This paper presents a model to study the transmission of liquidity shocks across financial institutions through the creditor channel. In the model, a borrower institution obtains funds from a large institutional lender and small investors. When the large lender's asset market is hit by a...

This paper examines the link between disclosure and the cost of capital. We exploit an exogenous cost of capital shock created by the Enron scandal in Fall 2001 and analyze firms' disclosure responses to this shock. These tests are opposite to the typical research design that analyzes cost of...

I investigate whether information quality affects the cost of equity capital through liquidity risk. Liquidity risk is the sensitivity of stock returns to unexpected changes in market liquidity; recent asset pricing literature has emphasized the importance of this systematic risk. I find that...

We show whether central clearing of a particular class of derivatives lowers counterparty risk. For plausible cases, adding a central clearing counterparty (CCP) for a class of derivatives such as credit default swaps reduces netting efficiency, leading to an increase in average exposure to...

This paper offers out-of-sample evidence of subsequent short-term abnormal returns for stocks experiencing a price change of ten percent or more in either direction on the German stock market between 1988 and 2007. First, we find significant evidence of overreaction which is not exclusively...

Major bubble episodes are rare events. In this paper, we examine what factors might cause some asset price bubbles to become very large. We recreate, in a laboratory setting, some of the specific institutional features investors in the South Sea Company faced in 1720. Several factors have been...

This study investigates the presence of month-of-the-year effect on Bucharest Stock Exchange using a both a linear regression and a GARCH-M model with dummy variables for both the mean and the variance equation. We have collected monthly returns for five Romanian official exchange indices and...

This article reassess informational financial contagion theory relevant to systemic risk in banking in the light of a coordination problem approach to economics, and then proceed to analyze and comment some related types of systemic risk policies. Typically, policies to limit or contain...