Learning in Crowded Markets

We study a capital reallocation problem in which investors can enter into a new market where they compete with each other in identifying the best deals. While ex ante investors are uncertain about their relative advantage in identifying the best deals, they...

Uploaded: Jan 14, 2018

Dirk Hackbarth, Alejandro Rivera, Alejandro Rivera, Tak-Yuen Wong, Tak-Yuen Wong | Working Paper No. 00020-00

Optimal Short-Termism

This paper studies incentives in a dynamic contracting framework of a levered firm. In particular, the manager selects long-term and short-term efforts, while shareholders choose initially optimal leverage and ex-post optimal default policies. There are three results. First, shareholders trade...

Uploaded: Dec 28, 2017

Tomasz Piskorski | Working Paper No. 00017-00

An Equilibrium Model of Housing and Mortgage Markets with State-Contingent Lending Contracts

We develop a tractable general equilibrium framework of housing and mortgage markets with aggregate and idiosyncratic risks, costly liquidity and strategic defaults, empirically relevant informational asymmetries, and endogenous mortgage design. We show that adverse selection plays an important role in...

Published: Journal of Finance, 2020

Brendan Daley, Brett Green, Victoria Vanasco | Working Paper No. 00023-00

Securitization, Ratings, and Credit Supply

We show that the availability of credit ratings (or other public information) increases the allocative efficiency of cash flows by reducing costly retention, but reduces lending standards and can lead to an oversupply of credit. These findings are in contrast...

Uploaded: Nov 21, 2017

Liyan Yang | Working Paper No. 00018-00

Disclosure, Competition, and Learning from Asset Prices

This paper studies the classic information-sharing problem in a duopoly setting in which firms learn information from a financial market. By disclosing information, a firm incurs a proprietary cost of losing competitive advantage to its rival firm but benefits from...

Uploaded: Nov 21, 2017

Yaron Leitner, Bilge Yilmaz, Bilge Yilmaz | Working Paper No. 00016-00

Regulating a model (JFE, forthcoming)

We study a situation in which a regulator relies on risk models that banks produce in order to regulate them. A bank can generate more than one model and choose which models to reveal to the regulator. The regulator can...