The Impact of Smart Money on Retail Investors in Peer-to-Peer Marketplaces
with Allen Sirolly
Abstract: We use novel data from LendingClub to examine performance differences between retail and institutional investors in crowd-sourced lending and its unintended consequences on retail investors. Our study distinguishes through the use of novel, self-collected data which facilitates the identification of loans that are rejected by institutional investors as well as how fast listed loans are funded.
The Effects of Labor Market Frictions on Corporate Debt
with Yasser Boualam
Abstract: Since Modigliani and Miller 1958 , economists have puzzled over why capital structure decisions are vital in the real world. Over the years, corporate taxes and bankruptcy costs have emerged as generally agreed upon reasons for why capital structure matters. The effects of bankruptcy on workers have been considered as a major force behind capital structure decisions. After all, wages are a large share of production factors and workers are risk averse. Empirically, a strong link has been made between capital structure and wages. The leading theory of unemployment asserts the role of (search) frictions in firm's hiring of workers. Frictional matching of workers and firms happens both out of unemployment and from job-to-job. We evaluate the impact of these channels on firm debt under various wage setting conditions and productivity processes.
with Kory Kantenga
Abstract: We measure the roles of the permanent component of worker and firm productivities, complementarities between them, search frictions, and equilibrium sorting in driving German wage dispersion. We do this using a standard assortative matching model with on-the-job search. The model is identified and estimated using matched employer-employee data on wages and labor market transitions without imposing parametric restrictions on the production technology. The model's fit to the wage data is comparable to prominent wage regressions with additive worker and firm fixed effects that use many more degrees of freedom. Moreover, we propose a direct test that rejects the restrictions underlying the additive specification. We use the model to decompose the rise in German wage dispersion between the 1990s and the 2000s. We find that changes in the production function and the induced changes in equilibrium sorting patterns account for virtually all the rise in the observed wage dispersion. Search frictions are an important determinant of the level of wage dispersion but have had little impact on its rise over time.
with Dongho Song and Amir Yaron
Abstract: We find strong evidence of cyclical variation in the stock market's response to macroeconomic news announcement (MNA) surprises. The sensitivity of stock prices to MNA surprises starts to increase as the economy enters a recession and peaks soon after the recession. Peak sensitivity is about twice the average sensitivity. The sensitivity becomes below average at the end of the expansion. We then show that the short-term interest rate futures behave in the opposite way. When stock prices are more sensitive to MNA surprises, interest rates are less so and vice versa. This is consistent with anecdotal evidence that the direction and shape of the market's response reflect the evolution of beliefs about monetary policy. We utilize the standard cash flow, risk-free rate, and risk premium news decomposition of returns and show that in fact, the news about future cash flows and risk-free rates are the primary drivers of the cyclical variations. Finally, we introduce a dividend growth model to illustrate that the risk of an interest rate hike can entirely mitigate the positive cash flow effects on returns.
with Marcus Hagedorn and Iourii Manovskii
with Tim Bollerslev and George Tauchen
Journal of Econometrics, 2008
with Bryan D. Spiegelberg, June dela Cruz, and John D. York
Journal of Biological Chemistry, 2005