Knowledge that Transforms

AFA Elections: The 2023 AFA elections will again take place online. All voting-eligible AFA members should receive an email in mid-October with a direct link to an individual ballot. If you do not receive this email or if you are unable to vote online please contact [email protected]. Please look at the biographical sketches on the ballot and then vote by the deadline. The AFA 2024 Annual Meeting will be held January 5–7, 2024 (Friday, Saturday, and Sunday) in San Antonio, Texas: ASSA Headquarters will be the Grand Hyatt San Antonio and the AFA hotel will be the Marriott Rivercenter. Registration and Housing information will be available on the AEA website – attendees must go through the official housing company to get the convention rates. NOTE: Conference details are subject to change – please watch the ASSA website for the latest updates at https://www.aeaweb.org/conference/. AFA Financial and Board Meeting Summaries: The AFA Board of Directors has voted to publish a Board Meeting Summary to increase transparency of AFA governance and decisions made by the Board. Recent Board Meeting Summaries as well as AFA Financial Statements are posted on the AFA website (www.afajof.org). We hope that this additional communication is informative and we welcome your feedback. Other Announcements: Please go to our website, www.afajof.org, for announcements regarding AFA news, meetings, onferences, and research support.

Financial:The Association remains in a strong financial position with total assets of $24.7 million as of June 30, 2022.For the past fiscal year, operating income was $33,486.This is close to break-even for the AFA operations.However, it should be noted that there were no catering expenses or travel grants due to a 2022 virtual meeting.With interest, dividends, realized and unrealized capital gains and losses, the total income for the fiscal year was -$2,873,484.Due to stock market losses as reflected in the total income (loss), the Association's net assets decreased by about 10% from the previous fiscal year.Please note: For details,

ABSTRACTThis paper characterizes the optimal transaction tax in an equilibrium model of financial markets. If investors hold heterogeneous beliefs unrelated to their fundamental trading motives and the planner calculates welfare using any single belief, a positive tax is optimal, regardless of the magnitude of fundamental trading. Under some conditions, the optimal tax is independent of the planner's belief. The optimal tax can be implemented by adjusting its value until total volume equals fundamental volume. Knowledge of (i) the share of nonfundamental trading volume and (ii) the semielasticity of trading volume to tax changes is sufficient to quantify the optimal tax.

ABSTRACT Private equity funds intermediate investment and affect portfolio firm performance by actively engaging in operational, governance, and financial engineering. We study this type of intermediation in a dynamic agency model in which an active intermediary raises funds from outside investors and invests in a firm run by an agent. Optimal contracting addresses moral hazard at the intermediary and firm levels. The intermediary's incentives to affect firm performance are strongest after poor performance, while the agent's incentives are strongest after good performance. We also show how financial engineering, that is, financial contracting with outside investors, interacts with operational and governance engineering.

ABSTRACT Should regulators reveal the models they use to stress‐test banks? In our setting, revealing leads to gaming, but secrecy can induce banks to underinvest in socially desirable assets for fear of failing the test. We show that although the regulator can solve this underinvestment problem by making the test easier, some disclosure may still be optimal (e.g., if banks have high appetite for risk or if capital shortfalls are not very costly). Cutoff rules are optimal within monotone disclosure rules, but more generally optimal disclosure is single‐peaked. We discuss policy implications and offer applications beyond stress tests.