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Abstract
This dissertation comprises an introductory chapter as well as two empirical studies on new approaches to questions in financial economics. In the first chapter, I examine the impact of two bank regulation changes on liquidity creation. Using amendments in 2005 to the FDIC Improvement Act (FDICIA) and the Community Reinvestment Act (CRA), I document that treating each regulatory change as a separate event leads to confounding results. Failure to disentangle the two changes leads to an overstatement of the increase in liquidity creation driven by regulatory changes. I find no evidence that the regulatory change leads to outcomes contradictory to the purposes of the CRA. The second chapter examines how uncertainty affects the rationality of the market's earnings expectations. The results reveal cross-sectional and time-series variations in uncertainty are associated with opposite patterns in the return predictability of analysts' conditional biases. An information choice model explains the contrasting findings and helps to reconcile the existing theories in the literature. The model suggests that for highly uncertain firms, investors find it too costly to acquire new information. However, when aggregate uncertainty increases temporarily, the benefit of acquiring new information outweighs the cost of acquiring such information.