Market makers learn about asset values as they set intraday prices and absorb portfolio flows. Absorbing these flows causes inventory imbalances. Previous work has argued that market makers change prices to manage incoming flows and offset inventory imbalances. This study argues that they have...

We develop a theoretical model to analyse the e ect of competition on the conflict of interest arising from the issuer pay compensation model of the credit rating industry. We nd that relative to monopoly, rating agencies are more likely to inflate ratings under competition, resulting in lower...