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Journal of Finance's Blog

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MISCELLANEA

January 3, 2018 Comments (0)


ANNOUNCEMENTS

January 3, 2018 Comments (0)


Liquidity as Social Expertise

December 22, 2017 Comments (0)

ABSTRACT
This paper proposes a theory of liquidity dynamics. Illiquidity results from asymmetric information. Observing the historical track record teaches agents how to interpret public information and helps overcome information asymmetry. However, an illiquidity trap can arise: too much asymmetric information leads to the breakdown of trade, which interrupts learning and perpetuates illiquidity. Liquidity falls in response to unexpected events that lead agents to question their valuation...

Bank Capital and Lending Relationships

December 18, 2017 Comments (0)

ABSTRACT
This paper investigates the mechanisms behind the matching of banks and firms in the loan market and the implications of this matching for lending relationships, bank capital, and credit provision. I find that bank‐dependent firms borrow from well‐capitalized banks, while firms with access to the bond market borrow from banks with less capital. This matching of bank‐dependent firms with stable banks smooths cyclicality in aggregate credit provision and mitigates the effects of bank...

Homeowner Borrowing and Housing Collateral: New Evidence from Expiring Price Controls

December 18, 2017 Comments (0)

ABSTRACT
I empirically analyze how changes in access to housing collateral affect homeowner borrowing behavior. To isolate the role of collateral constraints from that of wealth effects, I exploit the fully anticipated expiration of resale price controls on owner‐occupied housing in Montgomery County, Maryland. I estimate a marginal propensity to borrow out of housing collateral that ranges between $0.04 to $0.13 and is correlated with homeowners' initial leverage. Additional analysis of...