This paper employs numerical simulations of the Park and Sabourian (2011) herd model to derive new theory-based predictions for how information risk and market stress influence aggregate herding intensity. We test these predictions empirically using a comprehensive data set of highfrequency and...

This paper presents a general equilibrium model with technological uncertainty, financial markets and imperfect information. The future consists of uncertain environments that are more or less clearly distinguishable (measurable). This limits the possibilities of specialization and...

In this paper, we study whether central bank communication has a positive effect on market participants’ perception of central banks’ (i) credibility, (ii) unorthodox measures, and (iii) independence. We utilise a survey of more than 500 financial market participants from around the world...

The spread of the global financial crisis of 2008/2009 was rapid, and impacted the functioning and the performance of financial markets. Due to the importance of this phenomenon, this study aims to explain the impact of the crisis on stock market behavior and interdependence through the study of...

Market distress can be the catalyst of a deleveraging wave, as in the 2007/08 financial crisis. This paper demonstrates how market distress and deleveraging can fuel each other in the presence of adverse selection problems in asset markets. At the core of the detrimental feedback loop is agents'...