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.
SSRN Research Paper Series
The Social Science Research Network’s Research Paper Series includes working papers produced by Stanford GSB the Rock Center.
You may search for authors and topics and download copies of the work there.
Behavioral Responses to State Income Taxation of High Earners: Evidence from California
Drawing on the universe of California income tax filings and the variation imposed by a 2012 tax increase of up to 3 percentage points for high-income households, we present new findings about the effects of personal income taxation on household…
Going Public in China: Reverse Mergers Versus IPOs
We study firms that go public through reverse mergers (RMs) versus initial public offerings …
Active Funds and Bundled News
We use trade-level data to examine the role of actively managed funds (AMFs) in earnings news dissemination. AMFs trade 170 percent more on earnings announcement (EA) days than on non-EA days. Abnormal AMF participation is…
Loan Portfolio Risk and Capital Adequacy: A New Approach to Evaluating the Riskiness of Banks
We develop a Loan Portfolio Risk (LPR) variable that measures time-varying volatility in default risk for a portfolio of bank loans. An Equity-to-LPR ratio (ELPR) is incrementally important in predicting bank…
The Parade of Bankers’ New Clothes Continues: 34 Flawed Claims Debunked
The debate on banking regulation has been dominated by flawed and misleading claims. The title of our book The Bankers New Clothes: What’s Wrong with Banking and What to Do About It (Princeton University Press, 2013, see bankersnewclothes.com)…
Salient or safe: why do predicted stock issuers (PSIs) earn low returns?
Exchange Rate Reconnect
The failure to find fundamentals that co-move with exchange rates or forecasting models with even mild predictive power – facts broadly referred to as “exchange rate disconnect” – stands among the most disappointing, but robust, facts in all of…
Competition and Incentives in Mortgage Markets: The Role of Brokers
Mortgage brokers acting as expert advisors for households often receive commission payments from lenders. This paper empirically analyzes the effects on welfare and market structure of regulations restricting this form of broker compensation.…
Tick Size Tolls: Can a Trading Slowdown Improve Price Discovery?
This study examines how an increase in tick size affects algorithmic trading (AT), fundamental information acquisition (FIA), and the price discovery process around earnings announcements (EAs). Leveraging the SEC’s randomized “Tick Size Pilot”…
Bank Leverage, Welfare, and Regulation
We take issue with claims that the funding mix of banks, which makes them fragile and crisis-prone, is efficient because it reflects special liquidity benefits of bank debt. Even aside from neglecting the systemic damage to the economy that banks…
Banks Adjust Slowly: Evidence and Lessons for Modeling
This paper presents five facts on the behavior of U.S. banks between 2007 and 2015 that impose useful restrictions on the formulation of a bank problem. (1) Market to book leverage ratio diverged significantly during the crisis. (2) Book values…
Five Facts About Beliefs and Portfolios
We administer a newly-designed survey to a large panel of retail investors who have substantial wealth invested in financial markets. The survey elicits beliefs that are crucial for macroeconomics and finance, and matches respondents with…
Capital Requirements, Risk Choice, and Liquidity Provision in a Business Cycle Model
Accepted at the Journal of Financial Economics
This paper develops a quantitative dynamic general equilibrium model in which households’ preferences for safe and liquid assets constitute a violation of Modigliani and Miller. I…
The Insurance is the Lemon: Failing to Index Contracts
We model the widespread failure of contracts to share risk using available indices. A borrower and lender can share risk by conditioning repayments on an index. The lender has private information about the ability of this index to measure the…
Climate Change and Long-Run Discount Rates: Evidence From Real Estate
Revise and Resubmit at the Journal of Political Economy
We explore what private market data can tell us about the appropriate discount rates for valuing investments in climate change abatement. We estimate the term structure of…
Debt Relief and Slow Recovery: A Decade after Lehman
We follow a representative panel of millions of consumers in the U.S. from 2007 to 2017 and document several facts on the long-term effects of the Great Recession. There were about six million foreclosures in the ten-year period after Lehman’s…
Arbitration with Uninformed Consumers
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 in…
The Limits of Shadow Banks
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 trillion US residential mortgage…
Compression Auctions With an Application to LIBOR-SOFR Swap Conversion
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 the London…
Financial Regulation in a Quantitative Model of the Modern Banking System
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…