A dynamical price formation model for financial assets is presented. It aims to capture the essence of speculative trading where mispricings of assets are used to make profits. It is shown that together with the incorporation of the concept of risk aversion of agents the model is able to reproduce several key characteristics of financial price series. The approach is contrasted to the conventio...

The aim of this study is to investigate the effects of capital structure decisions on firms’ profitability in manufacturing sector in Turkey. The data used in this research corresponds to the financial statements of manufacturing companies collected between 2005 and 2011. Regression analysis was employed by using financial ratios obtained from financial statements of firms within the scope of a...

This study compares the predictive ability of: (1) ratings, rating changes and total assets; (2) financial ratios; and (3) financial ratios combined with ratings and rating changes on a sample of forty-eight insolvent life insurers over the period 1990 to 1992. Based on the expected cost of misclassification, ratings, rating changes and total assets have comparable predictive ability to financi...

. We consider the model of a financial exchange economy with finitely many periods having financial restricted participation i.e., each agents portfolio choice is restricted to a closed convex set containing zero, as in siconolfi([3]). Time and uncertainty are represented by a finite event-tree D. There is a market for physical commodities at any state today or in any date of future and financi...

This paper o¤ers a monetary theory of asset liquidity— one that emphasizes the role of assets in payment arrangements— and it explores the implications of the theory for the relationship between assets’ intrinsic characteristics and liquidity, and the e¤ects of policy on asset prices and welfare. The environment is a random-matching economy where risk-free bonds coexist with a risky asset, equi...

We study an over-the-counter (OTC) market with bilateral meetings and bargaining where the usefulness of assets, as means of payment or collateral, is limited by the threat of fraudulent practices. We assume that agents can produce fraudulent assets at a positive cost, which generates endogenous upper bounds on the quantity of each asset that can be sold, or posted as collateral in the OTC mark...

Credit booms often cause economic expansions. But some credit booms end in financial crises yet others do not. To find out why, this paper presents a dynamic general equilibrium model of production economies with adverse selection in the financial market. Entrepreneurs can take on short-term collateralized debt and trade long-term assets to finance investment. Funding liquidity can erode market...

A growing literature suggests that inequality is economically costly. However, much of this literature depends on static analyses, begging the question of why a market system doesn't redress inequality over time if it is efficient to do so. We develop a dynamic model of asset accumulation and endogenous asset-price formation in an agrarian economy with multiple market imperfections. The model i...

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,...

This paper is concerned with empirical and theoretical basis of the E¢ cient Market Hypothesis (EMH). The paper begins with an overview of the statistical properties of asset returns at di¤erent frequencies (daily, weekly and monthly), and considers the evidence on return predictability, risk aversion and market e¢ ciency. The paper then focuses on the theoretical foundation of the EMH, and sho...