By generalizing the Leland and Pyle (1977) model to the case of multiple correlated assets, this paper studies the signaling and hedging behavior of an intermediary who sells multiple assets in financial markets. Based on information asymmetry, this paper demonstrates the intrinsic...

Several articles in highly regarded news outlets over the last decade have argued that firms holding relatively more cash are favored by investors. The contention is those firms holding cash will have better access to good investment prospects. This view contradicts the Jensen (1986) free cash...

This study focuses on the background and relationship of asset pricing, optimal portfolios and efficient portfolio frontiers. This has been discussed in light of multiple crisis; right from the Asian Crisis of 1997, dotcom of 2001 till the financial crisis of 2008. This study tracks the changes...

The price-bubble and crash process formation is theoretically investigated in a two-asset equilibrium model. Sufficient and necessary conditions are derived for the existence of average equilibrium price dynamics of different agent-based models, where agents are distinguished in terms of factor...

We present comprehensive evidence in support of giving liquidity equal standing to size, value/growth, and momentum as investment styles, as defined by Sharpe (1992). First, we show that financial market liquidity, as identified by stock turnover, is an economically significant indicator of...

A rational-expectations equilibrium with positive demand for financial information does exist under fully revealing asset price - contrary to a wide-held conjecture. Generalizing the common additive signal-return model with CARA utility to the family of distributions with moment generating...

Banks produce short-term debt for transactions and storing value. The value of bank money must not vary over time so agents can easily trade this debt at par. This requires that no agent finds it profitable to produce costly private information about the bank's loans. To produce safe liquidity...

We measure the profitability of an investment in voting stocks, considering the prices of both voting and non-voting stocks. As Niehoff (2016) showed, non-voting stocks' prices reflect new information on average faster than the prices of the corresponding voting stocks. To exploit this...

Rational expectation equilibrium (REE) models were considerably developed over the past 40 years. However, still relatively little has been done on their empirical applications, private signals being unobservable. We propose a new methodology, theoretically premised, to reconstitute these...

The paper examines the tendency to sell winners and hold on to losers in a dynamic noisy rational expectations equilibrium with informed and uninformed investors. The key feature of the model is that the information asymmetry between investors varies over time. Besides demonstrating that the...