Christian Kontz
Christian Kontz
Hi, I’m Christian Kontz. I’m a Ph.D. candidate in Finance at Stanford Graduate School of Business.
My research sits at the intersection of empirical corporate finance and asset pricing. I study how delegated asset management, the growth of passive investing, and emerging trends like ESG investing shape firms’ decisions and real economic outcomes.
Research Interests
- Financial Intermediation
- Corporate Finance
- Climate Finance
- Empirical Asset Pricing
Job Market Paper
Benchmark-linked capital flows increase firms' CAPM βs, thereby raising managers' perceived cost of equity and reducing investment. Using exogenous variation from Russell and S&P 500 reconstitutions, we show that inclusion in a benchmark stock index increases a stock's CAPM β. Managers interpret the higher β as a higher cost of equity and reduce investment. Consistent with this mechanism, benchmark inclusion also raises the perceived cost of equity among stock analysts and regulators. Industries with larger increases in βs due to benchmarking have accumulated less capital over the past two decades. Benchmark-induced changes in the cross-section of CAPM βs do not cancel out but affect aggregate investment because higher βs fall on many firms with high investment elasticities, while lower βs benefit a few large but inelastic firms. This mechanism can account for the majority of the missing investment puzzle.
Working Papers
This paper documents that ESG preferences in fixed income markets affect real outcomes through securitization. I find that higher ESG scores lower funding costs for auto loan securitizations and that captive lenders pass through these savings to consumers: an 8 basis point ESG funding advantage translates into a 20 basis point lower consumer interest rate. The high pass-through is driven by a 6 percentage point higher probability of receiving subsidized interest rates (e.g., 0% financing). Lower consumer borrowing costs increase loan demand by up to 4.6%. Yet because issuer ESG scores are weak proxies for financed CO2 emissions, the same mechanism reduces the cost of capital for high-emission vehicles. A subjective-beliefs model can explain how investors who intend to price emissions but implement it via ESG scores lower the cost of capital of high-emission vehicles.
Work in Progress
This paper documents that index investing distort risk measures used in regulatory price-setting. Exploiting quasi-experimental variation from Russell index reconstitutions, we find that a utility's inclusion in a more heavily benchmarked index inflates its CAPM β. We then show this effect leads regulators to authorize higher returns on equity, which are ultimately passed on to consumers. This mechanism has substantial aggregate consequences, generating over $85 billion in total economic costs from 1998-2018. Evidence from the regulated railroad industry confirms the mechanism's external validity, highlighting a significant, previously undocumented consequence of modern financial market structure on regulated industries.