Working Papers

These papers are working drafts of research which often appear in final form in academic journals. The published versions may differ from the working versions provided here.

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Darrell Duffie, Leif Andersen, Yang Song
August 1, 2017

We demonstrate that the funding value adjustments (FVAs) of major dealers are debt-overhang costs to their shareholders. In order to maximize shareholder value, dealer quotations therefore adjust for FVAs. Contrary to current valuation practice, FVAs...

Benjamin Hébert, Michael Woodford
July 26, 2017

We propose a new principle for measuring the cost of information structures in rational inattention problems, based on the cost of generating the information used to make a decision through a dynamic evidence accumulation process....

Shai Bernstein, Josh Lerner, Filippo Mezzanotti
July 18, 2017

Do private equity firms contribute to financial fragility during economic crises? We find that during the 2008 financial crisis, PE-backed companies increased investments relative to their peers, while also experiencing greater equity and debt inflows....

Shai Bernstein, Timothy James McQuade, Richard R. Townsend
July 7, 2017

Do household wealth shocks affect employee output? We examine this question through the lens of technological innovation, by comparing employees that worked at the same firm and lived in the same metropolitan area, but experienced...

Anat R. Admati
June 26, 2017

Financialized corporate governance as commonly practiced causes significant inefficiencies and harm. Corporations and governments routinely fail to design and enforce rules that reduce the opacity of corporations, create effective commitments that prevent harm, and ensure...

Charles M. C. Lee, Eric C. So, Charles C. Y. Wang
June 3, 2017

We argue, from an extensive literature review, that in the vast majority of research settings, biases in alternative expected-return proxies (ERPs) are irrelevant. Therefore, in most settings, the choice between alternative ERPs should be based...

Jonathan B. Berk, Jules H. van Binsbergen
June 1, 2017

We study a market for a skill that is in short supply and high demand, where the presence of charlatans (professionals who sell a service that they do not deliver on) is an equilibrium outcome....

Andrea L. Eisdeldt, Hanno Lustig, Lei Zhang
May 23, 2017

We develop a dynamic equilibrium model of complex asset markets with endogenous entry and exit in which the investment technology of investors with more expertise is subject to less asset-specific risk. The joint equilibrium distribution...

Shai Bernstein, Emanuele Colonnelli, Xavier Giroud, Benjamin Iverson
May 5, 2017

Revise and Resubmit at Journal of Financial Economics

How do different bankruptcy approaches affect the local economy? Using U.S. Census microdata, we explore the spillover effects of reorganization and liquidation on geographically proximate firms. We...

Hanno Lustig, Ralph S.J. Koijen, Stijn Van Nieuwerburgh
April 24, 2017

We show that bond factors, which predict future U.S. economic activity at business cycle horizons, are priced in the cross-section of U.S. stock returns. High book-to-market stocks have larger exposures to these bond factors than...

Barney Hartman-Glaser, Hanno Lustig, Mindy X. Zhang
April 22, 2017

Although the aggregate capital share for U.S. firms has increased, the firm-level capital share has decreased on average. The divergence is due to the largest firms. While these mega-firms now produce a larger output share,...

Juliane Begenau, Tim Landoigt
April 2017

WFA Award for Best Paper on Financial Institutions

How does the shadow banking system respond to changes in the capital regulation of commercial banks? We propose a tractable, quantitative general equilibrium model with regulated and unregulated...

Brett S. Green, Brendan Daley, Victoria Vanasco
March 19, 2017

We explore the effect of credit ratings on loan origination and securitization. The model involves two stages: first, banks decide whether to originate a given loan pool or not, and obtain private information about the...

Shai Bernstein, Emanuele Colonnelli, Benjamin Iverson
March 13, 2017

This paper investigates the consequences of liquidation and reorganization on the allocation and subsequent utilization of assets in bankruptcy. Using the random assignment of judges to bankruptcy cases as a natural experiment that forces some...

Greg Buchak, Gregor Matvos, Tomasz Piskorski, Amit Seru
March 2017

We study the rise of fintech and non-fintech shadow banks in the residential lending market. The market share of shadow banks in the mortgage market has nearly tripled from 2007-2015. Shadow banks gained a larger...

Juliane Begenau, Berardino Palazzo
March 2017

Among stock market entrants, more firms over time are R&D–intensive with initially lower profitability but higher growth potential. This sample-selection effect determines the secular trend in U.S. public firms’ cash holdings. A stylized firm industry...

Mark L. Egan, Gregor Matvos, Amit Seru
March 2017

We examine gender discrimination in the financial advisory industry. We study a less salient mechanism for discrimination, firm discipline following missteps. There are substantial differences in the punishment of misconduct across genders. Although both female...

Salman Arif, Azi Ben-Rephael, Charles M. C. Lee
February 24, 2017

Daily directional trading by mutual funds (MFs) is highly-persistent and price-destabilizing, leading to return reversals lasting months.  This effect is distinct from the “flow-induced trading” phenomenon in prior studies.  At the same time, short-sale volume...

Charles M. C. Lee, Ken Li
February 14, 2017

Predicted stock issuers (PSIs) are firms with expected “high-investment and low-profit” (HILP) profiles that earn unusually low returns.  Over a 36-year period (1978-2013), average returns to top-decile PSIs are indistinguishable from Treasury yields.  We show...

Benjamin Hébert, Jesse Schreger
2017

Forthcoming in American Economic Review

We estimate the causal effect of sovereign default on the equity returns of Argentine firms. We identify this effect by exploiting changes in the probability of Argentine sovereign default induced...