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Liquidity and Financial Market Runs

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  • Antonio Bernardo
  • Ivo Welch

Abstract

We model a run on a financial market, in which each risk-neutral investor fears having to liquidate shares after a run, but before prices can recover back to fundamental values. To avoid having to possibly liquidate shares at the marginal post-run price - in which case the risk-averse market-making sector wi

Suggested Citation

  • Antonio Bernardo & Ivo Welch, 2006. "Liquidity and Financial Market Runs," Yale School of Management Working Papers ysm280, Yale School of Management, revised 01 Aug 2003.
    • Handle: RePEc:ysm:somwrk:ysm280
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    File URL: http://icfpub.som.yale.edu/publications/2359
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