We study financial markets in which both rational and overconfident agents coexist and make endogenous information acquisition decisions. We demonstrate the following irrelevance result: when a positive fraction of rational agents (endogenously) decides to become informed in equilibrium, prices are...

We study a novel class of noisy rational expectations equilibria in markets with large number of agents. We show that, as long as noise (liquidity traders, endowment shocks) increases with the number of agents in the economy, the limiting competitive...

This paper considers an optimal contracting problem between an informed risk-averse agent and a principal, when the agent needs to perform multiple tasks, and the principal is active, namely she can influence some aspect of the agency relationship on top...

We develop a benchmark model to study the equilibrium consequences of indexing in a standard rational expectations setting. Individuals incur costs to participate in financial markets, and these costs are lower for individuals who restrict themselves to indexing. A decline...

We study a security design problem under asymmetric information, in the spirit of Myers and Majluf (1984). We introduce a new condition on the right tail of the firm-value distribution that determines the optimality of debt versus equity-like securities. When...

We study information sales in financial markets with strategic risk-averse traders. Our main result establishes that the optimal selling mechanism is one of the following two: (i) sell to as many agents as possible very imprecise information; (ii) sell to...