A dynamic market for a risky asset with a continuum of risk averse heterogeneously informed investors and a risk neutral competitive market sector is examined. The market is (semi-strong) informationally efficient due to competitive market making activity. The paper analyzes the effect of...

Suppose that information about the value of a risky asset is dispersed among many agents in the economy. The paper studies the rate at which successive price quotations from competitive market makers, which reflect the desired (notional) trades of risk- averse informed agents, reveal the value...

We develop a model of banking competition which allows us to disentangle the roles that limited liability, deposit insurance (both with flat and risk-based premia), and rivalry for deposits play in determining risk-taking incentives both in the asset and the liability side of the balance sheet....

This paper studies the effect of debt renegotiation on the design of optimal loan arrangements in a model of borrowing and lending with asymmetric information. The optimal form of finance is a standard debt contract with a bankruptcy clause that acts as a payment incentive. Debt renegotiation...

The residence-based principle has been proposed as a second-best measure to the full international coordination of capital tax policies. A basic requirement for this system to work is that tax authorities have full information about the foreign investments of their residents. The degree of...

This paper uses ML and GMM techniques to estimate systems of stochastic differential equations that describe the behaviour of stock returns. We test restrictions implied by a continuous time asset pricing model that builds on the work of Chamberlain (1988). The stochastic differential equations...

The paper explains why an issuer may wish to raise external capital by selling multiple financial claims that partition its total asset cash flows, rather than a single claim. It is shown that in an asymmetric information environment, the issuer's expected revenue is enhanced by such cash flow...

The industrial structure of an intermediation industry is analysed in brokerage markets, where intermediaries help to reduce search frictions. The aspect of competition in intermediated markets is analysed in an `island economy', in which intermediaries invest in information networks, which...