We study the quot;efficient marketsquot; paradigm in the context of agency relations: principal-investors want to monitor and compensate their agent-traders using market security prices in quot;mark-to-marketquot; contracts. The view of each principal is that market prices aggregate the...

A bank determines whether potential borrowers are credit-worthy, that is, whether they meet the bank's credit or lending standards. In making this determination, each bank is in competition with other banks, but without knowing the competitor banks' credit standards. The resulting unique form of...

We propose a theory of mergers that combines managerial merger motives with an industry-level regime shift that may lead to value-increasing merger opportunities. Anticipation of these merger opportunities can lead to defensive acquisitions, where managers acquire other firms to avoid losing...

We study the basic properties of an equally-weighted index of U.S. commodity futures from the perspective of a Japanese investor. We find that the returns on the U.S. equally-weighted commodity futures index maintain their basic properties, documented in Gorton and Rouwenhorst (2005), when...

Agency problems in firms are prevalent because of a scarcity of wealthy principals with corporate govern-ance ability, whom we call quot;restructuring specialistsquot;. We investigate how this scarce resource, quot;agency cost-free capital,quot; is allocated. We show that the restructuring...

We empirically investigate the effects of the adoption of Regulation Fair Disclosure (Reg FD) by the U.S. Securities and Exchange Commission in October 2000. This rule was intended to stop the practice of selective disclosure, in which companies give material information only to a few analysts...

Noise traders are agents whose theoretical existence has been hypothesized as a way of solving certain fundamental problems in Financial Economics. We briefly review the literature on noise traders. The is an entry for The New Palgrave: A Dictionary of Economics, 2nd Edition (Palgrave Macmillan:...

Central banking is intimately related to liquidity provision to banks during times of crisis, the lender-of-last-resort function. This activity arose endogenously in certain banking systems. Depositors lack full information about the value of bank assets so that during macroeconomic downturns...

We study the basic properties of an equally weighted index of U.S. commodities futures from the perspective of a Japanese investor. We find that the returns on the U.S. equally-weighted commodity futures index maintain their basic properties documented in Gorton and Rouwenhorst (2005), when...

For this study of the simple properties of commodity futures as an asset class, an equally weighted index of monthly returns of commodity futures was constructed for the July 1959 through December 2004 period. Fully collateralized commodity futures historically have offered the same return and...