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

• Adelino, M., Ferreira, M. A., Giannetti, M., & Pires, P. (2023). Trade Credit and the Transmission of Unconventional Monetary Policy. Review of Financial Studies, 36, 775–813.

  We show that production networks are important for the transmission of unconventional monetary policy. Firms with bonds eligible for purchase under the European Central Bank’s Corporate Sector Purchase Program act as financial intermediaries by extending additional trade credit to their customers. The increase in trade credit is pronounced from core countries to periphery countries and for financially constrained customers. Customers then increase investment and employment in response to the increased trade financing, whereas suppliers expand their customer base, contributing to upstream industry concentration. Our findings suggest that trade credit redistributes the effects of monetary policy across regions and firms.

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• Cornaggia, J., Cornaggia, K. J., & Israelsen, R. (2023). Rating Agency Fees: Pay to Play in Public Finance? Review of Financial Studies, 36, 2004–2045.

  We examine the relationship between credit rating levels and rating agency fees in a public finance market in which rating agencies earn lower fees and face higher disclosure requirements relative to corporate bond and structured finance markets. Controlling for variation in the complexity of credit analysis at the issue level, we find evidence that rating agency conflicts of interest distort credit ratings in the municipal bond market. Unexpectedly expensive ratings are more likely downgraded, and inexpensive ratings are more likely upgraded. The relationship between credit ratings and rating agency fees is driven by issuers who lose access to AAA insurance.

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• Krishnamurthy, A., & Li, W. (2023). The Demand for Money, Near-Money, and Treasury Bonds. Review of Financial Studies, 36, 2091–2130.

  Bank-created money, shadow-bank money, and Treasury bonds all satisfy investors’ demand for liquidity. We measure the quantity of these forms of liquidity and their corresponding liquidity premium in a sample from 1934 to 2016, estimating the substitutability of these assets and the liquidity per unit delivered by each asset. Treasuries and bank transaction deposits are imperfect substitutes, in contrast to perfect substitutes found by Nagel (2016). Bank and nonbank non-transaction deposits are closer substitutes for Treasuries. Our empirical results inform theories of the monetary transmission mechanism running through shifts in asset supplies and models of the coexistence of the shadow banking and regulated banking system.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.

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• Backus, D. K., Chernov, M., Zin, S. E., & Zviadadze, I. (2022). Monetary Policy Risk: Rules versus Discretion. Review of Financial Studies, 35, 2308–2344.

  Long-run asset pricing restrictions in a macro term structure model identify discretionary monetary policy separately from a policy rule. We find that policy discretion is an important contributor to aggregate risk. In addition, discretionary easing coincides with good news about the macroeconomy in the form of lower inflation, higher output growth, and lower risk premiums on short-term nominal bonds. However, it also coincides with bad news about long-term financial conditions in the form of higher risk premiums on long-term nominal bonds. Shocks to the rule correlate with changes in the yield curve’s level. Shocks to discretion correlate with changes in its slope.

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• Baron, M., & Muir, T. (2022). Intermediaries and Asset Prices: International Evidence since 1870. Review of Financial Studies, 35, 2144–2189.

  We study data on commercial banks and securities firms across multiple countries since 1870. Balance sheet expansion of leveraged intermediaries negatively predicts returns of stocks, bonds, currencies, and housing. The predictability is stronger at shorter horizons, is robust to macroeconomic controls, and holds outside distress periods, in contrast to models featuring nonlinearities during distress. Intermediaries in global financial centers predict international equity returns. A new data set on individual stock holdings of Japanese intermediaries since 1955 shows intermediaries affect returns of stocks directly held. Our results suggest a strong universal link between intermediaries and asset returns distinct from macroeconomic channels.

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• Bond, P., & García, D. (2022). The Equilibrium Consequences of Indexing. Review of Financial Studies, 35, 3175–3230.

  We develop a benchmark model to study the equilibrium consequences of indexing in a standard rational expectations setting. Individuals incur costs to participate in financial markets, and these costs are lower for individuals who restrict themselves to indexing. A decline in indexing costs directly increases the prevalence of indexing, thereby reducing the price efficiency of the index and augmenting relative price efficiency. In equilibrium, these changes in price efficiency in turn further increase indexing, and raise the welfare of uninformed traders. For well-informed traders, the share of trading gains stemming from market timing increases relative to stock selection trades.

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• Buraschi, A., Piatti, I., & Whelan, P. (2022). Subjective Bond Returns and Belief Aggregation. Review of Financial Studies, 35, 3710–3741.

  This paper proposes an aggregation scheme of subjective bond return expectations based on the historical accuracy of professional interest rate forecasters. We use disaggregated survey data on bond returns and document large disagreement in the cross-sectional distribution and persistence in forecast accuracy. Our aggregate subjective belief proxy outperforms equal weighting schemes, and its dynamics are significantly different from statistical forecasting models. With this measure in hand, we study the relationship between quantities of risk and subjective expectations of excess returns and demonstrate a strong link between the two, even if such a relationship is difficult to detect using realized returns.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.

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• Cornaggia, K., Hund, J., Nguyen, G., & Ye, Z. (2022). Opioid Crisis Effects on Municipal Finance. Review of Financial Studies, 35, 2019–2066.

  We investigate the effects of opioid abuse on municipal finance. We employ instrumental variables, border discontinuity difference-in-differences regressions, and coarsened exact matching to identify consistent causal effects, while controlling for variation in economic conditions and demographics. Opioid abuse lowers credit ratings, increases new offer yields, and reduces bond issuance. Reversal of these effects following effective antiopioid legislation further supports causality. Differential effects due to investor heterogeneity suggest that opioid abuse affects municipal finance through a capital supply channel. Overall, we conclude that local opioid abuse impedes municipalities’ access to capital and thus hurts their ability to provide public services and infrastructure.

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• Dannhauser, C. D., & Hoseinzade, S. (2022). The Unintended Consequences of Corporate Bond ETFs: Evidence from the Taper Tantrum. Review of Financial Studies, 35, 51–90.

  This paper examines whether ETFs are a unique source of corporate bond fragility. Relative to mutual funds, ETFs cater to high-liquidity-demand investors, facilitate positive feedback strategies, and transmit outflows to corporate bonds via near-proportional trading. Comparing yield spread changes of bonds from the same issuer, we show that ETFs create flow-induced pressure during the Taper Tantrum, a period of market turmoil. Redemptions used to maintain the relative price efficiency of the largest and most liquid ETFs lead to significantly higher yield spreads for 4 months before reverting. The pattern indicates ETFs amplify the effects of negative fundamental shocks.

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• De Marco, F., Macchiavelli, M., & Valchev, R. (2022). Beyond Home Bias: International Portfolio Holdings and Information Heterogeneity. Review of Financial Studies, 35, 4387–4422.

  We show that international portfolios reflect the underlying heterogeneity in investors’ beliefs. Using data on the foreign sovereign debt holdings of European banks matched with their forecasts on future bond yields, we find that expecting higher returns and having more accurate forecasts are associated with larger bond holdings. Crucially, the elasticity of portfolio holdings to expected returns is increasing in the precision of the forecast, implying that investors optimally exploit comparative advantages in information production. We rationalize the results in a model in which partial information specialization arises endogenously by introducing a degree of unlearnable uncertainty about asset payoffs.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.

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