Research

Draft

Summary:

• We use COVID-period migration to measure the shift in location preferences induced by the pandemic and the shift to remote work

• Market participants believe that the shift in preferences poses downside risk to the future of some municipal economies 

• Structural model estimates indicate that the 11.7 basis point municipal yield spread increase in the hardest hit areas likely corresponds to a more than 2% reduction in the present value of municipal cash flows. 

• Evidence highlights the importance of the shift to remote work in explaining these patterns.

Presentations: Remote Work Conference at Stanford (scheduled), FIFI @ S. Carolina (scheduled), AEA, FCMG 

Dynamic relationship between COVID-era migration and municipal bond spreads (Poisson):

Draft

Summary:

• We find the flow of employees between a pair of firms sharply drops by around 20-30% when the firms start to share a director on their boards. 

• The drop in flows is more severe for high-skill workers and  among firm pairs that are labor and product market competitors

Presentations: Cavalcade (scheduled), Euro. Winter Finance Summit (scheduled), Owners as Strategists, NFA, Endless Summer, EFA, Northeastern Finance Conf., CSFN Conf. on Governance and Sustainability, Bretton Woods Ski Conf., MFA, Santiago Finance Workshop, LFG @ Chicago Fed, Conf. on Empirical Legal Studies @UChicago, Dolomites Summer Finance, Erasmus Corp. Gov., Michigan State, Tennessee, Georgia Tech, Vanderbilt

Coverage: Columbia Law School Blog, ProMarket 

Relative flow of employees between a pair of firms around initiation of board overlap (Poisson):

Draft coming soon

Summary:

• We study the set of trading heuristics identified and discussed in the top 3 finance journals since 1950

• In our sample of individual investors, around one-third of identified heuristics are actually used less often than would be expected by random trading.

• Trades associated with greater usage of heuristics exhibit significantly worse returns

• Heuristic usage tends to be higher among older and more experienced investors, when investors are placing larger trades, and during periods of low market returns.

Presentations: UCONN finance conference (scheduled), Boulder Summer Conference (scheduled)

Relationship Between Heuristic Usage & 12mo Returns for Different Categories of Heuristics:

Links to paper: SSRN, Published Version

Summary:

• We analyze the role of financial markets in shaping the incentives of government agencies using a unique empirical setting: the weather derivatives market. 

• We find that the National Weather Service (NWS) measures the temperature more accurately at a location after the CME introduces a contract that settles based on the temperature measured at that weather station

Improvement in NWS temperature measurement error rate post-CME contract introduction:

Links to paper: SSRN, Published Version, Internet Appendix

Summary:

• I examine the effect of financial sector stress on risk sharing in a novel setting: the CME’s weather derivatives market. The results provide causal evidence of the effect of financial sector stress on the pricing of exchange-traded financial contracts and risk sharing in the economy.

Collapse of Monthly Temperature Futures Market Brought on by the Crisis:

Links to paper: SSRN, Published Version, Internet Appendix

Summary:

• We document significant persistence in the market timing performance of active individual investors, suggesting some investors are skilled at timing. 

Performance of a trading strategy based on the differential flows of past successful and unsuccessful market timers:

Links to paper: SSRN, RAPS, Online Appendix

Summary:

• We find that investment consultants (who advise institutional investors) frequently shortlist funds using threshold screens clustered at cognitive reference numbers (e.g., $500MM AUM, 0% excess returns) and the clustering of screens affects fund outcomes.

Investment consultant screen frequency and fund elimination probability by fund AUM:

Links to paper: SSRN, RCFS, Internet Appendix

Summary:

• We find firms’ financial resources play an important role in mitigating the spread of COVID-19 using data on nursing homes. Further, increases in Medicaid reimbursement rates led to relatively better outcomes at facilities more reliant on Medicaid.​  

Estimated Impact of Medicaid Reimbursement Expansion on COVID-19 cases:

Links to Paper: SSRN, Management Science

Summary:

• We find that under risk-insensitive loan pricing – a feature present in many government programs – marginal credit quality borrowers are less likely to receive credit in the SBA disaster loan program. We model the loan decision of a government lender and show how access to credit varies with the loan program's subsidy and degree of risk-sensitive pricing.

Relationship between the minority share of applicant county and SBA disaster loan denial rate:

Links to Paper: SSRN, JFQA

Summary:

• We provide an initial assessment of how migration patterns have changed during the pandemic. Using proprietary moving data, we find high income movers are moving out of large cities and are moving less for job-related reasons and more for non-work related reasons. Areas with greater inflows of high income households during the pandemic also experienced greater economic growth.

Media Coverage (link)

Proportional change in interstate migration following COVID-19 outbreak by origin (top) and destination (bottom) 

Data

Links to paper: SSRN, JFQA, Internet Appendix

Summary:

• We classify firms’ financial constraints using a random forest model. We create two versions of our measures: a "Full" model that uses many predictors and an "Exogenous" model using a small set of arguably exogenous predictors.  We find institutional ownership is negatively associated with equity-related constraints, while retail investors exhibit a preference for equity-focused constrained firms.  Further, we find the equity issuance and investment of equity-constrained firms increase in periods of high investor sentiment.

Extended constraint measure coverage provided by our measure:

Institutional investors hold more of the least equity-constrained firms

Robinhood investors tend to favor equity constrained stocks

Links to paper: SSRN, JFQA

Summary:

• We study individual labor market decisions during the house price run-up of the early 2000s using the career paths of nearly 7 million workers. We find severe negative long-run outcomes for individuals that enter realty in areas with higher non-fundamental house price growth.

Relative occupational wage growth for Bubble MSA entrants into realty during 2000s boom: