In a first attempt to apply the global games methodology to signalling games, Ewerhart and Wichardt (2004) analyse a beer-quiche type signalling game with additional imperfect information about the preferences of the receiver. Their approach allows them to dismiss the unreasonable pooling on...

High rates of government investment in public sector capital forecast high risk premiums both at the aggregate and firm-level. This result is in sharp contrast with the well-documented negative relationship between the private sector investment rate and risk premiums. To explain the empirical...

Suppose the value of a firm is endogenously determined by a manager's costly effort. We call this manager a distinguished player if he also can trade shares of the firm on a market. Arbitrage-free asset pricing theory suggests that the equilibrium market price reflects the value increasing...

We numerically determine the equilibrium trading strategies in a Continuous Double Auction (CDA). We consider heterogeneous and liquidity motivated agents, with private values and costs that trade sequentially in random order under time constraints and are not aware of the type of the other...

We examine the strategies of different types of investors (the insider, the information follower, and the price follower) who have asymmetric information about future news events and how these strategies affect stock prices. We show that stock price jumps occur when the insider receives accurate...

Signaling models contributed to the corporate finance literature by formalizing "the informational content of dividends" hypothesis. However, these models are under criticism as the empirical literature found weak evidences supporting a central prediction: the positive relationship between...

We analyse a Kyle-type continuous-time market model in which liquidity trading is correlated with a noisy public signal that is released continuously. We show that, in contrast to the previous literature, Kyle's lambda, the price sensitivity to the order flow, can even be nonmonotonic, depending...

Theories of predatory trading assume exogenous market depth and/or exogenous distress of the prey. By endogenizing both, I obtain a new feedback loop between liquidity and predatory trading. On the one hand, limited depth helps predators move prices to push the prey into distress. On the other...

We are developing a theory of equilibrium market instability in a general equilibrium duopoly caused merely by strategic trade. An economy is described as a strategic market game, where players have market power as buyers and sellers. First order conditions of individual decisions are first kind...

How effective are available policy tools in managing liquidity risks in the mutual fund industry? We assess one such tool - swing pricing - which allows funds to adjust their settlement price in response to large net flows. Our empirical analysis exploits the fact that swing pricing is available...