We measure investors' short- and long-term stock-return expectations using both options and survey data. These expectations at different horizons reveal what investors think their own short-term expectations will be in the future, or forward return expectations. While contemporaneous short-term...

We develop a tractable model to study the macroeconomic impacts of limited arbitrage by linking arbitrage activities with the macroeconomy through collateralization. We show that the interactions between speculative trading and the business cycle can work as a powerful transmission mechanism,...

We analyze a novel feedback mechanism between market and funding liquidity that causes self-fulfilling liquidity dry-ups. Financial firms facing funding withdrawals have an incentive to acquire information about their assets. Those with good assets gain by resorting to outside liquidity sources...

I propose and estimate a dynamic model of financial intermediation to study the different roles of the condition of banks' and firms' balance sheets in real activity. The net worth of firms determines their borrowing capacity both from households and banks. Banks provide risky loans to multiple...

We investigate the channel through which fluctuations in the market liquidity of real-sector repo collateral cause arbitrage crashes and failure of systemically important intermediaries during the global financial crisis. Intermediaries pledge productive capital as repo collateral to fund the...

I develop a framework of the buildup and outbreak of financial crises in an asymmetric information setting. In equilibrium, two distinct economic states arise endogenously: "normal times", periods of modest investment, and "booms", periods of expansionary investment. Normal times occur when the...

Recent international financial crises highlight the advantages of understanding the global financial system as a network of economies in which cross-border financial linkages are fundamental to the spread of systemic risk. We investigate the changing network of financial markets for six periods...

We develop a parsimonious model of bubbles based on the assumption of imprecisely known market depth. In a speculative bubble, traders drive the price above its fundamental value in a dynamic way, driven by rational expectations about future price developments. At a previously unknown date, the...

We investigate the impact of financial crises on two fundamental features of stock returns, namely, the risk-return tradeoff and the leverage effect. We apply the fractionally integrated exponential GARCH-in-mean (FIEGARCH-M) model for daily stock return data, which includes both features and...

This paper contributes to the financialization literature exploring the dynamics of financialization in eight emerging European economies (EEEs) compared to the Anglo-Saxon countries. Our analysis encompasses the decade before and the years following the financial crisis in 2008, including the...