We explore the relation between institutional quality, trust and stock-market participation. In our theoretical model, agents update their beliefs in a Bayesian manner based on observations on frauds and choose whether to invest in the stock market. The corresponding empirical model shows that...

This paper analyzes the expected life-time utility and the hedging demands in an exchange only, representative agent general equilibrium under incomplete information. We derive an expression for the investor's expected life-time utility, and analyze his hedging demands for intertemporal changes...

This paper analyzes the expected life-time utility and the hedging demands in an exchange only, representative agent general equilibrium under incomplete information. We derive an expression for the investor’s expected life-time utility, and analyze his hedging demands for intertemporal...

We analyze banks’ pooling of corporate loans and propose Pareto-improving sharing rules that depend only on the relative sizes of the loans. Implementation of these sharing rules do not require any precise knowledge of default probabilities or default correlations.

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.

We analyze how a benevolent, privately informed government agency would optimally release information about the economy's growth rate when the agents hold heterogeneous beliefs. We model two types of agent: "conforming" and "dissenting." The former has a prior that is identical to that of the...