A large literature has shown that asset quality may be signaled by retention or, in a separate literature, screened by liquidity. I present a general framework to analyze both instruments, offering conditions that characterize which instrument will be used in equilibrium. I then expand the private information to include not only asset quality but also seller patience, showing that both retention and liquidity may be used to fully separate both dimensions of private information. The expanded model offers new predictions about how price, quantity, and liquidity covary with each other and with seller private information.

ABSTRACT Should regulators reveal the models they use to stress‐test banks? In our setting, revealing leads to gaming, but secrecy can induce banks to underinvest in socially desirable assets for fear of failing the test. We show that although the regulator can solve this underinvestment problem by making the test easier, some disclosure may still be optimal (e.g., if banks have high appetite for risk or if capital shortfalls are not very costly). Cutoff rules are optimal within monotone disclosure rules, but more generally optimal disclosure is single‐peaked. We discuss policy implications and offer applications beyond stress tests.