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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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...

Mark Egan, Gregor Matvos, Amit Seru
March 1, 2016

We construct a novel database containing the universe of financial advisers in the United States from 2005 to 2015, representing approximately 10% of employment of the finance and insurance sector. Roughly 7% of advisers have...

Steven Grenadier, Andrey Malenko, Nadya Malenko
February 2016

We consider a problem where an uninformed principal makes a timing decision interacting with an informed but biased agent. Because time is irreversible, the direction of the bias crucially affects the agent’s ability to credibly...

Matthew Botsch, Victoria Vanasco
January 29, 2016

We explore the implications of asymmetric information and bank learning for firm’s access to external financing. We hypothesize that banks acquire private information about borrower quality, not just when screening the initial loan, but while...

Zhiguo He, Arvind Krishnamurthy, Konstantin Milbradt
January 28, 2016

U.S. government bonds are considered to be the world’s safe store of value, especially during periods of economic turmoil such as the events of 2008. But what makes U.S. government bonds “safe assets?” We highlight...

Hanno Lustig, Andreas Stathopoulos, Adrien Verdelhan
January 2016

We derive a novel test for nominal exchange rate stationarity that exploits the forward-looking information in long maturity bond prices. When nominal exchange rates are stationary, no arbitrage implies that the return on the foreign...

Charles M. C. Lee, Eric C. So
January 2016

We show that analyst coverage proxies contain information about expected returns.  We decompose analyst coverage into abnormal and expected components using a simple characteristic-based model and show that firms with abnormally high analyst coverage subsequently...

Will Gornall, Ilya A. Strebulaev
November 1, 2015

Over the past 30 years, venture capital has become a dominant force in the financing of innovative American companies. From Google to Intel to FedEx, companies supported by venture capital have profoundly changed the U.S....

YiLi Chien, Hanno Lustig, Kanda Naknoi
November 2015

Empirical work on asset prices suggests that pricing kernels have to be almost perfectly correlated across countries. If they are not, real exchange rates are too smooth to be consistent with high Sharpe ratios in...