In contrast to the efficient-market hypothesis (EMH), the noisy-market hypothesis (NMH) asserts that prices are but noisy indications of fundamental values. We study losses in certainty equivalents of investing according to one hypothesis (NMH or EMH) when the other is true. Our findings suggest...

Using a large cross-section of international household-level data, we explore the relation between institutional quality, households' level of trust and stock-market participation. We find that institutional quality has a significant impact on both trust and stock-market participation. We also...

We analyze the heterogeneity of foreign bank loans in a newly constructed global dataset that explicitly distinguishes in a disaggregated loan-bank-firm setting between domestic loans and three categories of foreign loans: loans by subsidiaries of foreign banks, loans by foreign bank branches,...

A simple portfolio choice model shows that, when a bank's capital is constrained by regulation, regulatory cost (risk weightings) alters the risk and value calculations for the bank's assets. In particular, we find that banks may respond to stricter regulation by increasing the share of...

During good economic times, the likelihood of obtaining a loan from a foreign bank increases in the borrower firm's opacity. During bad economic times (recessions), this relation reverses as the probability of obtaining a foreign loan decreases for all firms, but drops disproportionately for...

We explore the link between informativeness of signals, stochastic dominance and equilibrium bids in a multi-unit auction with risk averse bidders. We show that for a particular class of signal distributions, there is a one-to-one relation between informativeness and conditional first-order...

We develop a rational, long-horizon model in which investments may damage future production/consumption possibilities through their impact on the climate. Within this framework, we show that the optimal investment consists of four funds: i) the risk-free asset; ii) a myopic portfolio; iii) a...

This paper studies the pricing of IPOs in a tractable model in which an investment bank faces some investors with superior information. We show how this can lead to underpricing and we make a number of empirical predictions