In this paper we show how rational expectations equilibrium models with asymmetric information, without market frictions, can generate extreme co-movements in asset prices. Information asymmetries generate a multiplier effect on price correlation - a World Bank definition of financial contagion....

In this paper, we analyze the conflicts of interest of an informed agent who is responsible for divulging his private information about a company and has a reward function positively dependent on its stock price. We assume that the demand for the stock is subject to shocks that may increase...

We model an interaction between an informed sender and an uninformed receiver. As in the classic cheap talk setup, the informed player sends a message to an uninformed receiver who is to take an action which affects the payoffs of both players. However, in our model the sender can communicate...