Liquid markets where agents have limited capacity to sign exclusive contracts, as well as imperfect knowledge of previous transactions by others, raise the following risk: An agent can promise the same asset to multiple counterparties and subsequently default. I show that in such markets an...

We use household data to estimate the cost of participating to financial markets and the cross sectional dispersion of stock market optimism. Our analysis is based on a mean-variance framework, within which we derive structural decision rules for individual composition of the risky assets...

This paper tests stylized facts and theories from behavioral economics and laboratory experiments using a randomized field experiment of our design. A major South African consumer credit lender issued 60,000 scripted direct mail solicitations where several marketing “treatments†were...

This paper contributes to the literature comparing the relative performance of financial intermediaries and markets by studying an environment in which a trade-off between risk sharing and growth arises endogenously. Financial intermediaries provide insurance to households against a liquidity...

Using the firm-level data set, this paper attempts to examine the dynamic patterns in the allocation of credit across firms in Korea. Supposedly, in Korea, the economic crisis in 1997 had a significant impact on the pattern in the allocation of credit across firms. In particular, this paper aims...

Abstract The literature on rural credit market has generally assumed that farm households are rationed in their access to subsidised formal credit. Due to lack of infrastructure and poor access to institutional credit, exploitation of farmers in interlocked credit market is expected to be high....

This paper is concerned with the general question of the provision of information by financial intermediaries to their customers. Specifically, it analyzes the different ways the market can be organized and its effects on pricing and the level of information investors obtain. We find that market...

Money managers are rewarded for increasing the value of assets under management, and predominantly so in the mutual fund industry. This gives the manager an implicit incentive to exploit the well-documented positive fund-flows to relative-performance relationship by manipulating her risk...

Standard models of moral hazard predict a negative relationship between risk and incentives, but the empirical work has not confirmed this prediction. In this paper, we propose a model with adverse selection followed by moral hazard, where effort and the degree of risk aversion are private...

This paper explores the case of a sovereign indebted country facing a choice of economic policy today that will determine the country's ability to continue its debt servicing in the future. If the sovereign undertakes an unsound economic policy it will repudiate its debt with certainty;...