Why Do Mutual Funds Hold Lottery Stocks? We document large cross-sectional differences in lottery stock holdings among actively managed U.S. equity funds. We examine the incentives and performance of mutual funds that hold more lottery stocks and find that such funds are smaller, younger, and poor recent performers – characteristics…

Stress Tests and Small Business Lending Post-crisis stress tests have altered banks’ credit supply to small business. Banks affected by stress tests reduce credit supply and raise interest rates on small business loans. Banks price the implied increase in capital requirements from stress tests where they have local knowledge, and…

The Underwriter Relationship and Corporate Debt Maturity Supply-side frictions impact corporate debt maturity choices. Similar to bank loan markets, corporate debt markets exhibit repeated issuance relationships between underwriters and issuers. Using micro-data on investor-underwriter-issuer relationships, we uncover significant frictions in the U.S. public corporate debt markets, even though firms issuing…

Can Cross-Border Funding Frictions Explain Financial Integration Reversals? We examine the role of funding frictions in international investments. Guided by an international CAPM with funding constraints, we use the differences in the betting-against-beta portfolio performance between countries to infer the magnitude and the implicit cost of barriers that impede the…

Pockets of Predictability Return predictability in the U.S. stock market is local in time as short periods with significant predictability ('pockets') are interspersed with long periods with little or no evidence of return predictability. We document this empirically using a flexible non-parametric approach and explore possible explanations of this finding,…

Terrorist Attacks and Household Trading Using two sources of household data, we show that an increase in terrorist attacks leads individual investors to reduce stock market participation and overall trading activities. The effects of attacks are evident both in households located in the state of the attack, as well as…

"Distortive Effects of Benchmarking by Fixed-Income Funds" I show that benchmarking concerns of fixed income funds lead to distortions in corporate bond prices, due to portfolio re-balancing in response to changes in the benchmark index. Risk-averse fund managers trade off hedging demand for illiquid assets in the benchmark against cash…

How Do Financial Expertise and Networks Affect Investing? Evidence from the Governance of University Endowments Abstract Using the unique laboratory of university endowments, we study the effects of expertise and networks on investment performance. Using detailed information on more than 11,000 unique board members for 579 university endowments, we show…