Knowledge that Transforms

Property taxes are commonly levied as a percentage of a home’s assessed value (AV). AVs should affect home prices through opposing channels. An unexpected increase in AV implies higher tax payments, which should hurt a home’s selling price (tax channel). On the other hand, the increase should have a positive effect since AVs serve as reference prices (anchoring channel). In a quasi-experimental setting exploiting geographic variations in AV-publication dates and reassessment frequencies, we find that a higher AV leads to a lower transaction price, indicating that the tax channel prevails. Disentangling the aggregate effect, we document that empirically, the anchoring channel does not play a major role. Our results thus suggest an exacerbation of previously documented inequities caused by taxation.

This paper presents a model in which risk-averse individuals can purchase insurance via traditional indemnity contracts or Decentralized Finance (DeFi) smart contract-based instruments. The model incorporates key features of DeFi insurance, including parametric payouts, basis risk arising from imperfect loss verification and pooled collateralization involving the risk of liquidity shortfalls. We characterize optimal insurance choices as a function of pricing, payout correlation and risk preferences. Numerical results show that DeFi insurance can complement or replace traditional coverage, improving welfare when basis and default risks are moderate or pricing advantages are substantial. The analysis reveals how DeFi-specific frictions shape insurance demand and provides insight into how DeFi instruments may shift market structure and expand the set of attainable risk transfer outcomes.

We examine the asset pricing implications of sustainability in commodity markets. We focus on metals and agricultural goods, for which we collect production-based environmental footprint data, namely greenhouse gas emissions and water consumption. We then build green-minus-brown portfolios and find no evidence that sustainability is priced in the cross-section of metals’ and agricultural commodities’ returns. We also document strong welfare benefits when diversifying equity and bond allocations with low-carbon commodities. Investor welfare, measured by the certainty equivalent return, increases by 22% when the commodity share is 20%. These results reveal the dual opportunities, both financial and environmental, brought by low footprint commodities.

Recent literature shows that investors’ revealed beliefs often point to the use of comparatively simple valuation approaches or heuristics rather than complex models with several dimensions of systematic risk to price assets. Against this background, we comprehensively analyze how different stock-level performance measures affect media tone in firm-specific articles in several major markets. While the realized risk-adjusted abnormal returns of all tested models are positively related to media sentiment, the CAPM-adjusted return as well as the raw stock return have the strongest impact in direct comparisons. Overall, the results are most consistent with the conjecture that, on average, reporting tends to be influenced more by straightforward valuation approaches than by risk adjustments derived from multi-factor asset pricing models. Further largely supportive evidence comes from return decompositions, subsample tests, reporting about mutual funds as well as from survey results.

A familiarity bias of target shareholders allows bidders to opportunistically choose the payment method in mergers and acquisitions. We employ the Stambaugh, Yu and Yuan (2015) mispricing score to identify overvalued bidders, reconfirming that overvaluation is a central driver of the payment choice. Using an instrumental variable based on exogenous price pressure, we provide causal evidence for bidder opportunism. Further analyses show that target shareholders more familiar with the bidder are more likely to accept equity despite particularly adverse market reactions. Our results suggest that behavioral biases of shareholders contribute to the transmission of stock market inefficiencies to the market for corporate control.