Economic variables move asymmetrically over the business cycle: quickly during crises but slowly during recoveries. I show that this asymmetry is stronger in countries with less developed financial systems and greater financial frictions. Then I explain this fact using a learning model with...

The authors consider a model of the stock market with delegated portfolio management. Portfolio managers try, but sometimes fail, to discover profitable trading opportunities. Although it is best not to trade in this case, their clients cannot distinguish 'actively doing nothing,' in this sense,...

Two hypotheses concerning firms issuing debt for the first time are tested. The first is that new firms' debt is discounted more heavily by lenders compared to otherwise identical firms that have 'reputations' in the form of credit histories. The second hypothesis is that, prior to the...