Using a search-based trading model, we show that either an illiquidity price premium or discount can arise between two assets with identical fundamentals. Liquidity between the two assets diverges endogenously in a self-reinforcing manner as trading is concentrated in the more liquid asset. When...

This paper develops and implements a new test to investigate whether sell-side analysts herd around the consensus when they make stock recommendations. Our empirical results support the herding hypothesis. Stock price reactions following recommendation revisions are stronger when the new...

We study the strategies of the market in the inter-dealer market. We show that market makers actively learn from the dealers they trade with and strategically react to the information content of the orders they receive. We identify quot;hidingquot; and quot;experimentingquot; as main types of...

The study examines the relationship between institutional ownership and liquidity of stocks, focusing on the effect of institutions' information advantage on liquidity. The information advantage of institutions can affect liquidity through two channels: adverse selection and information...

This paper examines the reliability of information provided by certification intermediaries, such as rating agencies in the context of both a monopolistic and a duopolistic certification industry. It demonstrates that, in a simple model where the intermediary is concerned about reputation and...

This study shows that the information content of FX transactions depends on the identity of market participants. Using spot FX transactions of a major Australian bank, we find that central banks have the greatest price impact, followed by non-bank financial institutions (NBFIs) such as hedge...

We investigate whether the reputation-herding theory or the tradeoff theory explains variation in the timing of individual analysts' forecasts. Using forecast accuracy improvements, forecast boldness, and the price impact of forecasts as measures of forecast quality, we find that in the...

This paper studies how future tense marking affects the terms of bank loans. We predict that languages that grammatically mark the future affect speakers' intertemporal preferences and thereby reduce the perception of the risks associated with loan issuance. We test this hypothesis on a sample...

A more positive cultural trust bias by an equity analyst's country of origin toward a firm's headquarter country is associated with significantly more positive stock recommendations, controlling for analyst-month and firm-month fixed effects. The cultural bias effect is stronger for eponymous...

Can crowdfunding benefit entrepreneurs beyond providing finance? This paper shows that crowdfunding extends early feedback to entrepreneurs about the market demand for their projects, thereby mitigating uncertainty associated with entry. Using Kickstarter data and exploiting a weather-based...