We study the impact of local taxation on the location and growth of firms. Our empirical methodology pairs establishments across jurisdictional boundaries to estimate the impact of taxation. Our approach improves on existing work as it corrects for unobserved establishment heterogeneity, for...

We provide evidence that lenders differ in their ex post incentives to internalize price-default externalities associated with the liquidation of collateralized debt. Using the mortgage market as a laboratory, we conjecture that lenders with a large share of outstanding mortgages on their...

We economically motivate and then test a range of hypotheses regarding performance and risk differences between UCITS-compliant and other hedge funds. The latter exhibit more suspicious return patterns than do absolute return UCITS (ARUs), but ARUs exhibit higher levels of operational risk. We...

The dangers of shouting ``fire'' in a crowded theater are well understood, but the dangers of rushing to the exit in the financial markets are more complex. Yet, the two events share several features, and I analyze why people crowd into theaters and trades, why they run, what determines the...

We analyze the effects of the observed increased share of delegated capital for trading strategies and equilibrium prices by introducing delegation into a standard Lucas exchange economy. In equilibrium, some investors trade on their own account, but others decide to delegate trading to...

We develop a liquidity-based asset pricing model featuring investors with heterogeneous investment horizons and stochastic transaction costs. In an equilibrium where all investors invest in all assets (integration), we find that the existence of investors with heterogeneous horizons, as opposed...

Employing a new dataset of over 9,000 expressed demands for over 700 hedge funds from a secondary market for hedge funds, this paper finds evidence suggesting that hedge fund investors rationally anticipate future hedge fund performance. Both buy and sell indications of interest arrive following...

Regime switching models can match the tendency of financial markets to often change their behavior abruptly and the phenomenon that the new behavior of financial variables often persists for several periods after such a change. While the regimes captured by regime switching models are identified...

We analyze the equilibrium size of the active management industry and the role of historical data---how investors use it to decide how much to invest in the industry, and how researchers use it to judge whether the industry's size is reasonable. As the industry's size increases, every manager's...

We develop a model of portfolio choice to nest the views of Keynes - who advocates concentration in a few familiar assets - and Markowitz - who advocates diversification across assets. We rely on the concepts of ambiguity and ambiguity aversion to formalize the idea of an investor’s...