A stochastic debt forecasting framework is presented where projected debt distributions reflect both the joint realization of the fiscal policy reaction to contemporaneous stochastic macroeconomic projections, and also the second-round effects of fiscal policy on macroeconomic projections. The...

This paper analyzes the welfare implications of information aggregation in a security-trading model where traders have both idiosyncratic endowment risk and asymmetric information about security payoffs. In the model a large market can be welfare-reducing --- i.e., the optimal market size is...

We present a competitive model of takeovers among heterogeneous firms. Each firm owns a tradeable "project" and non-tradeable "skill". The complementarity between them generates takeovers. We construct an equilibrium with two segmented markets. In one market, firms pay a fee to an intermediary...

We present a competitive model of takeovers that explains two robust features of the data: target premia and size-dependent bidder returns. Takeovers are driven by complementarity between two factors, non-tradeable "skill" and a tradeable "project". Firms are heterogeneous in both dimensions....

A quadratic-normal model has been a workhorse model in finance. While it can be derived from a CARA preference, some recent papers use risk-neutral traders facing an inventory cost to generate a quadratic-normal structure. So far, a relationship between the two models has been unclear. Using a...

The paper "Market Size Matters: A Model of Excess Volatility in Large Markets" to which these Appendices apply is available at the following URL: "http://ssrn.com/abstract=2575481" http://ssrn.com/abstract=2575481

We present a model of excess volatility based on speculation and equilibrium multiplicity. Each trader has two distinct motives to trade: (i) speculation based on noisy signals, and (ii) hedging against endowment shocks. The key to equilibrium multiplicity is the self-fulfilling nature of...