|Дата рождения||11 декабря 1973 г.|
|Образование||бакалавр: Economics and Accounting [Tel-Aviv University, 1994]
магистр: Economics [Tel-Aviv University, 1998]
PhD: Economics [Tel-Aviv University, 2001]
|Место работы||Duke University (Duke University) / Assistant Professor of Finance|
International Finance, Corporate Finance
"Price Informativeness and Investment Sensitivity to Stock Price." with Qi Chen and Wei Jiang (PDF File)
Last Version: September 2003.
Stock prices and real investments are highly correlated. Previous literature has offered two main explanations for this high correlation. The first explanation relies on price being informative about investment opportunities, the second one is based on financing constraints. In this paper we empirically examine the effect of price informativeness on the sensitivity of investment to stock price. We use two measures of price informativeness, both were recently developed in the literature. The first one is firm-specific return variation. The second one is the probability of informed trading (PIN). We find that both measures are strongly correlated with the sensitivity of investment to price. We argue that the second measure may point to an active role of prices in determining investments, i.e., prices reflect some information that is not known to managers, and provide some guidance to managers in their investment decisions.
"Volatility of FDI and Portfolio Investments: The Role of Information, Liquidation Shocks and Transparency." with Assaf Razin (PDF File)
Last Version: August 2002.
The paper develops a model of foreign direct investments (FDI) and foreign portfolio investments. FDI is characterized by hand-on management style which enables the owner to obtain relatively refined information about the productivity of the firm. This superiority, relative to portfolio investments, comes with a cost: A firm owned by the relatively well-informed FDI investor has a low resale price because of asymmetric information between the owner and potential buyers. Consequently, investors, who have a higher (lower) probability of getting a liquidity shock that forces them to sell early, will invest in portfolio (direct) investments. This result can explain the greater volatility of portfolio investments relative to direct investments. We show that this pattern may become weaker as the transparency in the capital market or the corporate governance in the host economy increase.
"Manipulation, the allocational role of prices and production externalities" with Alexander Guembel (PDF File)
Last Version: July 2002.
In this paper we show that profitable market manipulation via trade is possible if prices perform an allocational role. If market prices affect the real value of an asset (e.g. because they contain information relevant to a firm's investment decisions), a potentially informed speculator may wish to trade even in the absence of information. A source of profits will then be the effect that his trade has on the real value of the traded asset. We show that the problem is exacerbated if, in the real sector, there are multiple firms with positive investment spillovers. In this case, firm managers who have perfect private information may ignore it and follow the price signal, knowing that other managers are also looking at this signal. Shutting down a financial market may improve investment efficiency in this case. We discuss the implications of our argument to foreign exchange markets.
"Contagion of Self-Fulfilling Financial Crises Due to Diversification of Investment Portfolios" with Ady Pauzner (PDF File)
Last Version: June 2001.
We explore a model with two countries. Each might be subject to a self-fulfilling crisis, induced by agents withdrawing their investments in the fear that others will do so. While the fundamentals of the two countries are independent, the fact that they share the same group of investors may generate a contagion of crises. The realization of a crisis in one country reduces agents’ wealth and thus makes them more risk averse (we assume decreasing absolute risk aversion). This reduces their incentive to keep their investments in the second country since doing so exposes them to the strategic risk associated with the unknown behavior of other agents. Consequently, the probability of a crisis in the second country rises. This yields a positive correlation between the returns on investments in the two countries even though the two are completely independent in terms of fundamentals.
"The Choice of Exchange Rate Regime and Speculative Attacks" with Alex Cukierman and Yossi Spiegel (PDF File)
Last Version: February 2002.
We develop a framework for studying the choice of exchange rate regime in an open economy where the local currency is vulnerable to speculative attacks. The optimal regime is determined by a policymaker who trades off the loss from nominal exchange rate uncertainty, against the cost of maintaining a given regime. This cost is affected in turn by the likelihood of a speculative attack. Searching for the optimal regime within the class of exchange rate bands, we show that the optimal regime is either a peg (a zero-width band), a free float (an infinite-width band), or a non degenerate finite width band. In the latter case, the exchange rate is allowed to move freely only within a band set around some center rate. We examine the determinants of the optimal band width and show, among other things, that, ceteris paribus, lower costs of moving across currencies induce policymakers to set more flexible exchange rate systems. This lowers, in turn, the likelihood of financial crises. More generally the framework of the paper can be used to shed new light on the recent world wide trend towards a bipolar system of exchange rate arrangements.
"Demand Deposit Contracts and The Probability of Bank Runs" with Ady Pauzner (PDF File)
Last Version: February 2002.
We study a model of bank runs based on Diamond and Dybvig . We assume that agents do not have common knowledge regarding the fundamentals of the economy, but rather receive slightly noisy signals. The new model has a unique equilibrium in which the fundamentals determine whether a bank run will occur. This lets us compute the ex-ante probability of a bank run and relate it to the parameters of the demand deposit contract. We find that offering a higher return to agents who demand early withdrawal makes the bank more vulnerable to runs. We construct an optimal demand deposit contract that trades off the benefits from risk sharing against the costs of bank runs. Under this contract, there is a positive probability of panic-based bank runs. Nevertheless, it improves welfare relative to the autarkic regime. Finally, being able to make welfare computations, we assess the desirability of regimes that are intended to prevent bank runs: suspension of convertibility and deposit insurance.
Last Version: January 2002..
The economic literature has emphasized the role of strategic complementarities in generating banking crises and currency crises. Motivated by evidence from recent financial crises, we study a model, where strategic complementarities exist, not only within a group of depositors or within a group of currency speculators, but also between the two groups. The additional type of strategic complementarities generates a vicious cycle between banking crises and currency crises. This vicious cycle magni-fies the correlation between the two crises and destabilizes the economy. We discuss some policy implications, and, in particular, show that due to the interaction between the banking sector and the currency market, a Lender of Last Resort might not be able to prevent bank runs.
Публикации на портале:
Alex Cukierman, Itay Goldstein, Yossi Spiegel The Choice of Exchange Rate Regime and Speculative Attacks
// CEPR Discussion Papers.
No. 3714 .
|Адрес||Fuqua School of Business
Durham, NC 27708