A Fast Literature Search Engine based on top-quality journals, by Dr. Mingze Gao.

• Daniel, K., Klos, A., & Rottke, S. (2023). The Dynamics of Disagreement. Review of Financial Studies, 36, 2431–2467.

  In this paper, we infer how the estimates of firm value by “optimists” and “pessimists” evolve in response to information shocks. Specifically, we examine returns and disagreement measures for portfolios of short-sale-constrained stocks that have experienced large gains or large losses. Our analysis suggests the presence of two groups, one of which overreacts to new information and remains biased over about 5 years, and a second group, which underreacts and whose expectations are unbiased after about 1 year. Our results have implications for the belief dynamics that underlie the momentum and long-term reversal effect.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

  View on hdl.handle.net
• Danielsson, J., Valenzuela, M., & Zer, I. (2023). The Impact of Risk Cycles on Business Cycles: A Historical View. Review of Financial Studies, 36, 2922–2961.

  We investigate the effects of financial risk cycles on business cycles, using a panel spanning 73 countries since 1900. Agents use a Bayesian learning model to form their beliefs about risk. We construct a proxy of these beliefs and show that perceived low risk encourages risk-taking, augmenting growth at the cost of accumulating financial vulnerabilities, and, therefore, a reversal in growth follows. The reversal is particularly pronounced when the low-risk environment persists and credit growth is excessive. Global risk cycles have a stronger effect on growth than local risk cycles via their impact on capital flows, investment, and debt-issuer quality.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

  View on hdl.handle.net
• Davis, J., & Segal, G. (2023). Trendy Business Cycles and Asset Prices. Review of Financial Studies, 36, 2509–2570.

  The data-generating process underlying productivity includes both trend and business cycle shocks, generating counterfactuals for prices under full information. In practice, agents’ inability to immediately distinguish between the two shocks creates “rational confusion”: each shock inherits properties of its counterpart. This confusion magnifies the perceived share of permanent shocks and implies that, contrary to canonical frameworks, transitory shocks are the main driver of long-run risk through trendy business cycles. With learning, the equity premium turns positive, while investment and valuation ratios become procyclical, as in the data. Consequently, rational confusion is key for reconciling disciplined macro-dynamics with equilibriumAuthors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

  View on hdl.handle.net
• Derrien, F., Kecskés, A., & Nguyen, P.-A. (2023). Labor Force Demographics and Corporate Innovation. Review of Financial Studies, 36, 2797–2838.

  Firms in younger labor markets produce more innovation. We establish this by instrumenting the current labor force with historical births in each local labor market in the United States. Analyses of firms and inventors allow us to rule out unobservable heterogeneity across local labor markets and firms, life cycles, and other effects. Corporate innovation in younger labor markets reflects the innovative characteristics of younger labor forces, and its market value is higher. Younger workers as a group, not merely inventors by themselves, produce more innovation for firms through the labor force channel rather than through a financing or consumption channel.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

  View on hdl.handle.net
• Easley, D., Goldstein, I., & O’Hara, M. (2023). Financial Market Ethics. Review of Financial Studies, 36, 534–570.

  We develop a model of psychological-games-played-on-a-network to demonstrate a role for endogenously determined, rationally chosen ethics. Our analysis produces sharp results about contagion of nonethical or ethical behavior and the possible equilibrium configurations of each type of behavior. We find, and quantify, critical densities for clusters of each type of behavior that determine everything about contagion. We introduce society as a third player to investigate ethical failures as externalities. We use these results to show how regulations and network structure can affect whether clusters of ethical behavior can survive and how large they can be in a financial market setting.

  View on hdl.handle.net
• Eisfeldt, A. L., Herskovic, B., Koijen, R., Rajan, S., & Siriwardane, E. (2023). OTC Intermediaries. Review of Financial Studies, 36, 615–677.

  We study the effect of dealer exit on prices and quantities in a model of an over-the-counter market featuring a core-periphery network with bilateral trading costs. The model is calibrated using regulatory data on the entire U.S. credit default swap (CDS) market between 2010 and 2013. Prices depend crucially on the risk-bearing capacity of core dealers, yet unlike standard models featuring a dealer sector, we allow for heterogeneity in dealer risk-bearing capacity. This heterogeneity is quantitatively important. Depending on how well dealers share risk, the exit of a single dealer can cause credit spreads to rise by 8to 24.

  View on hdl.handle.net
• FichLe, E. M., Harford, J., & Tran, A. L. (2023). Disloyal Managers and Shareholders’ Wealth. Review of Financial Studies, 36, 1837–1888.

  A duty of loyalty prohibits fiduciaries from appropriating business opportunities from their companies. Starting in 2000, Delaware, followed by several other states, allowed boards to waive their duty. We show that public firms covered by waiver laws invest less in R&D, produce fewer and less valuable patents, and exhibit abnormally high inventor departures. Remaining innovation activities contribute less to firm value, a fact confirmed by the market reaction when firms reveal their curtailed internal growth opportunities by announcing acquisitions. Consistent with the laws’ intent to provide contracting flexibility to emerging firms, we find evidence of positive impacts for small firms.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

  View on hdl.handle.net
• Garcia-Macia, D., & Villacorta, A. (2023). Macroprudential Policy with Liquidity Panics. Review of Financial Studies, 36, 2046–2090.

  We study the optimality of macroprudential policies in an environment where banks provide liquidity to firms. Informational frictions between banks can cause interbank market freezes, prompting firms to accumulate their own liquid assets. Liquidity hoarding by firms in turn reduces the demand for bank loans and bank profitability, makes interbank market freezes even more likely, and may ultimately trigger a self-fulfilling bad equilibrium. Such “liquidity panics” provide an additional rationale for liquidity requirements on banks, which alleviate frictions in the banking sector and, paradoxically, can increase aggregate investment. Instead, policies encouraging bank lending can have the opposite effect.

  View on hdl.handle.net
• Gerken, W. C., Goldstein, I., & Painter, M. O. (2023). The Value of Differing Points of View: Evidence from Financial Analysts’ Geographic Diversity. Review of Financial Studies, 36, 409–449.

  Using satellite imagery of retail firms’ parking lots to measure time-varying local firm-specific performance, we document that analysts incorporate local information into their forecasts. Analysts rely more on local signals when less firm-wide information is available. This incorporation of noisy local firm information has firm-level implications. Examining across industries, we find causal evidence that geographic concentration of analysts increases consensus forecast errors and decreases firm liquidity. These effects are stronger for harder-to-value stocks. The market values geographic firm information, as the abnormal return around forecast revisions is higher for analysts who cover a firm from a unique location.

  View on hdl.handle.net
• Glebkin, S., Goldstein, I., Shen, J., & Yueshen, B. Z. (2023). Simultaneous Multilateral Search. Review of Financial Studies, 36, 571–614.

  This paper studies simultaneous multilateral search (SMS) in over-the-counter markets: When searching, a customer simultaneously contacts several dealers and trades with the one offering the best quote. Higher search intensity (how often one can search) improves welfare, but higher search capacity (how many dealers one can contact) might be harmful. When the market is in distress, customers might inefficiently favor bilateral bargaining (BB) over SMS. Such a preference for BB speaks to the sluggish adoption of SMS trading, like request-for-quote protocols, in over-the-counter markets. Furthermore, a market-wide shift to SMS may not be socially optimal.

  View on hdl.handle.net