We model irrational investors who can impact prices to cause predictability in returns and rational investors who are wealth-constrained in their attempts to arbitrage mispricing. We show that rational investors relax wealth constraints by forming financial intermediaries which leverage the...

Originators produce higher quality assets at a private cost. These assets can either be bought by informed intermediaries or sold in a pool with low quality assets. Savings gluts diminish origination incentives because they compress the spread between the price paid for high quality assets and...

Trust companies generate leverage cycle dynamics by intermediating less regulated credit to the financial markets in China. We find that the leverage factor constructed from trust companies can explain the time-series and cross-sectional asset returns. The leverage factor derived from securities...