Abstract What distribution best characterizes the time series and cross-section of individual stock returns? To answer this question, we estimate the degree of cross-sectional return skewness relative to a benchmark that nests many models considered in the literature. We find that cross-sectional skewness in monthly returns far exceeds what this benchmark model predicts. However, cross-sectional skewness in long-run returns in the data is substantially below what the model predicts. We show that fat-tailed idiosyncratic events appear to be necessary to explain skewness in the data. (JEL, G10, G11, G12, G13, G14).

Abstract This study examines whether the labor market rewards directors for individual excellence. We use national director awards to capture large, positive shocks to individual reputation. We find strong evidence that the labor market recognizes and rewards “superstar” directors. Award events lead to positive announcement returns and increase awardees’ chances of gaining new board seats at prestigious firms. Consistent with theories of career concerns and labor market signaling, the reputational effects are greater for younger directors and for nonoverboarded directors. Overall, our findings offer new insights into the nature of reputation and rewards in the upper echelon of the director labor market. (JEL G30, G34, G39) Received August 15, 2020; editorial decision May 11, 2021 by Editor Andrew Ellul. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

We survey more than 200 private equity (PE) managers from firms with $1.9 trillion of assets under management (AUM) about their portfolio performance, decision-making and activities during the Covid-19 pandemic. Given that PE managers have significant incentives to maximize value, their actions during the pandemic should indicate what they perceive as being important for both the preservation and creation of value. PE managers believe that 40% of their portfolio companies are moderately negatively affected and 10% are very negatively affected by the pandemic. The private equity managers—both investment and operating partners—are actively engaged in the operations, governance, and financing in all of their current portfolio companies. These activities are more intensively pursued in those companies that have been more severely affected by the Covid-19 pandemic. As a result of the pandemic, they expect the performance of their existing funds to decline. They are more pessimistic about that decline than the venture capitalists (VCs) surveyed in Gompers et al. (2021). Despite the pandemic, private equity managers are seeking new investments. Rather than focusing on cost cutting, PE investors place a much greater weight on revenue growth for value creation. Relative to the 2012 survey results reported in Gompers, Kaplan, and Mukharlyamov (2016), they appear to give a larger equity stake to management teams and target somewhat lower returns.

We investigate the equilibrium interest rate charges on non-recourse and recourse loans secured by stock. In such loans, the client retains the option to prepay and recover the collateral stock. We adopt a structural model of the firm where debt levels, with endogenous bankruptcy, affect equity dynamics. Complicating matters, the link between total equity and the price of a share of stock that forms the collateral depends on the extent of dilutions and buybacks that occur. For levered firms, due to dilution in bad states of nature, stock prices typically fall faster than equity values; and for firms that engage in buybacks in good states of nature, stock prices will rise faster than equity values. Banks that ignore these features underestimate the equilibrium interest rate charge on stock-based loans. We provide an analysis of individual stock-based loans and their portfolio characteristics, the latter of which can be used by banks to ascertain capital requirements.

Abstract We study how the recent run-up in housing and rental prices affects the outlook for inflation in the USA. Housing held down the overall inflation in 2021. Despite record growth in private market-based measures of home prices and rents, the government-measured residential services inflation was only 4% for the 12 months ending in January 2022. After explaining the mechanical cause for this divergence, we estimate that, if past relationships hold, the residential inflation components of the Consumer Price Index (CPI) and Personal Consumption Expenditure (PCE) are likely to move close to 7% during 2022. These findings imply that housing will make a significant contribution to overall inflation in 2022, ranging from one percentage point for headline PCE, to 2.6 percentage points for core CPI. We expect residential inflation to remain elevated in 2023.

Abstract There have been important methodological changes in the Consumer Price Index (CPI) over time. These distort comparisons of inflation from different periods, which have become more prevalent as inflation has risen to 40-year highs. To better contextualize the current run-up in inflation, this article constructs new historical series for CPI headline and core inflation that are more consistent with current practices and expenditure shares for the post-war period. Using these series, we find that current inflation levels are much closer to past inflation peaks than the official series would suggest. In particular, the rate of core CPI disinflation caused by Volcker-era policies is significantly lower when measured using today’s treatment of housing: only 5 percentage points of decline instead of 11 percentage points in the official CPI statistics.

This article provides an overview of the origins and development of stratification economics as a subfield that centers the importance of identity, social ranking, and relative group position. Stratification economics developed in response to explanations for interracial/ethnic/gender inequality that invoked group-based dysfunction on the part of the subordinate community. Influences, detailed here, include the works of W. E. B. DuBois, Thorstein Veblen, Karl Marx, Eric Williams, Herbert Blumer, Claude Steele, Cecilia Ridgeway, Thomas Pettigrew, and Linda Tropp. The article concludes with an exploration of unique insights and extensions stratification economics affords a variety of themes: the impact of multiple identities, the determinants of individual productivity, variation in intensity of group identification, “passing,” sources of intergroup differences in wealth, and social mobility and immigration. (JEL D31, D63, I31, J15, J16, Z13)

Attitudes towards business vary significantly across political lines, religious denominations, and ethnic groups. We utilize this variation to construct a measure of local business attitudes and show that firms in areas with stronger probusiness attitudes are less likely to incorporate in Delaware and adopt more management-friendly provisions in their corporate bylaws. These findings are further supported by an instrumental variable estimation utilizing data on immigration at the turn of the 19th century. The overall findings indicate that firms in probusiness areas are less likely to provide unconditional protection of their managers through incorporation in Delaware. Instead, they tend to provide protection through more flexible means, such as corporate bylaws.

We study the effects of peer gender composition in STEM doctoral programs on persistence and degree completion. Leveraging unique new data and quasi-random variation in gender composition across cohorts within programs, we show that women entering cohorts with no female peers are 11.7pp less likely to graduate within 6 years than their male counterparts. A 1 sd increase in the percentage of female students differentially increases women's probability of on-time graduation by 4.4pp. These gender peer effects function primarily through changes in the probability of dropping out in the first year of a Ph.D. program.