This article formalizes investor rationality and irrationality, exuberance and apprehension, to consider the implications of belief formation for the fragility of an economy's financial structure. The model presented generates a financial structure with portfolio linkages that make it...

The results of recent empirical studies on the relationships among Federal Reserve monetary-policy actions, U.S. interventions in currency markets, and exchange rates are re-examined. Changes in the Federal Reserve's federal funds rate target as measure of monetary-policy actions are used. Then...

Theoretical models of the adverse selection component of bid-asked spreads predict the component arises from asymmetric information about a firm's fundamental value. We test this prediction using two well known models [Glosten and Harris (1988) and George, Kaul, and Nimalendran (1991)] to...