We report on experimental markets for a contingent claim asset that eight subjects traded for nine periods before the state was revealed. There is an informative binary signal that arrives after each of the first eight trading rounds. In our baseline treatment the realization of the signal is...

The aim of this paper is to study asset reallocation in financial markets subject to search, bargaining, and information frictions, and to analyze the impact of monetary policy on equilibrium outcomes. The main results show that private information regarding the quality of an asset impairs its...

The goal of this paper is to study how informational frictions affect asset liquidity in OTC markets in a laboratory setting. The experiments replicate an OTC market similar to the one used in monetary and financial economics (Shi, 1995; Trejos and Wright, 1995; Duffie, Garleanu, and Pedersen, 2005):...

In the aftermath of the global financial crisis, the market for unsecured credit literally dried out and collateral secured debt became the most widely used concept to coinsure against liquidity shocks. However, since financial assets are usually unproductive, the question comes up why...

What sows the seeds of financial crises, and what policies can help avoid them? I model the interaction between the ex-ante production of assets and ex-post adverse selection in financial markets. Positive shocks that increase market prices exacerbate the production of low-quality assets and can...

Investors need performance measures particularly as a means for funds selection in the process of exanteportfolio optimization. Unfortunately, there are various performance measures recommended for differentdecision situations. Since an investor may be uncertain which kind of decision problem is...

We test one of the main predictions of the financial flexibility paradigm that expectations about future firm-specific shocks affect the firm's leverage. We extract the expectations of small and large future shocks from the market prices of equity options. We find that expectations for future...

The subprime crisis led to a wave of government interventions in the private sector that has been particularly strong in Europe and Latin America, where several governments are large shareholders in a variety of public firms. In a sense, the subprime crisis induced these governments to behave as...

The transmission process from policy-controlled interest rates to bank lending rates deserves reconsideration owing to the implementation of the European Monetary Union (EMU) in 1999. Additional attention to the subject in Austria is due to several large banks which, in 2002, have been charged...

We empirically study the use of value-based management systems in listed German firms and examine implications for firms' stock market performance. Using a novel, hand-collected data set covering 1,083 firm years from 2002 to 2008, we find that value-based management systems become increasingly...