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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Mark Egan, Gregor Matvos, Amit Seru
October 2018

We examine whether firms have an informational advantage in selecting arbitrators in consumer arbitration, and the impact of the arbitrator selection process on outcomes. We collect a novel data set containing roughly 9,000 arbitration cases...

Greg Buchak, Gregor Matvos, Tomas Piskorski, Amit Seru
October 2018

We study which types of activities migrate to the shadow banking sector, why migration occurs in some sectors, and not others, and the quantitative importance of this migration. We explore this question in the $10...

Darrell Duffie
September 10, 2018

This note explains a new type of auction based on an existing derivatives risk-management technique known as “compression.” A compression auction can be used to convert centrally cleared contracts on an underlying benchmark, such as...

Juliane Begenau, Tim Landvoigt
September 2018

WFA Award for Best Paper on Financial Institutions

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

Lin William Cong, Charles M. C. Lee, Yuanyu Qu, Tao Shen
August 20, 2018

This study reports on the current state-of-affairs in the funding of entrepreneurship and innovations in China and provides a broad survey of academic findings on the subject. We discuss the implications of these findings for...

Paul Pfleiderer
August 2018

Forthcoming at Economica

In this essay I discuss how theoretical models in finance and economics are used in ways that make them “chameleons” and how chameleons devalue the intellectual currency and muddy policy debates....

Saumitra Jha, Moses Shayo
July 26, 2018

How can we help individuals handle financial decisions in an increasingly complex environment? We explore an easily scalable avenue for improving financial understanding: learning by online trading in stocks. We randomly assign 1345 adults incentives...

Darrell Duffie
July 19, 2018

In the years leading up to the financial crisis that began in 2007, the core of the financial system was vulnerable to major shocks emanating from any of a variety of sources. While this particular...

Laura Blattner, Luísa Farinha, Francisco Rebelo
June 26, 2018

Winner 2017 BlackRock Applied Research Award

AQR Top Finance Graduate Award 2018

We provide evidence that a weak banking sector contributed to low productivity following the European debt crisis. An unexpected increase in capital requirements...

Shai Bernstein, Emanuele Colonnelli, Davide Malacrino, Timothy James McQuade
June 19, 2018

New firm formation is a critical driver of job creation, and an important contributor to the responsiveness of the economy to aggregate shocks. In this paper we examine the characteristics of the individuals who become...

Rebecca Diamond, Michael J. Dickstein, Timothy James McQuade, Petra Persson
June 4, 2018

The Affordable Care Act (ACA) established health insurance marketplaces where consumers can buy individual coverage. Leveraging novel credit card and bank account micro-data, we identify new enrollees in the California marketplace and measure their health...

Saumitra Jha, Moses Shayo
May 25, 2018

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 Palestinian and Israeli financial assets...

Juliane Begenau, Erik Strafford
May 2018

We decompose bank activities into passive and active components and evaluate the performance of the active components of the bank business model by controlling for passive maturity transformation strategies that can be executed in the...

Shai Bernstein, Timothy James McQuade, Richard R. Townsend
March 18, 2018

We investigate how the deterioration of household balance sheets affects worker productivity, and whether such effects mitigate or amplify economic downturns. To do so, we compare the output of innovative workers who were employed at...

Zhengyang Jiang, Arvind Krishnamurthy, Hanno Lustig
March 15, 2018

We develop a theory that links the U.S. dollar’s valuation in FX markets to foreign investors’ demand for U.S. safe assets. When the convenience yield that foreign investors derive from holding U.S. safe assets increases,...

Darrell Duffie, Leif Andersen, Yang Song
March 13, 2018

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. Our case examples include interest-rate swap...

Chris Hennessy, Akitada Kasahara, Ilya A. Strebulaev
March 12, 2018

Absent theoretical guidance, empiricists have been forced to rely upon numerical comparative statics from constant tax rate models in formulating testable implications of tradeoff theory in the context of natural experiments. We fill the theoretical...

Paul Brest, Mark A. Wolfson, Ronald J. Gilson
March 2018

Most investors have a single goal: to earn the highest financial return. These socially-neutral investors maximize their risk-adjusted returns and would not accept a lower financial return from an investment that also produced social benefits....

Darrell Duffie, Piotr Dworczak
March 2018

Recent scandals over the manipulation of LIBOR, foreign exchange benchmarks, and other financial benchmarks have spurred policy discussions over their appropriate design. We characterize the optimal fixing of a benchmark as an estimator of a...

Arvind Krishnamurthy, Viral V. Acharya
February 28, 2018

We examine theoretically the role of reserves management and macro-prudential capital controls as ex-post and ex-ante safeguards, respectively, against sudden stops, and argue that these measures are complements rather than substitutes. Absent capital controls, reserves...