Macroeconomic Fluctuations, Oil Supply Shocks, and Equilibrium Oil Futures Prices

Knowledge constraints and Firm growth

Neighborhood Choices, Neighborhood Effects and Housing Vouchers

Inference on Risk Premia in the Presence of Omitted Factors

Shareholder Litigation and Corporate Innovation

Risk Premia at the ZLB: a Macroeconomic Interpretation

Lender Forbearance We use a regression discontinuity design to study ex-post discretion in lender’s contractual enforcement of restrictive covenant violations. At pre-set thresholds, we find that lenders enforce contractual breaches at an 11% rate, varying between 5% and 18% and peaking when credit conditions are tightest, consistent with enforcement exacerbating Read more…

The Price Effects of Liquidity Shocks: A Study of SEC's Tick-Size Experiment This paper studies the SEC's pilot program that increased the tick size for approximately 1,200 randomly chosen stocks. We provide causal evidence of a negative impact of a larger tick size on stock prices equivalent to roughly $7 Read more…

The Fragility of Market Risk Insurance Insurers sell retail financial products called variable annuities that package mutual funds with minimum return guarantees over long horizons. Variable annuities accounted for $1.5 trillion or 34 percent of U.S. life insurer liabilities in 2015. Sales fell and fees increased after the 2008 financial Read more…

Margin Requirements and Equity Option Returns. In equity option markets, traders face margin requirements both for the options themselves and for hedging-related positions in the underlying stock market. We show that these requirements carry a significant margin premium in the cross-section of equity option returns. The sign of the margin Read more…

Deadlock on the Board We develop a dynamic model of board decision making. We show that directors may knowingly retain the policy they all think is the worst just because they fear they may disagree about what policy is best in the future --- the fear of deadlock begets deadlock. Read more…

Risk-Adjusted Capital Allocation and Misallocation We develop a theory linking “misallocation,” i.e., dispersion in static marginal products of capital (MPK), to systematic investment risks. In our setup, firms differ in their exposure to these risks, which we show leads naturally to heterogeneity in firm-level risk premia and, more importantly, MPK. Read more…

Corporate ESG Profiles and Investor Horizons We consider motivations for institutional investors to prefer firms with higher Environmental, Social and Governance (ESG) profiles. We find that such preferences depend critically on investor horizons: Investors with longer horizons tend to prefer higher ESG firms significantly more than do short-term investors. Consistent Read more…

Product Life Cycles in Corporate Finance We develop a novel 10-K text-based model of product life-cycles and examine firm investment policies. Conditioning on the life cycle substantially improves the explanatory power of investment-Q models. The improved models reveal that investment follows a pecking order through the life cycle. Firms initially Read more…

Production Networks and Stock Returns: The Role of Vertical Creative Destruction We study the relation between firms' risk and their upstreamness in a production network. Empirically, firms' average stock returns and productivity exposures increase monotonically with their upstreamness. We quantitatively explain these novel facts using a multi-layer general equilibrium model. Read more…