The relationship between asset demand and information quality in rational expectations economies is analyzed. First we derive a number of new summary descriptive statistics that measure four basic characteristics of investment style: asset selection, market timing, aggressiveness, and...

We show that stock liquidity increases the propensity of firms to raise debt capital. The positive effect of liquidity on a debt issuance propensity is much stronger in firms with greater default risk. The effect of liquidity on the cost of debt capital is much larger than its effect on the cost...