We develop a model of rational bubbles based on the assumptions of unknown market liquidity and limited liability of traders. In a bubble, the price of an asset rises dynamically above its steady-state value, justified by rational expectations about future price developments. The larger the...

This paper examines market liquidity in the post-crisis era in light of concerns that regulatory changes might have reduced dealers' ability and willingness to make markets. We begin with a discussion of the broader trading environment, including an overview of regulations and their potential...

I investigate the implications of government interventions and regulatory reform on too-big-too-fail expectations in the European banking sector. Evidence from stock returns over the period 1993 to 2016 suggests that large European banks have long benefitted and continue to benefit from implicit...

We study lottery behavior in banking stocks and use MAX/MIN to capture loss protection from bank bailout guarantees. We find that bank lottery preferences lead to lower short-term returns and that regulatory TARP assistance increases the likelihood of bank lotteryness and risk taking....