We present a competitive model of takeovers among heterogeneous firms. Each firm owns a tradeable "project" and non-tradeable "skill". The complementarity between them generates takeovers. We construct an equilibrium with two segmented markets. In one market, firms pay a fee to an intermediary...

Can belief shocks make trading excessive? We present a dynamic inventory management model in which belief shocks gradually propagate across traders, leading to the inflated trading activity which reduces traders' welfare. Trading can be socially beneficial because smoothing heterogeneous asset...

We present a competitive model of takeovers that explains two robust features of the data: target premia and size-dependent bidder returns. Takeovers are driven by complementarity between two factors, non-tradeable "skill" and a tradeable "project". Firms are heterogeneous in both dimensions....