What is the Consumption-CAPM missing? An Information-Theoretic Framework for the Analysis of Asset Pricing Models
We study a broad class of asset pricing models in which the stochastic discount factor (SDF) can be factorized into an observable component and a...
Investment banking careers: An equilibrium theory of overpaid jobs
We develop an optimal dynamic contracting theory of overpay for jobs in which moral hazard is a key concern, such as investment banking. Overpaying...
The Wall Street Walk when Blockholders Compete for Flows
An important recent theoretical literature argues that the threat of exit can represent an effective form of governance when the blockholder is a...
Making Europe Safer
Open letter by the international Euro-nomics academic group (www.euro-nomics.com), composed of Markus Brunnermeier, Luis Garicano, Philip R. Lane...
Minsky's Financial Instability Hypothesis and the Leverage Cycle
Busts after periods of prolonged prosperity have been found to be catastrophic. Financial institutions increase their leverage and shift their...
Delegated Activism and Disclosure
Mutual funds hold large blocks of shares in many major corporations. Practitioners and regulators alike have been concerned that mutual funds use...
CDS Auctions
We analyze credit default swap settlement auctions theoretically and evaluate them empirically. In our theoretical analysis, we show that the current...
Repo Runs
This paper develops a dynamic model of financial institutions that borrow short-term and invest into long-term marketable assets. Because such...
Anticipated and Repeated Shocks in Liquid Markets
We show that Treasury security prices in the secondary market decrease significantly before subsequent auctions and recover shortly after. This price...
Liquidity Hoarding
Banks hold liquid and illiquid assets. An illiquid bank that receives a liquidity shock sells assets to liquid banks in exchange for cash. We...
Complicated Firms
We exploit a novel setting in which the same piece of information affects two sets of firms: one set of firms requires straightforward processing to...
Strategic Investment, Industry Concentration, and the Cross Section of Returns
This paper provides an alternative real options framework to assess how firms' strategic interaction under imperfect competition affects the...
Financing Constraints, Firm Dynamics, Export Decisions, and Aggregate productivity
We develop a dynamic industry model where financing frictions affect the entry decisions of new firms in the home market, as well as the riskiness of...
Short Run Bond Risk Premia
In the short-run, bond risk premia exhibit pronounced spikes around major economic and financial crises. In contrast, long-term bond risk premia...