Market consistent valuations with financial imperfection

Globalization under Financial Imperfection

The paper investigates the effects of international trade in goods and capital movement on the productivity distribution and industry-wide productivity when countries are heterogeneous in the quality of their financial institutions. In autarky, firm heterogeneity in their productivities arises in countries with poor financial institutions, while all firms adopt a high-productivity technology in...

Time-Consistent Majority Rules with Interdependent Valuations

This paper studies collective decision-making with interdependent valuations, where, unlike the extant literature, the committee cannot commit to a majority rule, necessitating it to be ex post optimal or “time-consistent”. We find that (1) a majority rule is timeconsistent if and only if the expected number of affirmative votes it generates is approximately the rule itself; (2) the preference ...

Are Time Consistent Valuations Information Monotone?

Multi-period risk functionals assign a risk value to discrete-time stochastic processes. While convexity and monotonicity extend in straightforward manner from the singleperiod case, the role of information is more problematic in the multi-period situation. In this paper, we define multi-period functionals in such a way that the development of available information over time (expressed as a fil...

Financial market crisis and financial market channel

Financial-market Equilibrium with Friction

We show that the endogenous stochastic process of the liquidity of securities is as important to investment and valuation as the exogenous stochastic process of their cash ‡ows. We develop a general-equilibrium model with heterogeneous investors who have an every-day motive to trade and pay transactions fees. Our model delivers the optimal, market-clearing moves of each investor and the resulti...