Knowledge that Transforms

We use population data on capital income and wealth holdings for Norway to measure asset positions and wealth returns before individuals marry and after the household is formed. These data allow us to establish a number of novel facts. First, individuals sort on personal wealth rather than parental wealth. Second, people match also on their personal returns to wealth and assortative mating on returns is as strong as that on wealth. Third, post-marriage returns on family wealth reflect in equal part the pre-marriage returns of the two spouses. However, for households at the top of the wealth distribution at marriage, family wealth is largely managed by the spouse with the highest potential to grow it, providing a microfoundation for the scale dependence in wealth returns documented in several empirical papers. Fourth, marriage lowers the degree of wealth inequality as well as the heterogeneity in returns relative to the counterfactual case of no marriages. We use a simple framework to illustrate how the inequality-attenuating role of marriage is affected by assortative mating on wealth and returns and by wealth management task allocation between spouses.

We introduce the nonlinear arbitrage correction (NAC), the residual that renders a linear benchmark model arbitrage-free while preserving the law of one price. The price of NAC captures the marginal Sharpe ratio increase consistent with no-arbitrage and upper-bounds the constrained Hansen–Jagannathan distance. Using four decades of international equity, currency, and factor returns, NAC is strongly countercyclical, peaking during crises when linear models turn negative. The implied Sharpe ratio increase reaches 0.3, underscoring its economic relevance. While linear models perform well on average, they fail in distressed states, underpricing nonlinear payoffs. Incorporating NAC restores positivity and stabilizes pricing across regimes.

This study explores the relation between a firm’s employment of managerial accountants and the efficiency of its investment decisions. To investigate this, we track the yearly employment levels of managerial accountants within firms and find a positive association with investment efficiency. This positive association persists after controlling for financial accountants and multiple measures of financial reporting quality, suggesting the effect operates through improved internal information. Cross-sectional tests show that the relation is concentrated in firms with greater internal information asymmetry and more complex overhead cost allocation. A staggered difference-in-differences (DiD) design exploiting state implementation of the 150 credit hour CPA rule further alleviates endogeneity concerns. Our study contributes to the investment efficiency literature and highlights an important benefit of employing managerial accountants. The findings are particularly relevant, given the recent shortage of accounting professionals. Data Availability: Data are available from public sources and third-party data providers.

We argue that heightened regulation on large banks contributed to the rise in fragility of smaller banks revealed by the 2023 regional bank crisis. In 2018, regulators restricted Wells Fargo, the third largest U.S. bank, from growing its total assets. We estimate this asset cap led Wells Fargo to give up deposits amounting to 2.2% of aggregate bank deposits. These deposits, primarily uninsured, were reallocated to banks geographically proximate to Wells Fargo, including smaller, less regulated banks. In turn, these banks experienced higher deposit outflows once monetary tightening commenced and saw their stock prices plummet during the 2023 stress.