The GM and Ford downgrade to junk status during May 2005 caused a wide-spread sell-off in their corporate bonds. Using a novel dataset, we document that this sell-off appears to have generated significant liquidity risk for market-makers, as evidenced by a significant imbalance in their quotes towards sales. We also document that simultaneously, there was excess comovement in the fixed-income s...

Models of market microstructure tell us that a spread is necessary to compensate market makers for order processing costs, inventory risk, and adverse selection. Since entry into market making is relatively easy on the Nasdaq dealer market, and the New York Stock Exchange (NYSE) specialist faces competition from public liquidity suppliers as well as from regional exchanges, competition should a...

The present study investigates the impact of dual listing of Australian shares on the NZSE. The results suggest that the average excess return on the day of listing is negative but is statistically insignificant. The negative excess return starts to accumulate before the day of listing and becomes statistically significant several weeks after this date to the end of the period (day +150). These...

European emerging and transition economies are in immense need of investments renewal capital, yet they produce a considerable amount unutilized resources. In particular, banks hold excess liquidity the face seemingly profitable lending opportunities. Is it demand-side or supply-side problem is this region entirely different have we been working under wrong paradigm? This study creates new esti...

This paper examines the optimal design of capital and liquidity regulations under fire sale externalities. The lack of complementary liquidity ratio requirements harms the purpose of capital adequacy requirements by yielding not only inefficiently low risky investment but also more severe financial crises. When capital is regulated but liquidity is not, banks still keep liquid assets for micro-...