Theoretical work in financial economics suggests that payoff complementarities lead to financial fragility. Indeed, phenomena like bank runs and currency attacks are often attributed to the feature that investors are better off taking the same action taken by other investors. Due to data...

Stock prices and real investments are highly correlated. Previous literature has offered two main explanations for this high correlation. The first explanation relies on price being informative about investment opportunities, the second one is based on financing constraints. In this paper we...

This paper empirically investigates directors' ownership in the mutual fund industry. Our results show that, contrary to anecdotal evidence, a significant portion of directors hold shares in the funds they oversee. Ownership patterns are broadly consistent with an optimal contracting...

The paper provides empirical evidence that strategic complementarities among investors generate fragility in financial markets. Analyzing mutual fund data, we find that, consistent with a theoretical model, funds with illiquid assets (where complementarities are stronger) exhibit stronger...

Bayesian learning implies decreasing weights on prior beliefs and increasing weights on track records, as the latter become more precise. We test whether investors learn about analyst predictive ability in this manner by examining market reactions to analysts' forecasts. Consistent with...