Finance

Finance is an applied branch of economics that studies the ways in which individuals, business entities, and other organizations allocate resources over time and make decisions in the presence of uncertainty.

The faculty in the finance area have wide-ranging expertise in all major areas of finance, including:

  • Asset pricing, or how security prices and interest rates are determined in the market.
  • Corporate finance, or how corporations raise capital and make investment decisions.

The faculty strive to produce a broad range of finance-related research that addresses topics of interest to academic researchers, practitioners, and policymakers. We communicate that research both through publication in scientific journals, and through the development of relevant and rigorous MBA and Executive Education programs. We also train and mentor future finance scholars through our PhD Program, which is regarded as one of the top finance doctoral programs worldwide.

Recent Journal Articles in Finance

Saumitra Jha, Moses Shayo
Econometrica. December
2019

Can participation in financial markets lead individuals to re-evaluate the costs of conflict, change their political attitudes and even their votes? Prior to the 2015 Israeli elections, we randomly assigned...

Samuel Antill, Steven Grenadier
Journal of Financial Economics. July
2019, Vol. 133, Issue 1, Pages 198-224

We model a firm’s optimal capital structure decision in a framework in which it may later choose to enter either Chapter 11 reorganization or Chapter 7 liquidation. Creditors anticipate equityholders’ ex-post reorganization incentives and pricethem into...

Hanno Lustig, Adrien Verdelhan
American Economic Review. June
2019, Vol. 109, Issue 6, Pages 2208-2244

We assume that domestic (foreign) agents, when investing abroad, can only trade in the foreign (domestic) risk-free rates. In a preference-free environment, we derive the exchange rate volatility and risk...

Xavier Giroud, Joshua D. Rauh
Journal of Political Economy. June
2019, Vol. 127, Issue 3, Pages 1262-1316

Using Census microdata on multi-state firms and their organizational forms, we estimate the impact of state taxes on business activity. For C corporations, employment and the number of establishments have...

Peter M. DeMarzo, Ilan Kremer, Andrej Skrzypacz
American Economic Review. June
2019, Vol. 109, Issue 6, Pages 2173-2207

We analyze test design and certification standards when an uninformed seller has the option to generate and disclose costly information regarding asset quality. We characterize equilibria by a minimum principle:...

Hanno Lustig, Adrien Verdelhan, Andreas Stathopoulos
American Economic Review (accepted). June
2019

Fixing the investment horizon, the returns to currency carry trades decrease as the maturity of the foreign bonds increases. The local currency term premia, which increase with the maturity, offset...

Rebecca Diamond, Timothy James McQuade
Journal of Political Economy. June
2019, Vol. 127, Issue 3, Pages 1063-1117

We nonparametrically estimate spillovers of properties financed by the Low Income Housing Tax Credit (LIHTC) onto neighborhood residents by developing a new difference-in-differences style estimator. LIHTC development revitalizes low-income neighborhoods,...

Lin William Cong, Steven Grenadier, Yunzhi Hu
Journal of Financial Economics (in press). May
15 , 2019

We model a dynamic economy with strategic complementarity among investors and study how endogenous government interventions mitigate coordination failures. We establish equilibrium existence and uniqueness, and we show that one...

Arvind Krishnamurthy, Zhiguo He, Konstantin Milbradt
American Economic Review . April
2019, Vol. 109, Issue 4, Pages 1230-1262

What makes an asset a “safe asset”? We study a model where two countries each issue sovereign bonds to satisfy investors’ safe asset demands. The countries differ in the float...

Juliane Begenau, Juliana Salomao
Review of Financial Studies. April
2019, Vol. 32, Issue 4, Pages 1235-1274

Data from U.S. public firms show that in booms large firms finance with debt and payout equity, whereas small firms issue both equity and debt. Therefore, large firms generally substitute...