Department of Economics
University of Virginia
332 Monroe Hall
Charlottesville, VA 22904
Primary Fields: Macroeconomics, Monetary Economics, Labor Economics, Household Finance, Asset Markets
On leave Spring 2019 visiting UCLA
"An Information-based Theory of Financial Intermediation" (2018) joint with Bruno Sultanum and Nicholas Trachter - updated July 2019
Abstract: We advance a theory of intermediation that builds on private information and heterogeneous screening ability across market participants. We solve for the equilibrium market structure and show that investors with high screening ability are the largest intermediators: they are the most central in trade, they trade frequently, they trade with many different counterparties, and they ex- tract high rents. We derive a set of testable predictions from the model and we test them using transaction-level micro data. Our empirical results provide evidence that our mechanism relying on private information and screening ability is a relevant feature of intermediation in over-the-counter markets.