There has been a long-running debate whether stock market prices are determined by fundamentals. To date no consensus has been reached. An important issue in this debate concerns the circumstances in which deviations from fundamentals are consistent with rational behavior. A continuous-time...

To end a financial crisis, the central bank is to lend freely, against good collateral, at a high rate, according to Bagehot’s Rule. We argue that in theory and in practice there is a missing ingredient to Bagehot’s Rule: secrecy. Re-creating confidence requires that the central bank lend in...

Financial crises are devastating in human and economic terms. To avoid the next one, it is important to understand the recent financial crisis of 2007-2008 and the financial eras which preceded it. Gary Gorton has been studying financial crises since his 1983 PhD thesis, ""Banking Panics."" The...

Fighting financial crises: learning from the past -- The New York Clearing House Association -- The start of a panic -- What the New York Clearing House did during National Vanking Era panics -- Information production and suppression and emergency liquidity -- "Too big to fail" before the Fed --...