The panic of 2007–2008 was a run on the sale and repurchase market (the repo market), which is a very large, short-term market that provides financing for a wide range of securitization activities and financial institutions. Repo transactions are collateralized, frequently with securitized bonds. We refer to the combination of securitization plus repo finance as “securitized banking” and argue that these activities were at the nexus of the crisis. We use a novel data set that includes credit spreads for hundreds of securitized bonds to trace the path of the crisis from subprime-housing related assets into markets that had no connection to housing. We find that changes in the LIB-OIS spread, a proxy for counterparty risk, were strongly correlated with changes in credit spreads and repo rates for securitized bonds. These changes implied higher uncertainty about bank solvency and lower values for repo collateral. Concerns about the liquidity of markets for the bonds used as collateral led to increases in repo haircuts, that is the amount of collateral required for any given transaction. With declining asset values and increasing haircuts, the US banking system was effectively insolvent for the first time since the Great Depression.

We show that individual investors over-extrapolate from their personal experience when making savings decisions. Investors who experience particularly rewarding outcomes from 401(k) saving—a high average and/or low variance return—increase their 401(k) savings rate more than investors who have less rewarding experiences. This finding is not driven by aggregate time-series shocks, income effects, rational learning about investing skill, investor fixed effects, or time-varying investor-level heterogeneity that is correlated with portfolio allocations to stock, bond, and cash asset classes. We discuss implications for the equity premium puzzle and interventions aimed at improving household financial outcomes.

Why did the failure of Lehman Brothers make the financial crisis dramatically worse? Our answer is that the financial crisis was a process of a build-up of risk during the crisis prior to the Lehman failure. During the crisis market participants tried to preserve an option to withdraw by shortening maturities — the “flight from maturity”. We show that the flight from maturity was manifested in a steepening of the term structures of spreads in money markets. With increasingly short maturities, lenders created the possibility of fast exit. The failure of Lehman Brothers was the tipping point of this build-up of systemic fragility. A crisis is a dynamic process in which “tail risk” is endogenous.

The Financial Crisis began and accelerated in short-term money markets. One such market is the multi-trillion dollar sale-and-repurchase (“repo”) market, where prices show strong reactions during the crisis. The academic literature and policy community remain unsettled about the role of repo runs, because detailed data on repo quantities is not available. We provide quantity evidence of the run on repo through an examination of the collateral brought to emergency liquidity facilities of the Federal Reserve. We show that the magnitude of repo discounts (“haircuts”) on specific collateral is related to the likelihood of that collateral being brought to Fed facilities.

We construct a comprehensive list of dual-class firms in the United States and use this list to analyze the relationship between insider ownership and firm value. Our data have two useful features. First, since dual-class stock separates cash-flow rights from voting rights, we can separately identify the impact of each. Second, we address endogeneity concerns by using exogenous predictors of dual-class status as instruments. In single-stage regressions, we find strong evidence that firm value is increasing in insiders’ cash-flow rights and decreasing in insider voting rights. In instrumental variable regressions, the point estimates are similar but the significance levels are lower.

This paper uses performance-evaluation methodology to estimate the returns earned by insiders when they trade their company's stock. Our methods are designed to estimate the returns earned by insiders themselves and thereby differ from the previous insider-trading literature, which focuses on the informativeness of insider trades for other investors. We find that insider purchases earn abnormal returns of more than 6% per year, and insider sales do not earn significant abnormal returns. We compute that the expected costs of insider trading to noninsiders are about 10 cents for a $10,000 transaction.

We document that the percentage of all U.S. assets that are “safe” has remained stable at about 33 percent since 1952. This stable ratio is a rare example of calm in a rapidly changing financial world. Over the same time period, the ratio of U.S. assets to GDP has increased by a factor of 2.5, and the main supplier of safe financial debt has shifted from commercial banks to the “shadow banking system.” We analyze this pattern of stylized facts and offer some tentative conclusions about the composition of the safe-asset share and its role within the overall economy.

Large blocks of stock play an important role in many studies of corporate governance and finance. Despite this important role, there is no standardized data set for these blocks, and the best available data source, Compact Disclosure, has many mistakes and biases. In this paper, we document these mistakes and show how to fix them. The mistakes and biases tend to increase with the level of reported blockholdings: in firms where Compact Disclosure reports that aggregate blockholdings are greater than 50%, these aggregate holdings are incorrect more than half the time and average holdings for these incorrect firms are overstated by almost 30 percentage points. For researchers using uncorrected blockholder data as a dependent variable, these errors will increase the standard error of coefficient estimates but do not appear to cause bias. However, we find that if blockholders are used as an independent variable, economically significant errors-in-variables biases can occur. We demonstrate these biases using a representative analysis of the relationship between firm value and outside blockholders. An online appendix to our paper provides a “clean” data set for our sample firms and time period. For researchers who need to work outside of this sample, we also test the efficacy of alternative (cheaper) fixes to this data problem, and find that truncating or winsorizing the sample can reduce about half of the bias in our representative application.

This paper analyzes mutual‐fund performance from an investor's perspective. We study the portfolio‐choice problem for a mean‐variance investor choosing among a risk‐free asset, index funds, and actively managed mutual funds. To solve this problem, we employ a Bayesian method of performance evaluation; a key innovation in our approach is the development of a flexible set of prior beliefs about managerial skill. We then apply our methodology to a sample of 1,437 mutual funds. We find that some extremely skeptical prior beliefs nevertheless lead to economically significant allocations to active managers.

We present a method of ranking U.S. undergraduate programs based on students’ revealed preferences. When a student chooses a college among those that have admitted him, that college “wins” his “tournament.” Our method efficiently integrates the information from thousands of such tournaments. We implement the method using data from a national sample of high-achieving students. We demonstrate that this ranking method has strong theoretical properties, eliminating incentives for colleges to adopt strategic, inefficient admissions policies to improve their rankings. We also show empirically that our ranking is (1) not vulnerable to strategic manipulation; (2) similar regardless of whether we control for variables, such as net cost, that vary among a college’s admits; (3) similar regardless of whether we account for students selecting where to apply, including Early Decision. We exemplify multiple rankings for different types of students who have preferences that vary systematically.