We present a model with leverage and margin constraints that vary across investors and time. We find evidence consistent with each of the model's five central predictions: (1) Because constrained investors bid up high-beta assets, high beta is associated with low alpha, as we find empirically...

This paper surveys the theoretical and empirical literature on the macroeconomic implications of financial imperfections. It focuses on two major channels through which financial imperfections can affect macroeconomic outcomes. The first channel, which operates through the demand side of finance...

Testing the effects of short-selling restrictions on asset prices is challenging: shifts in stock lending supply usually are not observed directly. This paper takes advantage of a unique dataset that contains actual shifts in the lending supply curve for several stocks on the Brazilian market....

This paper surveys the theoretical and empirical literature on the macroeconomic implications of financial imperfections. It focuses on two major channels through which financial imperfections can affect macroeconomic outcomes. The first channel, which operates through the demand side of finance...

In this paper we examine the quantitative effects of margin regulation on volatility in asset markets. We consider a general equilibrium infinite-horizon economy with heterogeneous agents and collateral constraints. There are two assets in the economy which can be used as collateral for...

We study a production economy with multiple sectors financed by issuing securities to agents who face capital constraints. Binding capital constraints propagate business cycles, and a reduction of the interest rate can increase the required return of high-haircut assets since it can increase the...

In this paper we examine the quantitative effects of margin regulation on volatility in asset markets. We consider a general equilibrium in finite-horizon economy with heterogeneous agents and collateral constraints. There are two assets in the economy which can be used as collateral for...

Are pandemics systemically important to modern-day financial markets? This study uses the COVID-19 pandemic as a natural experiment for testing how large-scale pandemics affect the financial markets. Using hand-collected data at the firm level, I find that managers systematically underestimated...

This paper provides an early warning indicator for bubbles in financial markets. The indicator is based on traditional unit root tests, more precisely on the augmented Dickey-Fuller test and may be used in a repeated manner with rolling samples. The performance of the indicator is tested...

To promote the financial stability, there is a need for an early warning system to signal the formation of asset price misalignments. This research provides two novel methods to accomplish this task. Results in this research shows that the conventional unit root tests in modified forms can be...