In this paper, we examine the effect of segmented commodity markets on the relationship between the forward exchange rates premium and changes in the future spot rates in a general equilibrium model. Market segmentation is modeled by introducing a proportional cost for transferring physical...

In a market-based democracy, we model different constituencies that disagree regarding the likelihood of economic disasters. Costly public policy initiatives to reduce or eliminate disasters are assessed relative to private alternatives presented by financial markets. Demand for such public...

We examine the relationship between monetary-policy-induced changes in short interest rates and yields on long-maturity default-free bonds. The volatility of the long end of the term structure and its relationship with monetary policy are puzzling from the perspective of simple structural...

The Financial Industry Regulatory Authority began to collect transaction data from broker-dealers in 2011 as a step towards enhancing its understanding of securitization markets. We use transaction data to document the importance of the interdealer network structure for market quality. Some...

When investors disagree, speculation between them alters equilibrium prices in financial markets. Because managers maximize firm value given financial market prices, disagreement alters firms' value-maximizing investment policies. Disagreement therefore impacts aggregate investment, consumption,...

Elementary portfolio theory implies that environmentalists optimally hold more shares of polluting firms than non-environmentalists, and that polluting firms attract more investment capital than otherwise identical non-polluting firms. These results reflect the demand to hedge against high...

Prior to the subprime crisis, mortgage brokers charged higher fees for subprime loans that turned out to be riskier ex post, even when conditioning on other risk characteristics. Borrowers who paid higher conditional fees were inherently more risky, not just because they paid higher fees. The...

We develop an equilibrium model for origination fees charged by mortgage brokers and show how the equilibrium fee distribution depends on borrowers' valuation for their loans and their information about fees. We use non-crossing quantile regressions and data from a large subprime lender to...

We measure the incidence of latency arbitrage for cross-listed stocks around the time of an exogenous shock that made the markets faster. Our sample is from NASDAQ Nordic and consists of Nordic blue chip firms listed and traded in multiple markets. We document a sharp decline in the incidence of...