I introduce and study dynamic persuasion mechanisms. A principal privately observes the evolution of a stochastic process and sends messages over time to an agent. The agent takes actions in each period based on her beliefs about the state of the process and the principal wishes to influence the agent’s action. I characterize the optimal persuasion mechanism and show how to derive it in applications. I then consider the extension to multiple agents where higher-order beliefs matter. (JEL D82, D83)

We show that analyst coverage proxies contain information about expected returns. We decompose analyst coverage into abnormal and expected components using a simple characteristic-based model and show that firms with abnormally high analyst coverage subsequently outperform firms with abnormally low coverage by approximately 80 basis points per month. We also show abnormal coverage rises following exogenous shocks to underpricing and predicts improvements in firms’ fundamental performance, suggesting that return predictability stems from analysts more heavily covering underpriced stocks. Our findings highlight the usefulness of analysts’ actions in expected return estimations, and a potential inference problem when coverage proxies are used to study information asymmetry and dissemination.

African elections often reveal low levels of political accountability. We assess different forms of voter education during an election in Mozambique. Three interventions providing information to voters and calling for their participation were randomized: an information campaign using SMS, an SMS hotline for electoral misconduct, and the distribution of a free newspaper. To measure impact, we look at official electoral results, reports by electoral observers, and behavioral and survey data. We find positive effects of all treatments on voter turnout. However, only the distribution of the free newspaper led to more accountability-based participation and to a decrease in electoral problems.

Aggregate real wages exhibit less procyclicality than most macroeconomic models predict. We use 35 years of Current Population Survey data to confirm that the puzzling behavior of wages largely owes to changes in the composition of the employed over the business cycle. This composition effect relates to changes in both the number and the relative wage levels of those entering and exiting. The changing gap in wages of entrants and exiters is especially important for the unemployed. A large part of this wage gap is due to differences in average Mincer residuals between entrants and exiters.

This paper establishes a new empirical fact: Mutual funds' flow-performance sensitivity is a hump-shaped function of aggregate risk-factor realizations. Explanations based on extant theories can explain only a fraction of the pattern. We thus develop a new parsimonious model. It assumes Bayesian investors who are uncertain about the degree to which fund returns are exposed to systematic risk. Fund performance is then less informative about manager skill when factor realizations are larger in absolute value. The data also support the out-of-sample prediction that the hump shape is more pronounced for funds with more uncertain risk loadings.

We investigate the effect of innovativeness on crowdfunding outcomes. Because crowdfunding campaigns characterized by greater incremental innovativeness are more comprehensible and generate more user value for typical crowdfunders, incremental innovativeness may result in more favorable funding outcomes. By comparison, campaigns that feature greater radical innovativeness are riskier to develop, harder for crowdfunders to understand and result in less favorable funding outcomes. This negative effect of radical innovativeness may be mitigated by incremental innovativeness, which may help crowdfunders to understand and appreciate radical innovativeness more. A sample of 334 Kickstarter campaigns provides support for our hypotheses.

We develop a dynamic agency model of a public corporation. Managers underinvest because of risk aversion. They smooth rents and payout. They do not exploit interest tax shields fully. The interactions of investment, debt, and payout decisions can change drastically depending on managers’preferences. Managers with power utility set investment, debt, and payout proportional to the firm’s net worth, generating a constant (possibly negative) net debt ratio. With exponential utility, investment decisions are separated from decisions about debt and payout. More profitable firms become cash cows, and less profitable firms accumulate debt, as in a pecking-order model.