Three types of agents acting on different information sets are considered: fully informed agents, insiders, and outsiders. Differences in information quality are shown to affect the properties of their optimal portfolios. For an outsider, the share of wealth invested in the stock is decreasing...

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

Based on a screening model, we hypothesize that borrower risk will be over- (under-)priced in recessions (booms), and the loan spreads' sensitivity to default risk as a function of economic growth will be inverse U-shaped. We test this prediction using a sample of 5,300 U.S. commercial loans...

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 show that a simple equilibrium model with uncertain growth is able to simultaneously generate patterns in implied volatility and risk aversion that are similar to the ones observed in the data. In addition, the model produces an implied pricing kernel that is increasing for particular levels...