Liquidity in financial marketsDo marketmakers provide the efficient amount of liquidity during a financial crisis?
Referenced by the Nobel Prize Committees Scientific Background, 2010. (2) A Search-based Theory of the On-the-run Phenomenon, with Dimitri Vayanos. Journal of Finance, Vol. 63 (2008), pp. 1351-1389.Why recently issued bond have higher price than older ones, even if they have the same cash flows.Nominated for the 2008 Smith Breeden Prize for the Best Paper in the Journal of Finance(3) Liquidity Premia in Dynamic Bargaining Markets, Journal of Economic Theory, Vol. 140 (2008), pp. 66-96.
The relationship between the distribution of tradeable shares and cross-sectional expected returns. Click here for an empirical test of the model key predictions. (4) Models of the Liquidity Effect, with Chris Edmond. The New Palgrave Dictionary of Economics 2nd edition.
An increase in the money supply is followed by a temporary fall of short-term interest rates.
(5) Crises and Liquidity in Over the Counter Markets, (addendum) with Ricardo Lagos, and Guillaume Rocheteau, Journal of Economic Theory, Vol. 146 (2011), pp. 2169–2205. a substantially revised version of Crashes and Recoveries in Illiquid Markets. A non technical summary can be found at Vox-Eu. When OTC frictions are large, investors choose to trade so little that even well capitalized dealers don't find it optimal to provide liquidity. This creates a policy role for the government to buy private assets on its own account. (6) Liquidity Provision in Capacity Constrained Markets. Macroeconomic Dynamics, Vol. 15 (2010), pp. 119-144. When
competitive marketmakers face a capacity constraint on their number of
trades with outside investors, the bid-ask spread is positive, and
covaries positively with aggregate inventories.
(7) Liquidity Shocks and Order Book Dynamics, (addendum), with Bruno Biais. How does a limit order market absorb a transient liquidity shock? Equilibrium spread, order submission dynamics, cancellations, volume and depth. (8) Aggregate Implications of Micro Asset Market Segmentation (addendum) with Chris Edmond. Forthcoming, Journal of Monetary Economics.Consumption-based asset pricing when agents trade through a financial system comprised of many micro asset markets partially integrated with one another.(9) Pricing and Liquidity with Sticky Trading Plans (addendum) with Bruno Biais and Johan Hombert. When an aggregate liquidity shock hits the market and traders face cognition limits, algorithmic trading can appear to be price destabilizing. Yet, it is always welfare improving. (10) Liquidity in Frictional Asset Markets with Guillaume Rocheteau. Journal of Money, Credit, and Banking, Vol. 43 (2011), pp. 261-282. An overview of search models applied to financial and monetary economics. (11) Liquidity and the Threat of Fraudulent Assets (addendum) with Yiting Li and Guillaume Rocheteau. Some assets are harder to sell than others because they are more vulnerable to fraudulent practices. Real Estate(12) Why Has House Price Dispersion Gone Up? with Stijn Van Nieuwerburgh. Review of Economic Studies, Vol. 77 (2010), pp. 1567-1606.The increase in wage dispersion across US metropolitan areas can help explain the increase in the level and dispersion of house prices. Learning(13) Learning from Prices: Public Communication and Welfare, (addendum), with Manuel Amador. Journal of Political Economy, Vol. 118, (2010), pp. 866-907. When the information structure of the economy is endogenous, public information about aggregate economic condition can lead to more confusion and greater uncertainty. (14) Learning from Private and Public Observation of Others' Actions, (addendum), with Manuel Amador. Journal of Economic Theory, Vol .147 (2012), pp. 910-940. How information diffuses in a large economy through local interactions and prices. An earlier discrete time version circulated under the title Learning by Matching. (15) Restricted Perception Equilibria and Rational Expectations Equilibrium, with Stephane Gregoir. Journal of Economic Dynamics and Control, Vol. 31 (2007), pp 81-109. Equilibria where agents' decisions are based on an optimally misspecified model. |
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Research papers |