Essays on Financial Intermediaries and Market Frictions
CitationLiu, Weiling. 2019. Essays on Financial Intermediaries and Market Frictions. Doctoral dissertation, Harvard University, Graduate School of Arts & Sciences.
AbstractEven the largest, most sophisticated intermediaries face limitations due to market frictions. In my dissertation, I study the impact of these frictions in a variety of settings, ranging from the U.S. bond market to the insurance market. In the bond market, I find that when intermediaries hit risk limits on their balance sheets, the market compensates them for bearing additional risk with higher expected long-run returns. In the insurance market, when companies face political frictions, I find that they are less likely to adjust prices and more likely to reduce supply of insurance in the future. Finally, in Treasury auctions, I find that due to dealers' limited capacity to absorb inventory, the supply of Treasuries sold at auction creates a repeated, intraday price pressure effect. Because intermediaries connect financial markets to consumers, the study of their constraints unveils important market dynamics that impact regulators, consumers, as well as practitioners.
Citable link to this pagehttp://nrs.harvard.edu/urn-3:HUL.InstRepos:42029650
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