Survey-based excess stock return forecasts are procyclical, less volatile, and more persistent than countercyclical statistical forecasts. These patterns challenge rational representative-agent models. We show that they arise naturally in fully rational heterogeneous-belief models with speculative trade. Prices reflect the market...

Standard demand elasticity estimation treats investors’ demand slopes as stable objects that can be traced out by exogenous residual supply shifts. We show this identification strategy fails in dynamic settings: supply shocks cause demand curves to tilt and shift through...

In opaque markets plagued by asymmetric information, firms borrow from many lenders at once and individual contracts are not observable to other lenders. We identify a novel information externality in a model based on such a setting. To avoid adverse...

We study the role of investment banking as delegated cheap talk. In our model of an initial public offering (IPO), two parties have conflicting interests: an entrepreneur wants to sell his firm, whereas investors want to buy a good firm....

A principal ("she") monitors an agent's("his") hidden action by allocating attention to observe his performance publicly; however, her own attention allocation is also her hidden action that she cannot commit to, leading to a double moral hazard problem. We study...

We model stakeholder-driven institutional divestiture that promotes harmful-asset stranding through both an economic exposure channel and financial prices. We introduce two novel mechanisms. First, institutional divestiture weakens stakeholders' asset exposures, improving political conditions for stranding. Second, institutional divestiture credibly communicates...