A geometric study of shareholders' voting in incomplete markets: multivariate median and mean shareholder theorems


Social Choice and Welfare

octobre 2006, vol. 27, n°2, pp.377-406

Départements : Finance

A Note on Risk Aversion and Herd Behavior in Financial Markets

J. Decamps, S. LOVO

Geneva Papers on Risk and Insurance Theory

juillet 2006, vol. 31, n°1

Départements : Finance, GREGHEC (CNRS)

We show that differences in market participants risk aversion can generate herd behavior in stock markets where assets are traded sequentially. This in turn prevents learning of market's fundamentals. These results are obtained without introducing multidimensional uncertainty or transaction cost

Ascending auctions for multiple objects: the case for the Japanese design

G. Albano, F. Germano, S. LOVO

Economic Theory

août 2006, vol. 28, n°2, pp.331-355

Départements : Finance, GREGHEC (CNRS)

We consider two ascending auctions for multiple objects, namely, an English and a Japanese auction, and derive a perfect Bayesian equilibrium of the Japanese auction by exploiting its strategic equivalence with the survival auction, which consists of a finite sequence of sealed-bid auctions. Thus an equilibrium of a continuous time game is derived by means of backward induction in finitely many steps. We then show that all equilibria of the Japanese auction induce equilibria of the English auction, but that many collusive or signaling equilibria of the English auction do not have a counterpart in the Japanese auction

Bid Ask Price Competition with Asymmetric Information Between Market Makers

R. Calcagno, S. LOVO

Review of Economic Studies

avril 2006, vol. 73, n°2, pp.329-355

Départements : Finance, GREGHEC (CNRS)

This paper studies the effect of asymmetric information on the price formation process in a quote-driven market. One market maker receives private information on the value of the quoted asset, and repeatedly competes with market makers who are uninformed. We show that despite the fact that the informed market maker's quotes are public, the market is never strong-form efficient with certainty until the last stage. We characterize a reputational equilibrium in which the informed market-maker influences and possibly misleads the uninformed market makers' beliefs. At this equilibrium, a price leadership effect arises, the informed market maker's expected payoff is positive and the rate of price discovery increases in the last stages of trade

Culture in Organizations: Inertia and Uniformity


Journal of Law, Economics and Organization


Départements : Finance, GREGHEC (CNRS)

Mots clés : Culture in organizations, inertia, screening, uniformity, diversification

Distribution and growth in an economy with limited needs: Variable markups and 'the end of work'


Economic Journal

avril 2006, vol. 116, n°511, pp.382-407

Départements : Finance

This article studies a model of the distribution of income under bounded needs. Utility derived from any given is bounded from above and demand is therefore not isoelastic. On the other hand, introducing new varieties always increases utility. It is assumed that each variety is owned by a monopoly. Workers can specialise in material goods production or in the knowledge sector, which designs new varieties. As productivity increases, the economy moves from a 'Solovian zone' where wages increase with productivity, to a 'Marxian' zone where they paradoxically decline with productivity

Dynamic Portfolio Choice with Parameter Uncertainty and the Economic Value of Analysts' Recommendations" (previously entitled "Revisiting Treynor and Black (1973): a Second Step Towards a Theory of Active Portfolio Management ")

J. Cvitanic, A. LAZRAK, F. Zapatero, L. Martellini

Review of Financial Studies

2006, vol. 19, n°4, pp.1113-1156

Départements : Finance

Idiosyncratic Production Risk, Growth and the Business Cycle

G. Angeletos, L. E. CALVET

Journal of Monetary Economics

septembre 2006, vol. 53, n°6, pp.1095-1115

Départements : Finance

Mots clés : Entrepreneurial risk, Incomplete markets, Investment, Macroeconomic complementarity, Precautionary savings

We introduce a neoclassical growth economy with idiosyncratic production risk and incomplete markets. Each agent is an entrepreneur operating her own technology with her own capital stock. The general equilibrium is characterized by a closed-form recursion in the CARA-normal case. Incomplete markets introduce a risk premium on private equity, which reduces the demand for investment. As compared to complete markets, the steady state can thus have both a lower capital stock due to investment risk, and a lower interest rate due to precautionary savings. Furthermore, the anticipation of high real interest rates in the future feeds back into high risk premia and low investment in the present, thus slowing down convergence to the steady state. Our results highlight the importance of private risk premia for capital accumulation and business cycles

Informational cascades with endogenous prices: The role of risk aversion

J. Décamps, S. LOVO

Journal of Mathematical Economics

février 2006, vol. 42, n°1, pp.109-120

Départements : Finance, GREGHEC (CNRS)

In this paper, we show that long run market informational inefficiency and informational cascades can easily happen when trades occur at market clearing prices. We consider a sequential trade model where: (i) the investors' set of actions is discrete; (ii) dealers and investors differ in risk aversion; (iii) investors' information is bounded. We show that informational cascade occurs as soon as traders' beliefs do not differ too sharply. Thus, prices cannot fully incorporate the private information dispersed in the economyInformational cascades; Endogenous prices; Risk aversion

Liquidité, Coût du capital et organisation de la négociation des valeurs mobilières


Revue d'Économie Financière

2006, n°82, pp.123-138

Départements : Finance, GREGHEC (CNRS)

In this article, we present some arguments of recent research concerning how (1) stock exchanges organisation and (2) financial markets liquidity influence cost of capital and the quoted firms' value.