We prove that in smooth Markovian continuous–time economies with potentially complete asset markets, Radner equilibria with endogenously complete markets exist. JEL subject classification: D52, D53, G12 2010 Mathematics Subject Classification: 91B50, 91G80

The stock markets have two primary functions, that of providing liquidity and price discovery. While the market micro-structure was mostly ignored or assumed to function ideally for the purpose of asset pricing, M. O’Hara (Journal of Finance, 2003) has established that both liquidity and price discovery affect asset pricing, and in particular asset returns. While the cost of liquidity provision...

The theoretical literature suggests a positive relation between financial leverage and asset returns, but the empirical evidence on this effect is mixed. We examine leverage effects in public real estate markets across eight countries with active public real estate markets. Cross-country public real estate markets provide an interesting testing ground given the significant use of leverage in re...

This paper evaluates the data from the recent financial crisis to examine the risk spillover effects of financial markets value at risk (VaR), which captures the extreme behavior of an asset, is considered a measure of risk in an asset or in a market. We hypothesize that an extreme downside movement of returns in a market measured by a VaR has negative effects on other markets, causing a simila...

We introduce Large Scale Asset Purchases (LSAPs) in a New-Keynesian DSGE model that features distinct mortgage and corporate loan markets. We show that following a significant disruption of financial intermediation, central-bank purchases of mortgage-backed securities (MBS) are uniformly less effective at easing credit market conditions and stabilizing economic activity than outright purchases ...

The collective phenomena of a liquid market is characterized in terms of a particle system scenario. This physical analogy enables us to disentangle intrinsic features from purely stochastic ones. The latter are the result of environmental changes due to a ‘heat bath’ acting on the many-asset system, quantitatively described in terms of a time dependent effective temperature. The remaining intr...

Considerable anecdotal evidence suggests that the effects of liquidity shocks spread quickly throughout the financial sector. However, few studies have focused on the dynamics of liquidity across real-estate markets. This paper examines the liquidity spill-over impact across four markets linked by a common fundamental factor : the stock market, the derivative (Credit Default Swap (CDS)) market,...

We develop a two period model of trade where an insider, a noise trader, a high frequency trader (HFT) and a market maker trade a divisible asset that has a common value in two parallel markets. The market makers set competitive prices in both markets. We analyze the e ects of the high frequency trader, who can gain from observing prices across markets, on market quality. Even though informed t...

a r t i c l e i n f o JEL classification: C22 E44 G11 Keywords: Causality Rank test Threshold error-correction model (TECM) Wealth effect Credit price effect Using the non-parametric rank tests proposed by Breitung (2001), we set out in this study to determine whether any non-linear long-run equilibrium relationship exists between the stock and real estate markets of Western European countries....