Working Papers

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. We provide the first large-scale study that…

What makes an asset a “safe asset”? We study a model where two countries each issue sovereign bonds to satisfy investors’ safe asset demands. The countries differ in the float of their bonds and their resources/fundamentals available to rollover…

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 communicate…

This paper explores the implications of asymmetric information and learning in banking. We hypothesize that banks acquire private information about borrower quality, not just when screening the initial loan, but while monitoring the loan’s…

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 coordination among investors,…

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…

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. economy. Despite…

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 asset markets. However, the…

Exchange rates strongly co-vary against their base currency. We uncover a gravity equation in this factor structure: the key determinant of a country’s exchange rate beta on the common base factor is the country’s distance from the base country.…

The extreme fragility of the financial system that gives rise to systemic risk and crises is rooted in the incentives of people within this system and the failure of regulation to counter these incentives. The same forces that increase systemic…

We examine the ability of the government to impact mortgage refinancing activity and spur consumption by focusing on the Home Affordable Refinancing Program (HARP). The policy allowed intermediaries to refinance insufficiently collateralized…

Local stock markets adjust sluggishly to changes in local inflation. When the local rate of inflation increases, local investors subsequently earn significantly lower real returns on local stocks, but not on local bonds or foreign stocks. Our…

In a noisy rational expectations framework with costly information, some agents expend resources to become informed, and earn a return for their efforts by trading with the uninformed. Applying this insight, we examine the proposition that an…

We examine the economic determinants of short-sale supply, and its consequences for future stock returns.  Lendable supply increases with expected borrowing costs and decreases with financial statement constructs that indicate overvaluation…

Under revision for Econometrica

This paper studies U.S. banks’ exposure to interest rate and credit risk. We exploit the factor structure in interest rates to represent many bank positions in terms of simple factor portfolios.…

Financial market imperfections can have significant impact on employment decisions of firms. We illustrate the economic importance of this channel by showing that employment decisions are constrained by firms’ financial health and liquidity. Our…

 A portion of the global wealth portfolio is directed towards a safe and liquid reserve asset, which recently has been the US Treasury bond. Our model links the determination of reserve asset status to relative fundamentals and relative debt…

We present a theory in which the key driver of short-term debt issued by the financial sector is the portfolio demand for safe and liquid assets by the non-financial sector. This demand drives a premium on safe and liquid assets that the…

We propose a new method of testing asset pricing models that relies on using quantities rather than simply prices or returns. We use the capital flows into and out of mutual funds to infer which risk model investors use. We derive a simple test…

Systemic risk arises when shocks lead to states where a disruption in financial intermediation adversely affects the economy and feeds back into further disrupting financial intermediation. We present a macroeconomic model with a financial…