We study the informational channel of financial contagion in the laboratory. In our experiment, two markets with correlated fundamentals open sequentially. In both markets, subjects receive private information. Subjects in the market opening second also observe the history of trades and prices...

Central banks have become increasingly communicative. An important reason is that democratic societies expect more transparency from public institutions. Central bankers, based on empirical research, also believe that sharing information has economic benefits. Communication is seen as a way to...

This paper studies a recent tick size reduction in the U.S. Treasury securities market and identifies its effects on the market's liquidity and price efficiency. Employing difference-indifference regressions, we find that the bid-ask spread narrows significantly after the change, even for large...

We study general equilibrium asset prices in a multi-period endowment economy when agents' risk aversion is allowed to depend on the maturity of the risk. We find horizon-dependent riskaversion preferences generate a decreasing term structure of risk premia if and only if volatility is...

Motivated by individuals' emotional response to risk at different time horizons, we model an 'anxious' agent - one who is more risk averse with respect to imminent risks than distant risks. Such preferences describe well-documented features of 1) individual behavior, 2) equilibrium prices, and...

We investigate the determinants of students' university choice, with a focus on expected monetary returns, non-pecuniary factors enjoyed at school, and financial constraints, in the Pakistani context. To mitigate the identification problem concerning the separation of preferences, expectations,...

Despite a robust college premium, college attendance rates in the United States have remained stagnant and exhibit a substantial socioeconomic gradient. We focus on information gaps - specifically, incomplete information about college benefits and costs - as a potential explanation for these...

We estimate the elasticity of intertemporal substitution (EIS) - the elasticity of expected consumption growth with respect to variation in the real interest rate - using subjective expectations from the newly released FRBNY Survey of Consumer Expectations (SCE). This dataset is unique, since it...

We provide a preference-based rationale for endogenous overconfidence. Horizon-dependent risk aversion, combined with a possibility to forget, can generate overconfidence and excessive risk taking in equilibrium. An "anxiety prone" agent, who is more risk-averse to imminent than to distant...

Under rational expectations, monetary policy is generally highly effective in stabilizing the economy. Aggregate demand management operates through the expectations hypothesis of the term structure: Anticipated movements in future short-term interest rates control current demand. This paper...