We propose an incentive-based theory of how a savings glut produces financial fragility. Originators must be incentivized to produce high-quality assets. Assets are distributed to informed intermediaries or uninformed investors. A savings glut reduces origination incentives by compressing spreads between the prices paid for high-quality assets by informed intermediaries and prices paid by uninformed investors for generic assets. The narrowing of spreads relaxes intermediaries’ borrowing constraints, resulting in higher leverage. This generates financial fragility: intermediaries are more likely to become insolvent if unforeseen losses arise. Our model offers a coherent narrative of the run-up to the Global Financial Crisis.

Climate finance is the study of local and global financing of public and private investment that seeks to support mitigation of and adaptation to climate change. In 2017, the Review of Financial Studies launched a competition among scholars to develop research proposals on the topic with the goal of publishing this special volume. We describe the competition, how the nine projects featured in this volume came to be published, and frame their findings within what we view as a broader climate finance research program.

In this article we characterize and estimate the process for short-term interest rates using federal funds interest rate data. We presume that we are observing a discrete-time sample of a stationary scalar diffusion. We concentrate on a class of models in which the local volatility elasticity is constant and the drift has a flexible specification. To accommodate missing observations and to break the link between "economic time" and calendar time, we model the sampling scheme as an increasing process that is not directly observed. We propose and implement two new methods for estimation. We find evidence for a volatility elasticity between one and one-half and two. When interest rates are high, local mean reversion is small and the mechanism for inducing stationarity is the increased volatility of the diffusion process.

An artist’s death constitutes a negative shock to his future production; death permanently decreases the artist’s float. We use this shock to test predictions of speculative trading models with short-selling constraints. As predicted in our model, we find that an artist’s premature death leads to a permanent increase in prices and turnover; this effect being larger for more famous artists. We document that premature death increases prices (by 54.7%) and secondary market volume (by 63.2%).

In this article we characterize and estimate the process for short-term interest rates using federal funds interest rate data. We presume that we are observing a discrete-time sample of a stationary scalar diffusion. We concentrate on a class of models in which the local volatility elasticity is constant and the drift has a flexible specification. To accommodate missing observations and to break the link between “economic time” and calendar time, we model the sampling scheme as an increasing process that is not directly observed. We propose and implement two new methods for estimation. We find evidence for a volatility elasticity between one and one-half and two. When interest rates are high, local mean reversion is small and the mechanism for inducing stationarity is the increased volatility of the diffusion process.