The current financial crisis is a crisis of theory as well. The dominant theory of financial markets, the efficient market hypothesis (EMH), states that in an efficient market the price of a financial asset reflects publicly available information about that asset. Competing theories, such as...

We consider a model where investors can invest directly or search for an asset manager, information about assets is costly, and managers charge an endogenous fee. The efficiency of asset prices is linked to the efficiency of the asset management market: if investors can find managers more...

This paper examines the impact of credit ratings for sovereign bonds on bond price. We test whether credit rating agencies' announcements surprise the market as predicted by the conspiracy theory or confirm what the market has priced already as postulated by the market efficiency hypothesis. We...

This study examines whether diversity among market participants is associated with diverse information environments and better aggregation of information. Using measures of diversity among sell-side equity analysts, we demonstrate that although minority analyst forecasts are less accurate, their...

We rationalize exclusive portfolio dealing in a novel three-period partial equilibrium framework populated by a representative, risk-neutral seller and a small number of ex ante identical broker-dealers. Endowed with independent, uncertain demand for a representative asset, the broker-dealers...

The London inter-bank offered rate (LIBOR) serves as a benchmark for many financial transactions worldwide today. These rates have been subject to manipulative conduct, false reporting and collusion. In forensic accounting, the Benford test has been implemented to successfully detect manipulated...

Using a new dataset on syndicated loan primary market pricing adjustments, we examine whether relationship banks' information advantage facilitates price discovery in loan issuances. We find that the lead bank makes fewer adjustments to the initial pricing terms of a syndicated loan and shortens...

We cross-sectionally analyze the presence of aggregated hidden depth and trade volume in the S&P 500 and identify its key determinants. We find that the spread is the main predictor for a stock's hidden dimension, both in terms of traded and posted liquidity. Our findings moreover suggest that...

We develop a dynamic model of dealer intermediation between a monopolistic customerdealer (B2C) market and a competitive inter-dealer (B2B) market. Dealers face inventory constraints and adverse selection. We characterize the optimal quote setting and inventory management behavior for both...