We study how adverse selection distorts equilibrium investment allocations in a Walrasian credit market with two …-sided heterogeneity. Representative investor and partial equilibrium economies are special cases where investment allocations are … trade and investment allocations below perfect information levels. The degree of heterogeneity between informed agents' type …

with valuable signals for investment adjustment. The two forces have opposite impacts on the cost of capital, and the net … effect depends on which force dominates. We show that stocks of firms with low flexibility in investment adjustment ("value … firms") command an information premium, whereas stocks of firms with high flexibility in investment adjustment ("growth …