Equity market liberalizations are like IPOs, but they are IPOs of a country's stock market rather than of individual firms. Both are endogenous events whose benefits are limited by poor investor protection, agency costs, and information asymmetries. As for stock prices following an IPO, there...

Financial institutions may be vulnerable to predatory short selling. When the stock of a financial institution is shorted aggressively, leverage constraints imposed by short-term creditors can force the institution to liquidate long-term investments at fire sale prices. For financial...

China's securities markets are unlike those of Amsterdam, London or New York. Those markets evolved over centuries from myriad interactions among those seeking finance on the one hand and savers seeking rewarding investments on the other. Such spontaneous securities markets did emerge throughout...

Before the 2008 crisis, the cross-sectional skewness of banks' leverage went up and macro risk concentrated in the balance sheets of large banks. Using a model of profit-maximizing banks with heterogeneous Value-at-Risk constraints, we extract the distribution of banks' risk-taking parameters...

We propose a model of dynamic trading where a strategic high frequency trader receives an imperfect signal about future order flows, and exploits his speed advantage to optimize his quoting policy. We determine the provision of liquidity, order cancellations, and impact on low frequency traders...

Many financial markets have recently become subject to new regulations requiring transparency. This paper studies how mandatory transparency affects trading in the corporate bond market. In July 2002, TRACE began requiring the public dissemination of post-trade price and volume information for...

A financial crisis is an event of sudden information acquisition about the collateral backing short-term debt in credit markets. When investors see a financial crisis coming, however, they react by more intensively acquiring information about firms in stock markets, revealing those that are...

Optimal investment of firms implies that expected stock returns are tied with the expected marginal benefit of investment divided by the marginal cost of investment. Winners have higher expected growth and expected marginal productivity (two major components of the marginal benefit of...

Using complete order books from the Korea Stock Exchange for a four-year period including the 1997 Asian financial crisis, we observe (not estimate) limit order demand and supply curves for individual stocks. Both curves have demonstrably finite elasticities. These fall markedly, by about 40%,...