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Valuation and the Volatility of Financing and Investment

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  • Jonathan A. Parker

    (Northwestern University)

  • Michael Fishman

    (Northwestern University)

Abstract

all 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.

Suggested Citation

  • Jonathan A. Parker & Michael Fishman, 2010. "Valuation and the Volatility of Financing and Investment," 2010 Meeting Papers 1131, Society for Economic Dynamics.
    • Handle: RePEc:red:sed010:1131
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    References listed on IDEAS

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