We develop a model of financially constrained arbitrage, and use it to study the dynamics of arbitrage capital, liquidity, and asset prices. Arbitrageurs exploit price discrepancies between assets traded in segmented markets, and in doing so provide liquidity to investors. A collateral...

This paper studies how U.S. monetary policy affects global stock prices. We find that global stock prices respond strongly to changes in U.S. interest rate policy, with stock prices increasing (decreasing) following unexpected monetary loosening (tightening). This impact is more pronounced for...

We consider a setting in which insiders have information about income that outside shareholders do not, but property rights ensure that outside shareholders can enforce a fair payout. To avoid intervention, insiders report income consistent with outsiders' expectations based on publicly...

Recent takeover activity has been characterized by broader participation in acquiror financing on both debt and equity sides. We focus on private equity buyouts, and investigate whether the number of financing participants is related to the likelihood of insider trading prior to the bid...

We analyze the reliability of voluntary disclosures of financial information, focusing on widely-employed publicly available hedge fund databases. Tracking changes to statements of historical performance recorded at different points in time between 2007 and 2011, we find that historical returns...

This paper studies international equity markets when some investors have private information that is valuable for trading in many countries simultaneously. We use a dynamic model of equity trading to show that 'global' private information helps understand US investors’ trading behaviour and...

This paper reconsiders the role of foreign investors in developed country equity markets. It presents a quantitative model of trading that is built around two new assumptions about investor sophistication: (i) both the foreign and domestic populations contain investors with superior information...

A competitive stock market is embedded into a neoclassical growth economy to analyze the interplay between the acquisition of information about firms, its partial revelation through stock prices, capital allocation and income. The stock market allows investors to share their costly private...

We study a general static noisy rational expectations model, where investors have private information about asset payo¤s, with common and private components, and about their own exposure to an aggregate risk factor, and derive conditions for existence and uniqueness (or multiplicity) of...

The main objective of this paper is to provide estimates of the cost of moving out of subsistence for Madagascar's farmers. The analysis is based on a simple asset-return model of occupational choice. Estimates suggest that the entry (sunk) cost associated with moving out of subsistence can be...