We consider a privately informed issuer which holds a portfolio of assets that can be sold to raise cash, where the fractions of assets sold serve as a multidimensional signal. If good news about one asset is good news for the others, then there is a unique equilibrium that satisfies the...

This paper presents a model in which cash holding imposes a negative externality because it worsens future adverse selection in markets for long-term assets, which impairs their role for liquidity provision. Adverse selection worsens when potential sellers of long-term assets hold more cash...

Secondary markets for long-term assets might be illiquid due to adverse selection. In a model in which moral hazard is confined to project initiation, I find that: (1) when agents expect a liquidity dry-up on such markets, they optimally choose to self-insure through the hoarding of...