Does the presence of arbitrageurs decrease equilibrium asset price volatility? I study an economy with arbitrageurs, informed investors, and noise traders. Arbitrageurs face a trade-off between arbitrage and inference: they would like to buy assets in response to temporary price declines (the...

This paper examines how risk in trading activity can affect the volatility of asset prices. We look for this relationship in the behavior of interest rate swap spreads and in the volume and interest rates of repurchase contracts. Specifically, we focus on convergence trading, in which...

We estimate the effects of peer benchmarking by institutional investors on asset prices. To identify trades purely due to peer benchmarking as separate from those based on fundamentals or private information, we exploit a natural experiment involving a change in a government-imposed...

We examine the relationship between monetary policy operations and interbank borrowing and lending of funds using sovereign bonds as collateral. We first establish that, in the precrisis period, there are important but rather weak relations between these funding sources and that this...

We develop a new methodology for estimating the importance of herd behavior in financial markets. Specifically, we build a structural model of informational herding that can be estimated with financial transaction data. In the model, rational herding arises because of information-event...

Remarks at the University of Chicago Booth School of Business Annual U.S. Monetary Policy Forum, New York City.

Remarks at 2010 CFA Institute Fixed Income Management Conference, Newport Beach, California.

Testimony before the Subcommittee on Oversight and Investigations, Committee on Financial Services, U.S. House of Representatives.> .

Remarks at the Harvard Law School's Symposium on Building the Financial System of the 21st Century, Armonk, New York.

Joint written testimony before the Congressional Oversight Panel, Washington, D.C.