This paper studies security markets with trading frictions, and offers a complete characterization of viable convex cost systems. For frictional markets that give rise to a convex-cone traded-payoff span and a sublinear payoff cost functional, the following three conditions are equivalent:...

This paper investigates the returns and flows of German money market funds before and during the liquidity crisis of 2007/2008. The main findings of this paper are: in liquid times, money market funds enhanced their returns by investing in less liquid papers. By doing so they outperformed other...

This study decomposes total risk of a MSCI Asian country index returns into three components: world systematic risk, Asian regional systematic risk and country-specific risk. The study finds an Asian country index returns mostly respond to shocks originated within the country. China, Korea and...

The VIX, the stock market option-based implied volatility, strongly co-moves with measures of the monetary policy stance. When decomposing the VIX into two components, a proxy for risk aversion and expected stock market volatility (“uncertainty”), we find that a lax monetary policy decreases...

This paper develops a theory of multiple unit auctions with short squeezes in the post- auction market. This is especially relevant for financial and commodity markets where players may enter the auction with established forward positions. We study how a potential short squeeze impacts on...

This paper studies the effect of new fund flows on investment behavior and the resulting equilibrium price of risk. The Small Fund Industry model shows equilibria with overinvestment in unprofitable and underinvestment in profitable investment opportunities. The Large Fund Industry model derives...

The author proposes a test for the parametric specification of each component in the diffusion matrix of a d-dimensional diffusion process. Overall, d (d-1)/2 test statistics are constructed for the off-diagonal components, while d test statistics are constructed for the main diagonal...

This paper studies the long-run relationship between consumption, asset wealth and income in Germany, based on data from 1980 to 2003. While earlier studies – mostly for the Anglo- Saxon economies – have generally documented that departures of these three variables from their common trend...