The article presents a historical review of the literature related to the empirical problem of excessive risk premium. The risk premium (the difference between the return on equities and risk-free rate) observed in financial markets cannot be reconciled with theoretical models of financial...

We develop an agent-based model in which heterogeneous and boundedly rational agents interact by trading a risky asset at an endogenously set price. Agents are endowed with balance sheets comprising the risky asset as well as cash on the asset side and equity capital as well as debt on the...

In 1966, the irrigation community in Mula (Murcia, Spain) switched from a market (auction), which had been in place in the town for over 700 years, to a system of fixed quotas with a ban on trading, to allocate water from the town's river. We present a model, in which farmers face liquidity...

The fact that money, banking, and financial markets interact in important ways seems self-evident. The theoretical nature of this interaction, however, has not been fully explored. To this end, we integrate the Diamond (1997) model of banking and financial markets with the Lagos and Wright...

This article aims at verifying if there has been a structural change in the co-movement pattern of selected Central and Eastern Europe (CEE) over the ten-year period following the financial crisis. The empirical results confirmed that such a change was observed both in the correlation and...

This paper finds that Government of Canada benchmark bonds tend to be more illiquid over the subsequent month when there is a large increase in government debt supply. The result is both statistically and economically significant, stronger for the long-term than the short-term sector, and is...

In this paper I study the relationship between rationality and asset prices when agents have heterogeneous and incorrect beliefs about future events. Using the fully rational pricing as a benchmark, I show that when agents behave according to the Subjective Generalized Kelly rule (Bottazzi et...

This study applied the Piotroski score for 63 selected companies of Mexico, for the period 2005 to 2011. The Piotroski score provides an evaluation on the historical financial performance of a company, with the evaluation of nine financial analysis ratios or criteria. We decided to add this...

While climate change was largely tackled by government policies in the past, central banks are increasingly grappling with the risks climate change poses. They are evaluating their operational policies to reflect these risks and the transition to a net-zero economy. This paper explores the...