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I model an incomplete markets economy where unaware agents do not perceive all states of nature, so unintended default can occur when asset returns differ from what was perceived. The presence of default plays a crucial role in the proof of existence - particularly in economies where beliefs are...
Persistent link: https://www.econbiz.de/10014537040
This paper investigates the conditions under which socially responsible investment (SRI) is neutral from the viewpoint of general equilibrium theory. Three conditions are jointly sufficient for neutrality of SRI. First, the financial market is complete and SRI does not compromise the spanning...
Persistent link: https://www.econbiz.de/10014536933
We show how the prospect of disputes over firms' revenue reports promotes debt financing over equity. This is demonstrated in a costly state verification model with a risk averse entrepreneur. The prospect of disputes encourages incentive contracts that limit penalties and avoid stochastic...
Persistent link: https://www.econbiz.de/10012215300
While most studies examine the impact of business confidence on market performance, we instead focus on the consumer because consumer spending habits are a natural extension of trading activity on the equity market. This particular study examines investor sentiment as measured by the Consumer...
Persistent link: https://www.econbiz.de/10010436041
In a financial market where agents trade for short-term profit and where news can increase the uncertainty of the public belief, there are strategic complementarities in the acquisition of private information and, if the cost of information is sufficiently small, a continuum of equilibrium...
Persistent link: https://www.econbiz.de/10011599394
The sovereign debt crisis led to financial difficulties for European firms and a decline in the use of labour input. We use qualitative firm-level data for 24 European countries, collected within the third wave of the Wage Dynamics Network (WDN3) of the ESCB, to propose a cross-country analysis...
Persistent link: https://www.econbiz.de/10013470752
This paper features an analysis of the relationship between the S&P 500 Index and the VIX using daily data obtained from the CBOE website and SIRCA (The Securities Industry Research Centre of the Asia Pacific). We explore the relationship between the S&P 500 daily return series and a similar...
Persistent link: https://www.econbiz.de/10011843238
This study investigates the substitution financing effect of suppliers' trade credit on customers' trade-credit using Chinese listed firms from 2009 to 2018. Results verify the substitution financing effect of suppliers' trade credit on customers' trade credit, indicating that firms with higher...
Persistent link: https://www.econbiz.de/10015401227
In characterizing entrepreneurial behavior, researchers often regard nascent entrepreneurs entering risky markets as overconfident. In this paper, we challenge this prevailing view and show that a more differentiated consideration reveals the effects of overconfidence on market entry to be...
Persistent link: https://www.econbiz.de/10015191350
This paper develops a model of rational bubbles where trade of an asset takes place through a chain of middlemen. We show that there exists a unique and robust equilibrium, and a bubble can occur due to information frictions in bilateral and decentralized markets. Under reasonable assumptions,...
Persistent link: https://www.econbiz.de/10014536966