A Martingale Characterization of Equilibrium Asset Price Processes

A. LAZRAK, J. Décamps

Economic Theory

2000, vol. 15, n°1, pp.207-123

Départements : Finance

Agency conflicts in public and negotiated transfers of corporate control


The Journal of Finance

avril 2000, vol. 55, n°2, pp.647-677

Départements : Finance, GREGHEC (CNRS)

Mots clés : block trade ; Corporate Governance ; Ownership structure ; Small shareholders ; Takeover ; Theory

Bargaining Power and Optimal Leverage



décembre 2000, vol. 21, n°2, pp.85-101

Départements : Finance

Comparaison de méthodes d'extraction d'information à partir d'options de change : le cas du Franc-Deutschemark

E. Jondeau, M. ROCKINGER

Revue Finance

janvier 2000

Départements : Finance

Competing Mechanisms in a Common Value Environment



juillet 2000, vol. 68, n°4, pp.799-837

Départements : Finance

Consider strategic risk-neutral traders competing in schedules to supply liquidity to a risk-averse agent who is privately informed about the value of the asset and his hedging needs. Imperfect competition in this common value environment is analyzed as a multi-principal game in which liquidity suppliers offer trading mechanisms in a decentralized way. Each liquidity supplier behaves as a monopolist facing a residual demand curve resulting from the maximizing behavior of the informed agent and the trading mechanisms offered by his competitors. There exists a unique equilibrium in convex schedules. It is symmetric and differentiable and exhibits typical features of market-power: Equilibrium trading volume is lower than ex ante efficiency would require. Liquidity suppliers charge positive mark-ups and make positive expected profits, but these profits decrease with the number of competitors. In the limit, as this number goes to infinity, ask (resp. bid) prices converge towards the upper (resp. lower) tail expectations obtained in Glosten (1994) and expected profits are zero

Creative Destruction and Organization Change

D. THESMAR, M. Thoenig

Quarterly Journal of Economics

novembre 2000

Départements : Finance

Firms' organizational choices are influenced by external conditions such as the instability of the product market. In order to address this issue in a macroeconomic perspective, we embed the firm's choice of organizational structure in a model of growth through creative destruction, which induces endogenous market volatility. We find that an increasing supply of skill or globalization may increase the rate of creative destruction, the skill premium, and the skilled wages, and it may depress the unskilled wages. We use an original data set to test the empirical relevance of our theory

Darwinian selection does not eliminate irrational traders


European Economic Review

mars 2000, vol. 44, n°3, pp.469-490

Départements : Finance

Mots clés : Darwinian selectionEvolutionary dynamicsIrrationalityFinancial marketsStochastic algorithms

This paper offers a counter-argument to Friedman's (In: Essays in Positive Economics, University of Chicago Press, Chicago, 1953) claim that irrational agents are bound to be eliminated by market forces. Consider a financial market where some traders irrationally over- or under-estimate the dividend flow. We show that this irrationality can enhance their bargaining power, so that these agents can obtain larger gains from trade than rational agents. We analyze the stochastic evolutionary dynamics of the fraction of agents who are irrational, and show that they may well survive in the long term

Dispersion as Cross-Sectional Correlation

B. SOLNIK, J. Roulet

Financial Analysts Journal

janvier-février 2000, vol. 56, n°1, pp.54-61

Départements : Finance

We introduce the concept of cross-sectional dispersion of stock market returns as an alternative to the time-series approach to estimating the global correlation level of equity markets. Our objective is to derive a simple, instantaneous measure of the general level of global market correlation. Our cross-sectional method of estimating global correlation is dynamic and, using cross-sectional data, gives instantaneous information on the trend of global correlation. The traditional time-series method requires a long period of observations, and overlapping data have to be used to study the change in correlation. Both methods yield similar estimates for a “long” period, however, so a combination of the cross-sectional and time-series approaches should be of practical use to global asset managers

Environmental Harm and Financial Responsibility

E. Feess, U. HEGE

Geneva Papers for Risk and Insurance: Issues and Practice

2000, vol. 25, n°2, pp.203-217

Départements : Finance

Equity Trading Systems in Europe: A Survey of Recent Changes

T. FOUCAULT, M. Demarchi

Annales d'Economie et de Statistique

2000, n°60, pp.73-115

Départements : Finance, GREGHEC (CNRS)

This paper provides a survey of recent changes in the market microstructure of the five largest European Stock Exchanges. We first provide a brief statistical overview of European equity markets. Then, we discuss how the introduction of the Investment Services Directive and the development of institutional trading have prompted European Stock Exchanges to modify their trading systems since 1994. We show that these exchanges have converged to a similar market organization. In this organization, trading takes place in an order-driven market but trading rules can vary according to the type of securities. We also describe the remaining differences between the trading systems, in particular with respect to the consolidation of the order flow and transparency