Complex investments are investments that are difficult to value in the short-term. In this paper, we analyze the incentives of a manager who is compensated based on short-term stock prices to invest in complex long-term investments. In particular, we explore how the manager's investment decision...

Aufbauend auf einem klassischen Finanzmarktmodell behandeln wir drei Modellvarianten, die jeweils einen anderen Ansatz der (heterogenen) Erwartungsbildung von Investoren über künftige Wertpapierpreise in den Vordergrund der Betrachtungen rücken: das Konzept der konsistenten Erwartungen, das...

This paper investigates whether activist investors' focus on short-term stock prices impedes their role in improving corporate governance. The model builds on the notion that both the act of intervention and the threat of an intervention can generate value for the target firm. While the effect...

The paper examines the tendency to sell winners and hold on to losers in a dynamic noisy rational expectations equilibrium with informed and uninformed investors. The key feature of the model is that the information asymmetry between investors varies over time. Besides demonstrating that the...

We construct and analyze a model of delegated portfolio management in which money managers signal their investment skills via their choice of transparency for their fund. We show that a natural equilibrium is one in which high- and low-skill managers pool in opaque funds, while medium-skill...

This paper provides evidence that the conflict of interest caused by the issuer-pays rating model leads to inflated corporate credit ratings. Comparing the ratings issued by Standard & Poor's Ratings Services (S&P) which follows this business model to those issued by the Egan-Jones Rating...

This paper develops a dynamic rational expectations model of the credit rating process, incorporating three critical elements of this industry: (i) the rating agencies' ability to misreport the issuer's credit quality, (ii) their ability to issue unsolicited ratings, and (iii) their reputational...

In most employment relationships, the employee's performance at the firm is privately, not publicly, observed. Firms can reward successful employees by publicizing their abilities, for example via a job title, a glowing letter of recommendation, or a resume-worthy award. Firms that establish...

The paper examines the tendency to sell winners and hold on to losers in a dynamic noisy rational expectations equilibrium with informed and uninformed investors. The key feature of the model is that the information asymmetry between investors varies over time. Besides demonstrating that the...