Valuation and the Volatility of Financing and Investment
Abstractall projects are funded. In the region of multiplicity, the move from a pooling (socially efficient) equilibrium to a valuation (socially inefficient) equilibrium involves many features of a financial crisis: prices decline (interest spreads rise); real investment declines; unsophisticated investors leave the market (flight to quality) and sophisticated investors make profits; trust declines and due diligence increases.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 1131.
Date of creation: 2010
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