In this paper, we study a two-country general equilibrium model with partially segmented financial markets, where hedge funds emerge endogenously. Empirically, we show that the hedge fund investment strategy predicted by our model, which we call the "risk-adjusted carry trade" strategy, explains...

We present a theory of the linkages between corporate governance, corporate finance, and the real sector of an economy. Using a structural model of industry equilibrium with endogenous entry, we show that poor corporate governance leads to low levels of competition, and to firms with high...

We develop a model based on risk averse investors and limited arbitrage capital to explain the rationale for the so called carry trades: that is, trades where “the purchase of riskier, higher-yielding assets is funded by selling lower-yielding currencies” (Financial Times, January 28, 2008)....