Motivated by psychological evidence that attention is a scarce cognitive resource, we model investors' attention allocation in learning and study the effects of this on asset-price dynamics. We show that limited investor attention leads to ``category-learningquot; behavior, i.e., investors tend...

We develop a model of asset price bubbles based on the communication process between advisors and investors. Advisors are well-intentioned and want to maximize the welfare of their advisees (like a parent treats a child). But only some advisors understand the new technology (the tech-savvies);...

We study the macroeconomic consequences of financial market concentration in a complete markets economy with production. We propose a theory in which differences in preferences, productivity, and risk exposure generate gains from trade, but these gains are not fully realized because some large...

To confront the challenge that disaster risk is “dark matter” in finance, we construct an objective measure of disaster risk, which is able to predict half of GDP crashes in a sample of 20 advanced economies between 1870 and 2021. Despite this significant predictability, we find no...