Do asset prices aggregate investors’ private information about the ability of financial analysts? We show that as financial analysts become reputable, the market can get trapped: Investors optimally choose to ignore their private information, and blindly follow analyst recommendations. As time...

We use a simple, graphical moral hazard model to compare monitored bank lending versus non-monitored bond issues as sources of external funds for industry. We contrast the conditions that theoretically favor each system, such as the size and number of firms, with conditions prevailing when these...

We introduce and justify a taxonomy for the structure of markets and minimal institutions which appear in constructing minimally complex trading structures to perform the functions of price formation, settlement and payments. Each structure is presented as a playable strategic market game and is...

In order to explain in a systematic way why certain combinations of market, financial, and legal structures may be intrinsic to certain capabilities to exchange real goods, we introduce criteria for abstracting the qualitative functions of markets. The criteria involve the number of strategic...

A unifying framework for inference is developed in predictive regressions where the predictor has unknown integration properties and may be stationary or nonstationary. Two easily implemented nonparametric F-tests are proposed. The test statistics are related to those of Kasparis and Phillips...

A prominent use of local to unity limit theory in applied work is the construction of confidence intervals for autogressive roots through inversion of the ADF t statistic associated with a unit root test, as suggested in Stock (1991). Such confidence intervals are valid when the true model has...

This paper provides a set of results that can be used to establish the asymptotic size and/or similarity in a uniform sense of confidence sets and tests. The results are generic in that they can be applied to a broad range of problems. They are most useful in scenarios where the pointwise...

This paper introduces a new confidence interval (CI) for the autoregressive parameter (AR) in an AR(1) model that allows for conditional heteroskedasticity of general form and AR parameters that are less than or equal to unity. The CI is a modification of Mikusheva's (2007a) modification of...

Right-tailed unit root tests have proved promising for detecting exuberance in economic and financial activities. Like left-tailed tests, the limit theory and test performance are sensitive to the null hypothesis and the model specification used in parameter estimation. This paper aims to...

Identifying and dating explosive bubbles when there is periodically collapsing behavior over time has been a major concern in the economics literature and is of great importance for practitioners. The complexity of the nonlinear structure inherent in multiple bubble phenomena within the same...