareholder wealth effects of takeover defenses by developing a model in which takeovers facilitate the implementation of technological innovations. In the rational expectations equilibrium of the model with explicit contracts, we show that takeover defenses are deployed to insure...

We present a model of cash constrained entrepreneurs who need an investor to finance their project. Investors can either be uninformed, such as individual bondholders, or informed, such as venture capitalists and banks. There is an entrepreneurial moral hazard problem, which can be partially...

This paper investigates the governance structure choices of firms when there is competition between legal systems. We study the impact of the allocation of control over choice of governance and reincorporation on firms` technologies and technological specialization of countries in the context of...

We investigate the optimal regulation of financial conglomerates which combine a bank and a non-bank financial institution. The conglomerate`s risk-taking incentives depend upon the level of market discipline it faces, which in turn is determined by the conglomerate`s liability structure. We...

We study price formation in securities markets, using the sequential trade framework of Glosten and Milgrom [7]. This paper makes one basic methodological advance over previous research on sequential securities trading: we allow traders to choose from n trade sizes in a multi-period market,...

In this paper we provide an asymptotic analysis of generalised bipower measures of the variation of price processes in financial economics. These measures encompass the usual quadratic variation, power variation and bipower variations which have been highlighted in recent years in financial...

The basic question regarding sovereign debt is why sovereign borrowers ever repay, provided that creditors have no power to foreclose on any of their assets. In this paper we suggest an answer: sovereign debt will be served as long as the median voter is a net loser from default. Default...