We study the impact of the U.S. money market fund reform implemented in October 2016 on global banks' funding supply and business activities. We show that the reform induced a large negative wholesale funding shock for global banks. In contrast to the conventional bank lending channel, the primary response of global banks to the reform was a cutback in arbitrage positions that relied on unsecured funding, rather than a reduction in loan provision. We discuss the role of postcrisis liquidity regulations and unconventional monetary policy in explaining our findings, and implications for banks' business models and deposit competition.

This paper investigates the role of private equity (PE) in failed‐bank resolutions after the 2008 financial crisis, using proprietary Federal Deposit Insurance Corporation failed‐bank acquisition data. PE investors made substantial investments in underperforming and riskier failed banks, particularly in geographies where local banks were also distressed, filling the gap created by a weak, undercapitalized banking sector. Using a quasi‐random empirical design based on detailed bidding information, we show that PE‐acquired banks performed better ex post, with positive real effects for the local economy. Overall, PE investors played a positive role in stabilizing the financial system through their involvement in failed‐bank resolution.

Using an experiment in which 3.1 million bank customers were encouraged to save, we explore the mechanisms behind coholding liquid savings and credit card debt. Theoretically, we show that the joint responses of spending, saving, and borrowing to the nudge differ across economic models of coholding. Using machine learning techniques, we find that the most responsive individuals reduce spending and increase savings by 4.9% (206 USD PPP per month) while their credit card debt remains unchanged. These individuals' marginal responses to the nudge are consistent with our model of coholding for the purpose of self‐ or partner‐control.

Using confidential supervisory risk ratings, we document that banks increase risk after going public compared to a control group of banks that filed to go public but withdrew their filings for plausibly exogenous reasons. The increase in risk improves short‐term performance at the expense of long‐term performance. We argue that the increase in risk stems from pressure to maximize short‐term stock prices and earnings once the bank is publicly traded. After going public, banks owned by investors that place greater value on short‐term performance increase risk more, and those managed by CEOs with more short‐term compensation also increase risk more.

A war‐related factor model derived from textual analysis of media news reports explains the cross section of expected stock returns. Using a semisupervised topic model to extract discourse topics from 7,000,000 New York Times stories spanning 160 years, the war factor predicts the cross section of returns across test assets derived from both traditional and machine learning construction techniques, and spanning 138 anomalies. Our findings are consistent with assets that are good hedges for war risk receiving lower risk premia, or with assets that are more positively sensitive to war prospects being more overvalued. The return premium on the war factor is incremental to standard effects.

This article quantifies the effects of a multiday cyberattack that forced offline a technology service provider (TSP) to the banking sector. The attack impaired customers’ ability to send payments through the TSP, but the business continuity plans of banks and the TSP reduced the effect by more than half. Large banks performed better. Through contagion, banks not directly exposed to the attack experienced a liquidity shortfall, causing them to borrow funds or tap reserves. The ability to send payments after hours helped avoid further contagion. These results highlight the importance of preparedness by the private and official sector for cyberattacks.

We study supply‐and‐demand effects in the U.S. Treasury bill market by comparing the returns on T‐bills to the policy rate on the Federal Reserve's reverse repurchase (RRP) facility. We develop and test a simple model where the RRP‐bill spread is policed both by heterogeneously elastic money funds and by corporate treasurers who derive collateral benefits from holding T‐bills. In response to shifts in T‐bill supply, money funds act as front‐line arbitrageurs. However, when T‐bills become extremely scarce, less elastic corporate treasurers become the marginal investors and supply shifts have a larger effect on T‐bill rates.

I study how the secular decline in interest rates affects banks' intermediation spreads and credit supply. Following a permanent decrease in rates, bank lending may rise initially but contracts in the long run. As lower rates compress deposit spreads even well above the zero lower bound, banks' retained earnings, equity, and lending fall until loan spreads have risen enough to offset the reduction in deposit spreads. A higher inflation target can support bank lending at the cost of higher liquidity premia. I find support for the model's predictions in U.S. aggregate and bank‐level data.

I introduce and test for preference for simplicity in choice under risk. I characterize the theory axiomatically, and derive its properties and unique predictions relative to canonical models. By designing and running theoretically motivated experiments, I document that people value simplicity in ways not fully captured by existing models that study risk premia in financial markets. Participants' risk premia increase as complexity increases, holding moments fixed; their dominance violations increase in complexity; their behavior is predicted by simplicity's characterizing axiom; and their complexity aversion is heterogeneous in cognitive ability. None of expected utility theory, cumulative prospect theory, prospect theory, rational inattention, sparsity, salience, or probability weighting that differs by number of outcomes fully capture the experimental findings. I generalize the underlying theory to additionally capture broader measures of complexity, including obfuscation, computation, and language effects.

This paper develops an empirical methodology for extracting pricing factors from investor portfolio data. We apply this approach to the stockholdings of Norwegian individual investors from 1997 to 2017. A two‐factor model, featuring the market portfolio and a long‐short portfolio constructed from the holdings of investors sorted by age or wealth, explains both the common variation in portfolio holdings and the cross section of stock returns. Portfolio tilts toward the long‐short investor factor correlate with indebtedness, macroeconomic exposure, gender, and investment experience. Our paper illustrates the benefits of using holdings data for explaining the risk premia of financial assets.