We present a rational general equilibrium model that highlights the fact that relative wealth concerns can play a role in explaining financial bubbles. We consider a finite-horizon overlapping generations model in which agents care only about their consumption. Though the horizon is finite,...

Motivated by the insight of Keynes (1936) on the importance of higher-order beliefs in financial markets, we examine the role of such beliefs in generating drift in asset prices. We show that in a dynamic setting, a higher-order difference of opinions is necessary for heterogeneous beliefs to...

We analyze the effects of the observed increased share of delegated capital for trading strategies and equilibrium prices by introducing delegation into a standard Lucas exchange economy. In equilibrium, some investors trade on their own account, but others decide to delegate trading to...

We study capital structure choices that entrepreneurs make in their firms' initial year of operation, using restricted-access data from the Kauffman Firm Survey. Firms in our data rely heavily on external debt sources, such as bank financing, and less extensively on friends-and-family-based...

Strategic alliances are long-term contracts between legally distinct organizations that provide for sharing the costs and benefits of a mutually beneficial activity. In this paper, I develop and test a model that helps explain why firms sometimes prefer alliances over internally organized...

In this paper, we use call option prices to identify synergies and news from merger and acquisition (M&A) transaction announcements. We find that M&A announcements result in large and approximately equal gains to the bidder and the target on average, with the combined gains being large enough to...

We study the relations between management contract terms and performance in private equity using new data for 837 funds from 1984--2010. We find no evidence that higher fees or lower managerial ownership are associated with lower net-of-fee performance. Nevertheless, compensation rises and...