It is generally agreed that speculators can make profits from insider trading or from the release of false information. Both forms of stock-price manipulation have now been made illegal. In this article, the authors ask whether it is possible to make profits from a different kind of...

Empirical evidence suggests that banks hold capital in excess of regulatory minimums. This did not prevent the financial crisis and underlines the importance of understanding bank capital determination. Market discipline is one of the forces that induces banks to hold positive capital. The...

The critical role played by financial institutions in the recent financial crises has generated renewed interest on the corporate finance of the banking firm and the impact of the banking sector on the real economy. This paper introduces the special issue of the Review of Financial Studies...

In a financial market where traders are risk averse and short lived and prices are noisy, asset prices today depend on the average expectation today of tomorrow's price. Thus (iterating this relationship) the date 1 price equals the date 1 average expectation of the date 2 average expectation of...