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

• 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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• Bond, P., & Zeng, Y. (2022). Silence Is Safest Information Disclosure When the Audience’s Preferences Are Uncertain. Journal of Financial Economics, 145, 178–193.

  We examine voluntary disclosure decisions when firms are uncertain about audience preferences and are risk averse. In contrast to classic “unraveling” results, some firms remain silent in equilibrium. Silence is safer than disclosure; silence reduces the sensitivity of a firm’s payoff to audience preferences. Increases in firm (audience) risk-aversion reduce (increase) disclosure. Our model explains why some firms do not disclose earnings breakdowns, executive compensation, or Environmental, Social, and Governance (ESG) performance when they face diverse audiences, and why they disclose less under regulatory rules mandating that disclosure be entirely public.

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• Boyarchenko, N., Kovner, A., & Shachar, O. (2022). It’s What You Say and What You Buy a Holistic Evaluation of the Corporate Credit Facilities. Journal of Financial Economics, 144, 695–731.

  We evaluate the impact of the Federal Reserve corporate credit facilities (PMCCF and SMCCF) on corporate bond markets. Conditions in primary markets improve once the facilities are announced, particularly for issuers that need to refinance before 2022. Issuance accelerates before spreads normalize. The secondary market points to a causal role for the facilities, with a differential impact on eligible issues and a significant effect of direct bond purchases, but less so for purchases through ETFs. We find evidence that dealers link the primary and secondary market recovery, with facilities affecting dealer willing to underwrite issuances and intermediate in secondary markets.

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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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• Choi, J., Kronlund, M., & Oh, J. Y. J. (2022). Sitting Bucks Stale Pricing in Fixed Income Funds. Journal of Financial Economics, 145, 296–317.

  We find evidence of widespread stale pricing in bond mutual funds and the resulting risks of dilution and fragility. A principal driver of this phenomenon is the high illiquidity of funds’ holdings, which makes accurate pricing difficult and provides funds with greater discretion over valuation. Consequently, net asset values (NAVs) are extremely stale and fund returns are predictable over several days and weeks, particularly during market crises. Opportunistic traders withdraw capital from overvalued funds, exacerbating the risk of fund runs, while buy-and-hold investors face annual dilution of around $1.2 billion. Our results highlight adverse consequences of insufficient fair valuation practices that remain pervasive even after corrective regulations that followed the 2003 market-timing scandal.

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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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