This article explains the roots of financial crises in one of the oldest and most fundamental problems of commercial law: hidden leverage. Common law courts wrestled with this problem for centuries and developed a time - tested solution: the doctrine of secret liens. If the debtor becomes...

From a financial economic perspective, the governing condition of a meritorious civil action is the uncertainty of outcome. Expectation and outcome deviate, and the spread is the measure of uncertainty (or variance). During litigation each party has an option to settle or select trial. The...

This article analyzes the evolution of the private credit market of Lima between 1835 and 1865. In particular, it explores the effects of political instability and institutional change on the allocation of medium-term and long-term credit. By relying on a sample of more than 1,200 notarized...

We consider a standard sequential decision to adopt/buy a good in a herding environment. The setup is same as in Sgroi (2002). Contrary to the basic herding case we introduce a cost that the agents have to pay for the information about their predecessors' actions. All agents receive informative...

In a strategic environment, when a player's information acquisition is observable to others, it may strictly decrease the player's resulting equilibrium payoff even if information acquisition itself is costless. This phenomenon has previously been known by a number of examples. This paper shows...

Regulated firms can be tempted to adopt cost-saving technologies, operating procedures, or capital structures without fully assessing the associated risks. We demonstrate how a regulator can costlessly preclude such behavior if she can impose substantial penalties on the firm in the event of...

This paper utilizes historical evidence and game theory to examine institutions that fostered intercommunity impersonal exchange during the late medieval period. It presents the community responsibility system that functioned throughout Europe and supported impersonal exchange despite the lack...

We examine whether availability of higher quality financial information lessens investor losses during a period seen as a stock market crash. We focus on October 1929, which partly motivated sweeping financial reporting regulations in the 1930s. Using a sample of 540 common stocks traded on the...

Finance professionals, who are regularly exposed to notions of volatility, seem to confuse mean absolute deviation with standard deviation, causing an underestimation of 25% with theoretical Gaussian variables. In some fat tailed markets the underestimation can be up to 90%. The mental...

Consumer choice occurs over multiple products and services, each comprising multiple risks. In this paper, we present a new market research technique to measure consumers' preferences over large spaces of risks. We first describe the method, present its psychological and analytical motivation,...