We characterize optimal IPO design in the distinct adverse selection problems: one affecting the IPO stage and one arising in the after-market. Allocating shares to an investor with superior information in the after-market depresses the share's value to less informed investors. However, because...

In this paper, we develop a model in which overconfident market participants and rational speculators trade against trend-chasers. We show that the growth and the burst of a financial bubble stem from positive feedback trading. However, the presence of overconfident traders and the risk aversion...

This paper analyzes the strategic competition between privately informed fast (FT) and slow traders (ST). In accordance with the overwhelming findings in the empirical literature, we find that the speed advantage of FTs has a beneficial effect on market liquidity as well as price efficiency. We...