In a model that emphasizes technological progress and human capital creator as essential features of economic development, this paper establishes a theoretical link between the financial system and per capita output growth. More specifically, it demonstrates that stock markets--by facilitating...

This paper articulates a model of the small, open economy in which the stock market, rather than the bond market, determines domestic aggregate demand. It resembles in many respects the widely adopted dynamic Mundell-Fleming approach, but can, in some circumstances, exhibit output and asset...

The notion of asset market efficiency -- that market prices "fully reflect" all available information -- requires the operation of mechanisms that rapidly incorporate new information into asset prices. Particularly problematic -- both theoretically and empirically -- has been the case where new...

Using a unique high-frequency futures dataset, we characterize the response of U.S., German and British stock, bond and foreign exchange markets to real-time U.S. macroeconomic news. We find that news produces conditional mean jumps; hence high-frequency stock, bond and exchange rate dynamics...

This paper investigates the empirical relation between inflation and stock returns in ten industrialized countries, with a focus on the implications for links between inflation and the macroeconomy. The stock return decomposition of Campbell and Shiller (1988) is used to determine the extent to...

We aim to provide insight into the observed equity home bias phenomenon by analyzing the determinants of U.S. holdings of equities across a wide range of countries. In particular, we explore the role of information costs in determining the country distribution of U.S. investors' equity holdings...

I establish stylized empirical facts about the trading behavior of New York Stock Exchange specialists. Specifically, I look at the effect of future price movements, the specialist's explicit role, and the specialist's inventory levels on specialist trading behavior. The motivation for this...