In this research authors show that institutional investors' skill matters the most during high sentiment periods when market signals are noisy. The results reveal that fund managers with the highest (lowest) skill add (lose) $7.71 ($5.64) million of value during high sentiment periods, compared...

The supply and demand of credit are not always well aligned and matched, as is reflected in the countercyclical excess reserve-to-deposit ratio and interest spread between the lending rate and the deposit rate. We develop a search-based theory of credit allocations to explain the cyclical...

Using household-level survey and housing transaction data, we detect the flight to safety vis-a-vis housing in China: Great economic uncertainty causes the prices of housing assets to soar, especially those of good quality. To stabilize housing prices, China has imposed purchase restrictions on...

In the past decade, the Chinese economy has witnessed a great housing boom, accompanied by a slowdown in economic growth and an increase in firms' financial investment. The waning economic prospects are shown to lead to a surge in housing prices by stimulating firms' demand for financial...

We construct a model for Bitcoin-like cryptocurrency as risky and costly bubbles in an infinite-horizon production economy with incomplete markets. This model is consistent with the following facts: i) the surging Bitcoin market presents enormous volatility, and ii) its price dynamics are...

What is the role of production networks in inducing self-fulfilling business cycles? We build a continuous-time multisector business cycle model with input-output linkages and credit constraints to study this. Credit constraints faced by productive firms endogenously create self-fulfilling...

A large number of financial assets are traded in both exchanges and over-the-counter markets (i.e., centralized and decentralized markets, CM and DM hereafter, respectively). Moreover, the last century has witnessed the secular migration of asset trading from CM to DM. To this end, this paper...

We offer a tractable dynamic theory where excessive credit creation by the frictional banking sector may lead to over-investment and then endogenous boom-bust cycles. We formalize the idea in a general equilibrium framework with banks and financially constrained heterogeneous firms. In the...

The Great Recession has witnessed not only a marked disruption in the credit markets and a sharp increase of capital unemployment but also a severe deterioration of the matching efficiency in the labor market, as evidenced by the historically high unemployment rate and a significant outward...

We introduce a simple adverse selection problem arising in credit markets into a standard textbook real business cycle model. There is a continuum of households and a continuum of anonymous producers who produce the final goods from intermediate goods. These producers do not have the resources...