Dynamic models of competitive informed trading usually have multiple equilibria. Typically, the literature proceeds by studying one equilibrium which is chosen without any further justification. In the setup of Hirshleifer, Subrahmanyam, and Titman (1994) we document how the two equilibria the...

We provide a new insight on how changes in risk affect a firm's capital structure decisions. Using an approach that alleviates potential problems caused by high capital structure adjustment costs, we test whether firms that experience a substantial increase in risk choose an external financing...

Price quotes are a valuable commodity by themselves. This is a conundrum in the standard asset pricing framework. We study the value of access to accurate and timely prices in a market economy explicitly taking into account that in the U.S., exchanges have property rights in the price quotes...

We provide a theory of mandatory accounting conservatism as a means to avoid speculative bubbles and overvaluation. In a simple exchange economy where agents trade due to differences in opinion, we show that conservatism leads to a lower expected stock price than a full disclosure regime. Thus...

Both private and public information are valuable and affect the cost of capital (Easley and O'Hara, 2004). We endogenize the production of these types of information within the firm. In a simple agency problem in the presence of adverse selection, both private and public information are valuable...