been profitable, agency concerns are less severe, and the firm is growing rapidly. To study the effect of serial correlation of productivity shocks on investment and firm dynamics, we extend our model to allow the firm’s output price to be stochastic. We show that, in contrast to static agency...

We present a simple yet fully rational general equilibrium model that highlights the fact that relative wealth concerns can play a role in explaining the presence and dynamics of financial quot;bubbles.quot; Because our model has a finite horizon, our explanation for the existence of bubbles is...

We present a simple yet fully rational general equilibrium model that highlights the fact that relative wealth concerns can play a role in explaining the presence and dynamics of financial quot;bubblesquot;. Because our model has a finite horizon, our explanation for the existence of bubbles is...

We study security-bid auctions in which bidders compete for an asset by bidding with securities. That is, they offer payments that are contingent on the realized value of the asset being sold. The value depends on investment by the winner, thus creating the possibility of moral hazard. Such...

We characterize the optimal long-term financial contract in a setting in which a risk-neutral agent with limited capital seeks financing for a project that pays stochastic cash flows over many periods. These cash flows are observable to the agent but not to investors. The agent can be induced to...

This paper considers the problem faced by a financial intermediary with n assets to sell in the presence of asymmetric information. I show that when the intermediary has superior information about the value of each asset, the intermediary is better off selling shares in the assets individually...

We consider the release of information by a firm when the manager has discretion regarding the timing of its release. While it is well known that firms appear to delay the release of bad news, we examine how external information about the state of the economy (or the industry) affects this...

We apply gradient strategy methods, developed in the literature on robust optimization, approachability and calibration, to develop new bounds for option prices. While this literature focuses on asymptotic performance, we provide a financial interpretation of these methods by demonstrating how...

We develop a stylized general equilibrium model in which technology quot;bubblesquot; occur. In our model, agents are able to invest both in a riskless technology and in a risky one. A high risk/reward technology supports over-investment and risk-taking behavior at a rate which is increasing in...

In this paper, we propose an explanation for biases in portfolio choice. We show that if individuals compete for local resources within their community, their utility depends on their own wealth as well as aggregate community wealth. This leads to an externality in portfolio choice. If investors...