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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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...

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,...

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...

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...

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...

Jonathan B. Berk, Cambell R. Harvet, David A. Hirshleifer
November 29, 2016

Drawing on insights of current and past editors of top economics and finance journals, we provide guidelines for reviewers in preparing referee reports and cover letters for journals. Peer review is fundamental to the progress...

Darrell Duffie, Piotr Dworczak, Haoxiang Zhu
September 20, 2016

We analyze the role of benchmarks in over-the-counter markets subject to search frictions. The publication of a benchmark can, under conditions, raise total social surplus by (i) increasing the volume of beneficial trade, (ii) reducing...

Saumitra Jha, Moses Shayo
August 26, 2016

Financial markets expose individuals to the broader economy. Does participation in financial markets also lead citizens to re-evaluate the costs of conflict, their views on politics and even their voting decisions? Prior to the 2015...

Paul Gompers, William Gornall, Steven N. Kaplan, Ilya A. Strebulaev
August 2016

We survey 885 institutional venture capitalists (VCs) at 681 firms to learn how they make decisions across eight areas: deal sourcing; investment selection; valuation; deal structure; post-investment value-added; exits; internal firm organization; and relationships with...

Benjamin Hébert, Michael Woodford
June 28, 2016

We generalize the rationalize inattention framework proposed by Sims (2010) to allow for cost functions other than Shannon’s mutual information. Unlike other general treatments of the problem, our particular concern is with the additional structure...

Ulrike Malmendier, Demian Pouzo, Victoria Vanasco
May 26, 2016

How does the experience of a financial crisis and stock-market fluctuations alter the dynamics of financial markets? Recent evidence suggests that individuals  overweight personal experiences of macroeconomic shocks when forming beliefs about risky outcomes and making...

Leonid Kogan, Demitris Papanikolaou, Amit Seru, Noah Stoffman
May 2016

We propose a new measure of the economic importance of each innovation. Our measure uses newly collected data on patents issued to US firms in the 1926 to 2010 period, combined with the stock market...

Benjamin Hébert, Jesse Schreger
May 2016

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 by legal rulings in the...

Victoria Vanasco
April 2016

This paper explores the tension between asset quality and liquidity in a model where an originator exerts effort to screen assets, whose cash flows can be later sold in secondary markets. Screening improves asset quality,...

Hanno Lustig, Adrien Verdelhan
March 1, 2016

Compared to the predictions of complete market models, actual exchange rates are puzzlingly smooth and only weakly correlated with macro-economic fundamentals, suggesting that market incompleteness plays a key role in exchange rate dynamics. Incompleteness in...