A Fast Literature Search Engine based on top-quality journals, by Dr. Mingze Gao.
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Results 69 resources
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We analyze how regulatory constraints on household leverage—in the form of loan‐to‐income and loan‐to‐value limits—affect residential mortgage credit and house prices as well as other asset classes not directly targeted by the limits. Loan‐level data suggest that mortgage credit is reallocated from low‐ to high‐income borrowers and from urban to rural counties. This reallocation weakens the feedback between credit and house prices and slows house price growth in “hot” housing markets. Banks whose lending to households is more affected by the regulatory constraint drive this reallocation, but also substitute their risk‐taking into holdings of securities and corporate credit.
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We develop a stationary model of the aggregate stock market featuring both dividend‐paying and no‐dividend stocks within a familiar, parsimonious consumption‐based equilibrium framework. We find that such a simple feature leads to profound implications supporting several stock market empirical regularities that leading consumption‐based asset pricing models have difficulty reconciling. Namely, the presence of no‐dividend stocks in the stock market leads to a lower correlation between stock market returns and the aggregate consumption growth rate, a nonmonotonic and even negative relation between the stock market risk premium and its volatility, and a downward‐sloping term structure of equity risk premia.
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We study secured lending contracts using a proprietary, loan‐level database of bilateral repurchase agreements containing groups of simultaneous loans backed by multiple tranches within a securitization. We show that lower‐quality loans (i.e., loans backed by lower‐rated collateral) have higher margins and spreads. We calibrate a model using collateral asset prices and find that lower‐quality loans are riskier despite the higher margins, yet cheaper for the borrower. This finding is consistent with a combination of lender optimism and reaching for yield. We also show that lower‐quality loans have longer maturity, consistent with models of rollover concerns with asymmetric information.
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We study the influence of financial innovation by fintech brokerages on individual investors’ trading and stock prices. Using data from Robinhood, we find that Robinhood investors engage in more attention‐induced trading than other retail investors. For example, Robinhood outages disproportionately reduce trading in high‐attention stocks. While this evidence is consistent with Robinhood attracting relatively inexperienced investors, we show that it is also driven in part by the app's unique features. Consistent with models of attention‐induced trading, intense buying by Robinhood users forecasts negative returns. Average 20‐day abnormal returns are −4.7% for the top stocks purchased each day.
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We develop a flexible and bias‐adjusted approach to jointly examine skill, scalability, and value‐added across individual funds. We find that skill and scalability (i) vary substantially across funds, and (ii) are strongly related, as great investment ideas are difficult to scale up. The combination of skill and scalability produces a value‐added that (i) is positive for the majority of funds, and (ii) approaches its optimal level after an adjustment period (possibly due to investor learning). These results are consistent with theoretical models in which funds are skilled and able to extract economic rents from capital markets.
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We analyze the effect of import competition on household balance sheets using individual data on consumer finances. We exploit variation in local industry exposure to foreign competition to study households' response to the income shock triggered by China's accession to the World Trade Organization. We show that household debt increases significantly in regions where manufacturing industries are more exposed to import competition. The effects are driven by home equity extraction and are concentrated in areas with strong house price growth. Our results highlight the role played by mortgage markets in absorbing displacement shocks triggered by globalization.
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Using loan‐level data from Germany, we investigate how the introduction of model‐based capital regulation affected banks' ability to absorb shocks. The objective of this regulation was to enhance financial stability by making capital requirements responsive to asset risk. Our evidence suggests that banks “optimized” model‐based regulation to lower their capital requirements. Banks systematically underreported risk, with underreporting more pronounced for banks with higher gains from it. Moreover, large banks benefitted from the regulation at the expense of smaller banks. Overall, our results suggest that sophisticated rules may have undesired effects if strategic misbehavior is difficult to detect.
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We examine the effect of pay transparency on the gender pay gap and firm outcomes. Using a 2006 legislation change in Denmark that requires firms to provide gender‐disaggregated wage statistics, detailed employee‐employer administrative data, and difference‐in‐differences and difference‐in‐discontinuities designs, we find that the law reduces the gender pay gap, primarily by slowing wage growth for male employees. The gender pay gap declines by 2 percentage points, or 13% relative to the prelegislation mean. Despite the reduction of the overall wage bill, the wage transparency mandate does not affect firm profitability, likely because of the offsetting effect of reduced firm productivity.
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We model a market for a skill in short supply and high demand, where the presence of charlatans (professionals who sell a service they do not deliver on) is an equilibrium outcome. In the model, reducing the number of charlatans through regulation lowers consumer surplus because of the resulting reduction in competition among producers. Producers can benefit from this reduction, potentially explaining the regulation we observe. The effect on total surplus depends on the type of regulation. We derive the factors that drive the cross‐sectional variation in charlatans (regulation) across professions.
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Does automatic enrollment into a retirement plan increase financial distress due to increased borrowing outside the plan? We study a natural experiment created when the U.S. Army began automatically enrolling newly hired civilian employees into the Thrift Savings Plan. Four years after hire, automatic enrollmentincreases cumulative contributions to the plan by 4.1% of annual salary, but we find little evidence ofincreased financial distress. Automatic enrollment causes no significant change in credit scores, debt balances excluding auto debt and first mortgages, or adverse credit outcomes, with the possible exception of increasedfirst‐mortgage balances in foreclosure.