We study the optimal disclosure policy in security issuance using a Bayesian persuasion approach. An issuer designs a signal to persuade an investment bank to underwrite. The bank forms a posterior on the basis of the signal and makes its underwriting and retention decisions. When there is no...

In this paper, we investigate the stock price behaviour of newly listed companies on the stock exchange market with an extremely high level of information asymmetry. We show a unique mechanism of how informed investors influence the stock prices before entering the market to consume abnormal...

Information gathering is an instinctive response to uncertainty, but such efforts may not fully resolve the uncertainty that prompted them. This implies that proxies for investor information gathering may endogenously reflect investor uncertainty, not only before but also after information...

We consider a simple market environment in which traders with finite memory update forecasting rules at random intervals by OLS. In this context, changes in the perception of market risk can trigger volatility and bubbles. Consequently, higher degrees of risk response among traders can have a...

What determines investors' risk-taking across macroeconomic cycles? Researchers have proposed rational expectations models that introduce countercyclical risk aversion to generate the empirically observed time variation in risk-taking. We test whether systematic deviations from rational...

Recent empirical studies suggest that, during times of unexpected innovation, agents heterogeneously update their beliefs about an asset fundamental value, and they are uncertain about other agents' beliefs on it. In this paper I show that, when there is uncertainty about the market sentiment,...

Excessive risk-taking of financial agents drew a lot of attention in the aftermath of the financial crisis. Low interest rates and subdued market volatility during the Great Moderation are sometimes blamed for stimulating risk-taking and leading to the recent financial crisis. In recent years,...