We present a model of flight to quality episodes that emphasizes systemic risk and the Knightian uncertainty surrounding these episodes. Agents make risk management decisions with incomplete knowledge. They understand their own shocks, but are uncertain of how correlated their shocks are with...

This paper provides one potential explanation for the rise, persistence and eventual fall of internet stock prices. Specifically, we appeal to a model of heterogenous agents with varying degrees of beliefs about asset payoffs who are subject to short sales constraints. In this framework, it is...

The initial impact of the Asian financial crisis in Malaysia reduced the expected value of government subsidies to politically favored firms. Of the estimated $60 billion loss in market value for politically connected firms from July 1997 to August 1998, roughly 9% can be attributed to the fall...

We use a new firm-level dataset to examine the efficiency of investment in emerging economies. In the three-year period following stock market liberalizations, the growth rate of the typical firm's capital stock exceeds its pre-liberalization mean by an average of 5.4 percentage points....