We propose a new model of trading in OTC markets. Dealers accumulate inventories by trading with end-investors and trade among each other to reduce their inventory holding costs. Core dealers use a more efficient trading technology than peripheral dealers, who...

Long-held intuition dictates that information-based trade is impossible without exogenous noise. Risk seekers can resolve this conundrum. Even though such agents have negative risk aversion, they act as utility maximizers because they fully internalize their impact on prices. If their...

We study the disclosure policy of a regulator overseeing a monitor with reputation
concerns, such as a bank or an auditor. The monitor oversees a manager, who chooses
how much to manipulate given the monitor's reputation. Reputational incentives...

We characterize necessary conditions for socially responsible investors to impact firm behavior in a setting in which firm production generates social costs and is subject to financing constraints. Impact requires a broad mandate, in that socially responsible investors need to...

We study time-consistent debt policies in a trade-off model of debt in which the firm can freely issue new debt and repurchase existing debt. A debt policy is time-consistent if in any state equityholders prefer to follow it rather than...

Disagreement about macroeconomic fundamentals accounts for only part of the disagreement about future interest rates, creating a ‘‘disagreement correlation’’ puzzle. This puzzle arises because standard equilibrium models with belief differences predict a strong link between asset return disagreement and fundamental...