We examine how the banking sector may ignite the formation of asset price bubbles when there is access to abundant … liquidity. Inside banks, given lack of observability of effort, loan officers (or risk takers) are compensated based on the … macroeconomic risk, investors reduce direct investment and hold more bank deposits. This ‘flight to quality’ leaves banks flush with …

presents a case that there were four primary failures contributing to the crisis: excessive risk-taking in the financial sector … due to mispriced government guarantees; regulatory focus on individual institution risk rather than systemic risk; opacity …

case that there were four primary failures contributing to the crisis: excessive risk-taking in the financial sector due to … mispriced government guarantees; regulatory focus on individual institution risk rather than systemic risk; opacity of positions …

allocation based on mean-variance portfolio theory applied to sectoral returns. Wefind that the realized sectoral allocation of …

producers' hedging demand (speculators' risk capacity) increase hedging costs via price-pressure on futures, reduce producers …' inventory holdings, and thus spot prices. Consistent with our model, producers' default risk forecasts futures returns …,spot prices, and inventories in oil and gas market data from 1980-2006, and the component of the commodity futures risk premium …

We present a model where firms compete for scarce managerial talent ("alpha") and managers are risk-averse. When …