The paper starts with a description of major reforms of EU policy in the network industries. Based on the normative economics of regulation, it then points out generic information and transaction cost problems of regulatory policy making. An appropriate allocation of regulatory competencies may...

Market participants can invest to increase their gains from trade before searching for partners. The entrants' type distribution and trade efficiency are jointly determined and correlated. This paper explores a random search model of ex ante investments and trade efficiency, assuming that the...

The idea that information frictions amplify business cycles is hard to evaluate because information is not easily measured. We propose a quantifiable information friction that amplifies output fluctuations. In our simple model of decentralized trade, income dispersion measures uncertainty about...

This study seeks to explore, how market efficiency changes, if ordinary traders receive fundamental news more or less often. We show that longer temporal information gaps lead to fewer but larger shocks and a reduction of the average noise level on the dynamics. The consequences of these effects...

Sell-side analysts change their stock recommendations when their valuations differ from the market's. These valuation differences can arise from either differences in earnings estimates or the non-earnings components of valuation methodologies. We find that recommendation changes motivated by...

Using over 5000 equity and option trades unequivocally based on nonpublic information about firm fundamentals, we find that commonly used asymmetric information proxies (AIPs) display abnormal values on days with informed trading. Volatility and trading volume are abnormally high, whereas...