|
|
|
|
||||
|
||||
Leverage and Preemptive Selling of Financial InstitutionsAntonio E. BernardoUniversity of California, Los Angeles (UCLA) - Finance Area Ivo WelchUniversity of California, Los Angeles (UCLA); National Bureau of Economic Research (NBER) October 1, 2010 AFA 2011 Denver Meetings Paper Abstract: In our model, financial firms’ leverage choices and asset sales impose externalities on other financial firms. This means that individual firms cannot determine their optimal capitalizations in isolation, but have to take the aggregate financial sector characteristics into account. They become more aggressive when their peers are more conservative. For large parameter regions, small parameter differences induce just mild differences in the equilibrium allocation of risk. However, going just a little further, they can also induce completely different equilibria. Historical experience is not necessarily a good guide as to whether the prevailing equilibrium is fragile or not.
Number of Pages in PDF File: 50 Keywords: Leverage, Banks, Financial Institutions, Preemptive Selling, Fire Sales JEL Classification: G2, G31 working papers seriesDate posted: October 31, 2009 ; Last revised: October 3, 2010Suggested CitationContact Information
|
|
|||||||||||||||||||||||||||||||
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was processed by apollo7 in 0.375 seconds
