We propose a new approach to measuring informed trading in individual securities based on a portfolio optimization model for investors facing information and liquidity shocks. These shocks induce speculative and liquidity-motivated order flow, taking into account the price impact of trading. The...

This paper examines whether the risk of future collateral fire sales affects lending decisions. We study US mortgage applications and exploit exogenous variation in foreclosure frictions for identification. We find that lenders are less likely to approve mortgages when anticipated losses due to...

I model direct competition between investor-paid and issuer-paid credit rating agencies (CRAs). Frictions in the form of issuer private benefits induce issuer-paid CRAs to inflate ratings. Investor-paid CRAs optimally generate more accurate ratings, leading to adverse selection for investors...

We study intraday, market-wide shocks to stock prices, market liquidity, and trading activity on international stock markets and assess the relevance of recent theories on "liquidity dry-ups" in explaining such shocks. Market-wide price shocks are prevalent and large, with rapid spillovers...

We propose a portfolio optimization approach to identifying private information. In our model, investors are exposed to liquidity and private information shocks and optimize their trading across stocks taking into account price impact (Kyle's Lambda). We obtain a very simple expression for a...

We model endogenous technology adoption and competition among liquidity providers with access to High-Frequency Trading (HFT) technology. HFT technology provides speed and informational advantages. Information advantages may restore excessively toxic markets. Speed technology may reduce resource...