We find that active mutual funds perform better after trading more. This time-series relation between a fund’s turnover and its subsequent benchmarkadjusted return is especially strong for small, high-fee funds. These results are consistent with high-fee funds having greater skill to identify...

We survey the literature analysing the price formation and trading process, and the consequences of market organization for price discovery and welfare. We develop a united perspective on theoretical, empirical and experimental approaches. We discuss the evidence on transaction costs and the...

We use a unique data set to analyse how UK banks deal with small to medium size distressed firms both inside and outside bankruptcy. The approach to bankruptcy is contract-based, with lenders and borrowers relying on procedures written into the debt contract, and where the courts are largely...

We examine the risk-return characteristics of a rolling portfolio investment strategy where more than six thousand Nasdaq initial public offering (IPO) stocks are bought and held for up to five years. The average long-run portfolio return is low, but IPO stocks appear as ‘longshots’, as...

This paper derives arbitrage trading strategies taking into account the fact that the actions of arbitrageurs impact prices. This avoids the difficulty of having to rely on exogenous position limits to prevent infinite arbitrage profits. When arbitrageurs are financially constrained their...

A growing and deepening divide has opened up between countries where economic development has “taken off” and those caught in a vicious cycle of institutional backwardness and macroeconomic instability. This “Great Divide” is visible in almost every measure of economic performance, such...

We show that direct investments by consumers without the use of financial intermediaries can efficiently allocate financial capital to firms seeking funding for production of a novel consumption good. In our setting, consumers are also investors, and their privately known consumption preferences...

We analyse the Pareto optimal contracts between lenders and borrowers in a model with asymmetric information. The model is a generalization of the Rothschild-Stiglitz pure adverse selection problem to include moral hazard with limited liability contracts. Entrepreneurs with unequal ``abilities"...

In an economy where entrepreneurs with unequal ‘abilities’ face alternative investment projects, which differ in their degree of risk and productivity, we analyse the Nash equilibrium contracts arising from a banks-borrowers game in the context of asymmetric information. We show that, for a...