We present evidence that some mutual funds systematically act as contrarian traders, and earn returns in the stock market by providing liquidity to investors that demand immediacy, while others systematically realize costs of immediacy. On average, the mutual funds’ costs of immediacy exceed...

In this paper we study industry equilibrium and the effects of integration under the assumptions that 1) firms must use outside financing and 2) they face a moral hazard problem due to the possibility of taking excessive risks. These are typical features of banking and insurance, for instance....

We develop a model based on risk averse investors and limited arbitrage capital to explain the rationale for the so called carry trades: that is, trades where “the purchase of riskier, higher-yielding assets is funded by selling lower-yielding currencies” (Financial Times, January 28, 2008)....

We present a theory of the linkages between corporate governance, corporate finance, and the real sector of an economy. Using a structural model of industry equilibrium with endogenous entry, we show that poor corporate governance leads to low levels of competition, and to firms with high...

We study a repeated game where a seller, who has a short-term incentive to supply low quality, is periodically matched with a randomly selected buyer. Buyers observe only the outcomes of their neighbors' games and may receive signals from them. When the buyer population is large, the seller may...

I consider a market microstructure model in which the rates of public and private information arrival are probabilistic. The latter depends on the availability of private information that is stochastically changing over time. In equilibrium, traders estimate the availability of private...