We show that outcomes (parameter estimates and R-squareds) of regressions of prices on fundamentals allow us to recover exact measures of the ability of asset prices to aggregate dispersed information. Formally, we show how to recover absolute and relative price informativeness in dynamic...

We study the effect of trading costs on information aggregation and acquisition in financial markets. For a given precision of investors' private information, an irrelevance result emerges when investors are ex-ante identical: price informativeness is independent of the level of trading costs....

We explore the equilibrium relation between price volatility and price informativeness in financial markets, with the ultimate goal of characterizing the type of inferences that can be drawn about price informativeness by observing price volatility. We identify two different channels (noise...

We study the effect of trading costs on information aggregation and information acquisition in financial markets. For a given precision of investors' private information, an irrelevance result emerges when investors are ex-ante identical: price informativeness does not depend on the level of...

This paper studies the optimal determination of deposit insurance (DI) when bank runs are possible. In a variety of environments, the welfare impact of changes in the level of deposit insurance coverage exclusively depends on three sufficient statistics: the sensitivity of the likelihood of bank...

We study the relationship between homebuyers' beliefs about future house price changes and their mortgage leverage choices. From a theoretical perspective, whether more pessimistic homebuyers choose more or less leverage is ambiguous and depends on their willingness to reduce the size of their...

We study optimal corporate taxation when firms are financially constrained. We describe a corporate taxation principle: taxes should be levied on unconstrained firms, which value resources inside the firm less than constrained firms. Under complete information, this principle completely...

We explore how large and small banks make funding decisions when the government provides system-wide bailouts to the financial sector. We show that bank size, purely on strategic grounds, is a key determinant of banks' leverage choices, even when bailout policies treat large and small banks...

We study the relationship between homebuyers' beliefs about future house price changes and their mortgage leverage choices. From a theoretical perspective, whether more pessimistic homebuyers choose more or less leverage is ambiguous and depends on their willingness to reduce the size of their...