We model an exchange economy where a finite number of standard identical agents interact locally and analyse the time-series properties of the simulated dividend--price ratio <italic>dp</italic> _{<italic>t</italic>}. Our results document that a sufficient degree of social dynamics induces high persistence in <italic>dp</italic> _{<italic>t</italic>} which leads...

Assessing the risk of bank failures is the paramount concern of bank regulation. This paper argues that in order to assess the default risk of a bank, it is important to consider its financing decisions as an endogenous dynamic process. We provide a continuous-time model, where banks choose the...