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The Emergence of the Euro as an International Currency

Alogoskoufis, George; Portes, Richard; Rey, Hélène - C.E.P.R. Discussion Papers - 1997

*The European Union will enter Stage Three of Economic and Monetary Union (EMU) in 1999. The development of euro … financial markets and thickness externalities in the use of the euro as means of payment will be the major factors determining … the importance of the euro as an international currency. As euro securities markets become deeper and more liquid and …

Persistent link: https://www.econbiz.de/10005662175

The Determinants of Cross-Border Equity Flows

Portes, Richard; Rey, Hélène - C.E.P.R. Discussion Papers - 1999

We apply a new approach to a new panel data set on bilateral gross cross-border equity flows between 14 countries, 1989-96. The remarkably good results have strong implications for theories of asset trade. We find that the geography of information heavily determines the pattern of international...

Persistent link: https://www.econbiz.de/10005067617

A Preferred-Habitat Model of the Term Structure of Interest Rates

Vayanos, Dimitri; Vila, Jean-Luc - C.E.P.R. Discussion Papers - 2009

We model the term structure of interest rates as resulting from the interaction between investor clienteles with preferences for specific maturities and risk-averse arbitrageurs. Because arbitrageurs are risk averse, shocks to clienteles' demand for bonds affect the term structure---and...

Persistent link: https://www.econbiz.de/10008496455

Limits of Arbitrage: The State of the Theory

Gromb, Denis; Vayanos, Dimitri - C.E.P.R. Discussion Papers - 2010

We survey theoretical developments in the literature on the limits of arbitrage. This literature investigates how costs faced by arbitrageurs can prevent them from eliminating mispricings and providing liquidity to other investors. Research in this area is currently evolving into a broader...

Persistent link: https://www.econbiz.de/10008530340

Liquidity and Asset Prices: A Unified Framework

Vayanos, Dimitri; Wang, Jiang - C.E.P.R. Discussion Papers - 2009

We examine how liquidity and asset prices are affected by the following market imperfections: asymmetric information, participation costs, transaction costs, leverage constraints, non-competitive behavior and search. Our model has three periods: agents are identical in the first, become...

Persistent link: https://www.econbiz.de/10004976791

The Gambler's and Hot-Hand Fallacies: Theory and Applications

Rabin, Matthew; Vayanos, Dimitri - C.E.P.R. Discussion Papers - 2007

We develop a model of the gambler's fallacy -- the mistaken belief that random sequences should exhibit systematic reversals. We show that an individual who holds this belief and observes a sequence of signals can exaggerate the magnitude of changes in an underlying state but underestimate their...

Persistent link: https://www.econbiz.de/10005504387

An Institutional Theory of Momentum and Reversal

Vayanos, Dimitri; Woolley, Paul - C.E.P.R. Discussion Papers - 2008

We propose a rational theory of momentum and reversal based on delegated portfolio management. A competitive investor can invest through an index fund or an active fund run by a manager with unknown ability. Following a negative cashflow shock to assets held by the active fund, the investor...

Persistent link: https://www.econbiz.de/10005504572

A Search-Based Theory of the On-the-Run Phenomenon

Vayanos, Dimitri; Weill, Pierre-Olivier - C.E.P.R. Discussion Papers - 2006

We propose a model in which assets with identical cash flows can trade at different prices. Infinitely-lived agents can establish long positions in a search spot market, or short positions by first borrowing an asset in a search repo market. We show that short-sellers can endogenously...

Persistent link: https://www.econbiz.de/10005504616

Bond Supply and Excess Bond Returns

Greenwood, Robin; Vayanos, Dimitri - C.E.P.R. Discussion Papers - 2008

We examine empirically how the maturity structure of government debt affects bond yields and excess returns. Our analysis is based on a theoretical model of preferred habitat in which clienteles with strong preferences for specific maturities trade with arbitrageurs. Consistent with the model,...

Persistent link: https://www.econbiz.de/10005661526

Sovereign CDS and Bond Pricing Dynamics in the Euro-area

Palladini, Giorgia; Portes, Richard - C.E.P.R. Discussion Papers - 2011

six Euro-area countries over the period 2004-2011. As a first step, the supposed non stationarity of the two series is …

Persistent link: https://www.econbiz.de/10009365646