We study a number of large international military conflicts sinceWorld War II where we establish a news analysis as a proxy for theestimated likelihood that the conflict will result in a war. We findthat in cases when there is a pre-war phase, an increase in the warlikelihood tends to decrease...

To shed light on the empirical relevance of the limits to arbitrage, we study hedge funds’ trading patterns in the stock market during liquidity crises. Consistent with arbitrageurs’ limited ability to provide liquidity, we find that at the time of liquidity crises hedge funds reduce their...