We consider a model in which the correlation between shocks to consumption and to expected future consumption growth is nonzero and varies over time. We validate this assumption empirically using the model’s implication that time variation in consumption growth persistence (CGP) drives the correlation between stock and bond returns. Our model implies that the stock–bond correlation is also related to the predictive relation between bond yields and future stock returns. Finally, we provide suggestive evidence that asset price fluctuations are the primary driver of changes in CGP.

This article examines whether agency conflicts introduced by securitization affect servicers’ asset liquidation decisions. We find securitized loans are 25.4–28.5 percent less likely to be liquidated via short sales than portfolio loans. Securitized loan servicers’ bias against short sales does not represent an agency conflict if short sale and real estate owned (REO) liquidations are equally efficient. However, we find REOs have significantly lower average liquidation prices, higher average liquidation expenses, and longer average liquidation times than short sales. Although short sales benefit investors, securitized loan servicers have a financial incentive to pursue REOs.

The impact of earnings announcements (EAs) on investor uncertainty depends not only on how much new information they contain but also on how long it would take comparable information to arrive in the future through alternative sources, which I term “earnings horizon.” Using a structural model of periodic EAs, I show that earnings horizon is not captured by standard empirical measures of earnings informativeness or timeliness based on the event-study approach. However, earnings horizon can be estimated using patterns in return volatility over firms’ reporting cycles, which indicate that EAs have a short horizon and thus reduce investor uncertainty by one-third the amount suggested by event studies. Moreover, these patterns indicate that it takes investors considerably longer than the three- to five-day windows commonly applied in event studies to fully process EAs and that more frequent financial reporting may significantly enhance EAs’ informativeness. Data Availability: Data are available from the public sources cited in the text.

In a macroeconomic model with drifting long-run inflation expectations, the anchoring of inflation expectations manifests in two testable predictions. First, expectations about inflation far in the future should no longer respond to news about current inflation. Second, better anchored inflation expectations weaken the relationship between unemployment and inflation, flattening the reduced-form Phillips curve. We evaluate both predictions and find that the Federal Reserve’s communication of a numerical inflation objective, first through its Summary of Economic Projections and later through the announcement of a 2% target in 2012, better anchored inflation expectations. Moreover, inflation expectations in the United States have remained anchored amid the volatility of the COVID-19 pandemic. In contrast, similar analysis reveals no evidence of anchoring in Japan despite the adoption of a numerical inflation target.

Using comprehensive account-level data, we separate Chinese retail investors into 5 groups and document strong heterogeneity in trading dynamics and performances. Retail investors with smaller account sizes cannot predict future returns correctly, display daily momentum patterns, fail to process public news, and show overconfidence and gambling preferences, while retail investors with larger account balances predict future returns correctly, display contrarian patterns, and incorporate public news in trading. Using performance measures established in previous literature, we find that smaller retail investors suffer from poor stock selection abilities and trading costs, while large retail investors’ stock selection abilities are offset by trading costs.

The H-1B Visa Reform Act of 2004 dictates an annual allocation of 85,000 visas with 20,000 reserved for advanced-degree applicants. We represent the main requirements of this legislation as formal axioms and characterize visa allocation rules consistent with the axioms. Despite the precise number reserved, we show that the range of implementations satisfying these axioms can change the allocation of advanced-degree visas by as much as 14,000 in an average year. Of all rules satisfying these axioms, the 2019 rule imposed by executive order is most favorable to advanced-degree holders. However, two earlier modifications resulted in larger changes, possibly unintentionally.

Using 2015–2019 intraday short sale data from CBOE, we show that shorting flows near the open, middle, and close all negatively predict future returns, but the shorting flows near the open and middle have stronger predictive power than shorting flows near the close. We relate our findings to three informed trading models with different predictions on the timing of the trades. The long term predictive power of shorting flows near the open and midday is consistent with Kyle’s (1985) model of steady trading; the intraday variation in shorting flows’ predictive power is more consistent with Holden and Subrahmanyam’s (1992) aggressive trading model, in the sense that predictive power of shorting flows is stronger when there is greater urgency to trade at open and when the securities lending market is more competitive; and the liquidity timing hypothesis from Collin-Dufresne and Fos (2016) is also supported by the finding that opening shorting flows increase for firms with better liquidity conditions.

We study debt and equity valuation when investors have private information and may exhibit differences of opinion. Our model generates several predictions that are consistent with empirical evidence but difficult to reconcile with traditional models. Belief dispersion relates to expected equity and debt returns in opposite directions. Similarly, expected debt (equity) returns typically increase (decrease) with default risk, though these relationships reverse for firms close to bankruptcy. Firms’ capital structures affect their valuations even without classical capital structure frictions (e.g., tax shields, distress costs) – when liquidity is higher in the equity than in the debt market, leverage can raise firm value.

We estimate a model of savings for retired couples and singles who face longevity and medical expense risks and in which couples can leave bequests both when the first spouse dies and when the last spouse dies. We show that saving motives vary by marital status, permanent income, and age. We find that most households save more for medical expenses than for bequests but that richer households and couples, who hold most of the wealth, save more for bequests. As a result, bequest motives are a key determinant of aggregate retirement wealth.

The growing popularity of home-sharing platforms such as Airbnb, partly fueled by hosts’ ability to evade local taxes and regulations, has been shown to elevate housing costs by reallocating long-term housing units to the short-term rental market. This study assesses whether enhanced tax enforcement can mitigate this trend. We analyze staggered tax collection agreements between Airbnb and Florida counties, wherein Airbnb collects taxes from the hosts directly. Using a difference-in-differences methodology, we find these agreements significantly slow the growth of housing costs, highlighting the importance of tax policy in addressing the sharing economy’s influence on housing affordability.