ABSTRACT Research has long recognized that institutional investors possess significant information processing advantages. Yet even these investors face limited‐attention constraints, implying that periods of distraction may attenuate their advantage. We examine the effects of a plausibly exogenous shock to institutional attention arising from the annual buy‐side‐focused Equity Research and Valuation (ERV) conference for Chartered Financial Analysts on institutions' information processing at earnings announcements. Validation tests using conference call data indicate that fewer buy‐side analysts are present on earnings calls during ERV conferences and that questions are shorter, consistent with the presence of substitute or backup analysts. In our main analyses, we find that buy‐side analyst inattention reduces information asymmetry among investors and improves liquidity at these earnings announcements, consistent with theory, and observe similar results for non–earnings announcement events. In additional tests, we document slower price formation, but also more profitable retail trading, during these periods. Collectively, we provide novel evidence on the market consequences of institutional inattention during key information events.

Banks play a central role in the financial system and benefit the real economy by managing risk, and providing finance to households, small and medium-sized enterprises, large corporates and governments. However, their complexity, opacity and interconnectedness can elevate bank-level and systemic risks, posing dangers to the financial system and real economy. This was evident during the global financial crisis where taxpayer funded bailouts were used to rescue ailing banks, which in turn led to an overhaul of regulation and supervision. Consequently, safeguarding bank stability and addressing systemic risks via well designed regulations is essential for ensuring economic resilience and societal well-being. This study uses a quasi-natural experimental research design in the form of the Dutch Liquidity Balance Rule (LBR) to evaluate the impacts of liquidity regulation on bank-level stability and systemic risk. Our findings show that following the introduction of liquidity regulation, the stability of Dutch banks increases significantly relative to counterparts in neighbouring countries unaffected by the regulation. The observed reduction in risk stems from improved capitalization and reduced leverage, which contribute to greater financial stability. Systemic risk also decreases. Our findings have relevance beyond our research setting for policymakers tasked with implementing and monitoring the impacts of similar forms of liquidity regulation (such as bank liquidity coverage ratios) post global financial crisis.

Abstract Cryptocurrency has been the subject of heightened regulatory and investor attention in recent years, and regulators and policymakers across the globe are deliberating on how to account for, regulate, tax, and oversee digital assets and cryptocurrency marketplaces. Yet researchers have a limited understanding of key attributes of those who deal in crypto assets, such as whether their financial sophistication differs from that of other investors. Using U.S. administrative data, we provide evidence on (i) the attributes of taxpayers reporting cryptocurrency sales to the IRS, (ii) how these attributes are evolving, and (iii) how investors treat cryptocurrency versus other financial assets in certain settings. The results suggest that average reporting cryptocurrency sellers exhibit demographic attributes generally associated with less financial sophistication and are more likely to trade in meme stocks. Overall, we provide timely evidence that can inform cryptocurrency policy deliberations by highlighting the characteristics of taxpayers who appear to report cryptocurrency sales.

Regulators around the world have begun to require investment companies to provide information regarding fossil fuel investments to external stakeholders. In this paper we examine whether such disclosures impact the investment portfolios and/or investment policies of the disclosing firms. Using a 2016 California disclosure mandate that required some U.S. insurance companies to disclose their fossil fuel investments on a public website, we find the disclosing insurers reduced their fossil fuel investments by approximately 20 % relative to the non-disclosers. Despite this on-average result, we note significant variation in changes to investment portfolios. We find insurers pressured by external stakeholders, including public shareholders and environmental activists, are more likely to divest. In contrast, enhanced Californian regulatory oversight power is unrelated to divesture. Even after the disclosure mandate is reversed, we find the disclosing insurers do not revert to their pre-policy holdings of fossil fuel investments, suggesting the impact created a longer-term change in investment behavior.

Firstborns, on average, complete more education than laterborns. We study whether individuals’ endowments measured by genetic information amplify this effect. Our familyfixed effects approach allows exploiting exogenous variation in birth order and genetic endowments among 14,850 siblings in the UK Biobank. We find that those with higher genetic endowments benefit disproportionately more from being firstborn compared to those with lower endowments, providing a clean example of how nature and nurture interact in producing human capital. Since parental investments are a dominant channel driving birth order effects, our results are consistent with complementarity between endowments and investments in human capital formation.

We estimate price elasticities of housing supply for U.S. cities by examining the impact of foreign purchases on housing prices and quantities. After other countries introduced foreign-buyer taxes beginning in 2011, both house prices and quantities increased more in locations with high foreign-born populations. An increase in global capital inflows, instrumented with tax policy changes scaled by immigrant exposure, increased prices and quantities over 2011–2018. We combine these estimates to construct new local supply elasticities, which average 0.26 and range from 0.06 to 0.9. Compared to prior estimates, our elasticities are more inelastic and change cities’ relative rankings.

ABSTRACT Recent SEC regulations require that qualified hedge fund advisers provide their investors with narrative disclosures of their business and operations. We find that 40% of these disclosures omit or de‐emphasize information regarding advisers' operational and investment risks when compared to other sources of public information. Funds with such “inconsistencies” are associated with predictably lower fund performance but do not differ in their fund flows, flow‐performance relation, ownership structure, or management fees. These results are consistent with investors being subject to limited strategic thinking, which prevents them from fully unraveling the implications of strategic omissions. This, in turn, contributes to advisers' successful use of discretion to de‐emphasize information with adverse performance implications. Our findings suggest that information processing frictions can facilitate nondisclosure, even in markets with sophisticated investors.