Working Papers

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…

We model a dynamic economy with strategic complementarity among investors and endogenous government interventions that mitigate coordination failures. We establish equilibrium existence and uniqueness, and show that one intervention can affect…

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 of…

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 low book-to-…

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, their labor…

This paper examines whether increases in bank competition reduce discriminatory practices in mortgage lending. Lenders are significantly less likely to approve Black applicants’ loan applications despite facing similar credit risk. However,…

How can mortgages be redesigned to reduce housing market volatility, consumption volatility, and default? How does mortgage design interact with monetary policy? We answer these questions using a quantitative equilibrium life cycle model with…

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 market share among less…

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…

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.…

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…

This paper investigates the effect of a change in informational environment of borrowers on the organizational design of bank lending. We use micro-data from a large multinational bank and exploit the sudden introduction of a credit registry, an…

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…

I show that, in a benchmark model, debt securities minimize the welfare losses associated with the moral hazards of excessive risk-taking and lax effort. For any security design, the variance of the security payoff is a statistic that summarizes…

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 of science and we…

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 total…

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…

Size discovery is the use of trade mechanisms by which large quantities of an asset can be exchanged at a price that does not respond to price pressure. Primary examples of size discovery include “workup” in Treasury markets, “matching sessions”…

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 response to news about patents. Our patent-…

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.…