This study is to examine the economic consequences of asset measurement bases for illiquid, productive assets. We explicitly model both the entrepreneur (the seller) and the investor (the buyer) investment decision in a setting where the entrepreneur's hidden action (investment decision) and...

The authors explain why central counterparties (CCPs) emerged historically. With standardized contracts, it is optimal to insure counterparty risk by clearing those contracts through a CCP that uses novation and mutualization. As netting is not essential for these services, it does not explain...

Motivated by the revealed preference approach to consumer theory, this study constructs a dynamic theoretical model which infers the unobservable household behavior from the observable patterns of housing and mortgage market activities. The model emphasizes the role of sellers and their...

A pervasive empirical finding is that mutual fund managers do not maintain their performance. In this paper, I show that social interactions can explain this fact. To do so, I allow a “crowd” of managers to meet at random times and exchange ideas within a rational-expectations equilibrium...

Despite the prominent role that information plays in the economic theory of credit markets, no direct evidence exists on the causal relationship between the availability of information about loan applicants and loan performance. This paper provides such evidence by exploiting an unanticipated...

Information asymmetries in financial markets are not a new phenomenon. In a recent poll conducted amongst 76 industry experts, a staggering 83% of participants stated they do not believe utility token issuers disclose enough information to their stakeholders. This essay provides actionable...

I analyze a general setting where a policy maker needs information that financial market traders have in order to implement her optimal policy, and market prices can potentially reveal this information. Policy decisions, in turn, affect asset values, hence forward looking traders may have...

How effectively does a decentralized marketplace aggregate information that is dispersed throughout the economy? We study this question in a dynamic setting where sellers have private information that is correlated with an unobservable aggregate state. In any equilibrium, each seller's trading...

In an economy where traders absorb information partially, we study the effect of disclosure accuracy and disclosure clarity on financial markets. Accuracy measures how precisely a disclosure identifies the firm's fundamentals, whereas clarity measures how well traders understand the disclosure....