A contentious debate in finance revolves around whether investment managers add any value for their clients. Presumably, households delegate the investment decision because these managers are able to process information and use it efficiently to generate additional return. The raises the...

Why do countries with a higher prevalence of disease grow much more slowly than their seemingly-similar neighbors? While Acemoglu, Johnson and Robinson (2001) document a relationship between disease and growth for colonies and argue that the colonization process is an important determinant of...

Recessions appear to be times when markets function less efficiently. This phenomenon has been the domain of theories that rely on changes in preferences (demand shocks) or constraints on price-setting (sticky prices). In our simple model of decentralized trade with asymmetric information,...

Asset prices display high covariance relative to the covariance of their payoffs. (Pindyck and Rotemberg, 1993; Barberis, Shleifer and Wurgler, 2002) Many take this ‘excess covariance’ to be evidence of investor irrationality. This model reconciles the high covariance with a rational...

When a large number of agents play a game with strategic complementarity, information choices exhibit strategic complementarity as well: If an agent wants to do what others do, then they want to know what others know. Likewise, strategic substitutability in actions produces strategic...

The covariance of sectoral and aggregate U.S. output is significantly higher than the covariance of sectoral and aggregate productivity. Explaining this industry comovement is a challenge for business cycle theory. We propose an explanation based on costly information about productivity (TFP)....

This paper studies the effect of reductions in information asymmetry - information globalization - on international risk sharing and trade flows. Information frictions are often invoked to explain low levels of international trade beyond those that measured trade frictions (tariffs,...

The literature assessing whether mutual fund managers have skill typically regards skill as an immutable attribute of the manager or the fund. We show that many measures of skill, such as returns, alphas, and measures of stock-picking and market-timing, appear to vary over the business cycle. We...