We find that shocks to the equity capital ratio of financial intermediaries--Primary Dealer counterparties of the New York Federal Reserve--possess significant explanatory power for crosssectional variation in expected returns. This is true not only for commonly studied equity and government...

We develop a structural credit risk model to examine how the interactions of liquidity and default risk affect corporate bond pricing. By explicitly modeling debt rollover and by endogenizing the holding costs via collateralized financing, our model generates rich links between liquidity risk...

We develop a dynamic model of trading and investment with limited aggregate resources to study investment cycles. Unverifiable idiosyncratic investment opportunities imply market prices to play a role of rent distribution, distorting private investment incentives from a social point of view....

China's hybrid economy blends state planning with market mechanisms, using annual economic targets to guide development and macroeconomic management to ensure their achievement. Local governments set ambitious growth targets to align with central mandates and incentivize subordinates, leading to...

We develop a dynamic model of trading and investment with limited aggregate resources to study investment cycles. Unverifiable idiosyncratic investment opportunities imply market prices to play a role of rent distribution, distorting private investment incentives from a social point of view....