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SUMMARY:Sequential Credit Markets - Ulf Axelson\, Abraaj Group Professor i
 n Finance and Private Equity London School of Economics and Political Scie
 nce.
DTSTART:20170518T120000Z
DTEND:20170518T130000Z
UID:TALK66742@talks.cam.ac.uk
CONTACT:CERF/CF Admin
DESCRIPTION:Entrepreneurs who seek financing for projects typically do so 
 in decentralized markets where they need to approach investors sequentiall
 y. We study how well such sequential markets allocate resources when inves
 tors have expertise in evaluating investment opportunities\, and how surpl
 us is split between entrepreneurs and financiers. Contrary to common belie
 f\, we show that the introduction of a credit registry that tracks the app
 lication history of a borrower leads to more adverse selection\, quicker m
 arket break down\, and higher rents to investors which are not competed aw
 ay even as the number of investors grows large. Although sequential search
  markets lead to substantial investment inefficiencies\, they can neverthe
 less be more efficient than a centralized exchange where excessive competi
 tion may impede information aggregation. We also show that investors who r
 ely purely on public information in their lending decisions can out-compet
 e better informed investors with soft information\, and that an introducti
 on of interest rate caps can increase the efficiency of the market.
LOCATION:Room W4.03 Judge Business School
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