Quote Competition in Corporate Bonds
Version of Record online: 5/22/2026 | DOI: 10.1111/jofi.70048
TERRENCE HENDERSHOTT, DAN LI, DMITRY LIVDAN, NORMAN SCHÜRHOFF, KUMAR VENKATARAMAN
Dealer quotes in corporate bonds, though indicative, lower trading costs and increase trading volume. Dealers offering higher quality quotes attract more order flow and execute trades at favorable prices. Dealers advertise quotes to manage their inventories and attract orders from nonrelationship clients. However, quote competition is imperfect. The best quotes often fail to attract orders, and trade‐throughs are common. Nevertheless, quote competition is important as clients exploit quotes from other dealers in negotiations, forcing dealers with lower quality quotes to offer price improvements. Quoting is not a zero‐sum game, as more active bond‐level quoting leads to more bond‐level trading.
Version of Record online: 5/22/2026 | DOI: 10.1111/jofi.70054
RODRIGO BARBONE GONZALEZ, DMITRY KHAMETSHIN, JOSÉ‐LUIS PEYDRÓ, ANDREA POLO
We show that FX interventions can be effective, particularly in attenuating global financial spillovers. We exploit global financial shocks and Brazilian central bank interventions in FX derivatives using three matched administrative registers: bank credit (to firms), foreign credit to banks, and employer‐employees. After the U.S. Taper Tantrum (followed by emerging markets' FX turbulence), Brazilian banks with more foreign debt cut credit supply, reducing firm‐level employment. A subsequent large policy intervention supplying derivatives against FX risks —
Investing with Purpose: Evidence from Private Foundations
Version of Record online: 5/20/2026 | DOI: 10.1111/jofi.70055
MATTEO BINFARÈ, KYLE E. ZIMMERSCHIED
We study the asset allocation and investment performance of U.S. private foundations that support the charitable sector. Large foundations generated positive risk‐adjusted returns before 2008, driven by early access to private equity and venture capital funds, but have underperformed since. The median foundation underperforms by more than 100 bps. Foundations with concentrated stock holdings achieve higher returns but assume more risk. Due to the constraints imposed by the 5% minimum spending rule and accommodating monetary policy, foundations increase risk‐taking and reach for yield. Over time, a conservative asset allocation decreases real wealth, reducing charitable giving.
Why Have CEO Pay Levels Become Less Diverse?
Version of Record online: 5/19/2026 | DOI: 10.1111/jofi.70050
TORSTEN JOCHEM, GAIZKA ORMAZABAL, ANJANA RAJAMANI
This paper documents a new stylized fact: the cross‐sectional variation in CEO pay levels has declined precipitously in recent years. We offer one explanation for this decline, namely, firms are increasingly benchmarking CEO compensation to industry peers closest in size, thereby creating pay clusters. Our empirical tests provide support for this explanation and suggest that the rise of industry‐size benchmarking is driven by three institutional factors: the mandatory disclosure of compensation peer groups, proxy advisory influence, and say‐on‐pay regulation. Our findings highlight a consequence of adopting a one‐size‐fits‐all standard in the pay‐setting process.
Bank Competition Amid Digital Disruption: Implications for Financial Inclusion
Version of Record online: 5/17/2026 | DOI: 10.1111/jofi.70051
ERICA XUEWEI JIANG, GLORIA YANG YU, JINYUAN ZHANG
We examine how digital disruption affects bank competition using the staggered rollout of 3G mobile networks. 3G expansion increased mobile banking adoption among tech‐savvy households, reducing branch networks—especially in younger counties. Banks' strategies diverged: Less branch‐reliant banks closed branches and competed on price, while more branch‐reliant banks maintained branches but raised spreads. A structural model shows that perceived digital service improvements among younger consumers drove these shifts, reducing welfare for older savers. Counterfactuals demonstrate that subsidizing adoption for older savers can cost‐effectively reduce these disparities, facilitating a smoother digital transition.
Version of Record online: 5/15/2026 | DOI: 10.1111/jofi.70044
SVETLANA BRYZGALOVA, JIANTAO HUANG, CHRISTIAN JULLIARD
Using information in returns, we identify the stochastic process of consumption. We find that aggregate consumption reacts over multiple quarters to innovations spanned by financial markets. This persistent component accounts for over a quarter of consumption variation. These shocks command a large and significant risk premium, driving a large share of stocks' and a small yet significant fraction of bonds' time‐series variation. Nevertheless, we find no support for stochastic volatility of consumption driving time‐varying risk premia. Finally, an otherwise standard recursive utility model based on our estimated process explains equity premium and risk‐free rate puzzles with low‐risk aversion.
The Drivers and Implications of Retail Margin Trading
Version of Record online: 5/15/2026 | DOI: 10.1111/jofi.70049
JIANGZE BIAN, ZHI DA, ZHIGUO HE, DONG LOU, KELLY SHUE, HAO ZHOU
Using granular data covering both regulated (brokerage‐financed) and unregulated (shadow‐financed) margin accounts in China, we provide novel evidence on retail investors' margin trading behavior and its price implications. We first show that retail investors' decisions to lever up in stock trading despite the hefty borrowing cost is related to their lottery preferences. We then show that margin borrowing affects investors' trading behavior—investors are more likely to liquidate their holdings as they approach margin calls. Finally, we show that margin‐induced trading aggregates to affect asset prices and contributes to shock spillovers across stocks (e.g., from lottery stocks to nonlottery stocks).
Risk‐Free Rates and Convenience Yields around the World
Version of Record online: 5/11/2026 | DOI: 10.1111/jofi.70045
William Diamond, Peter Van Tassel
We infer risk‐free rates from index option prices to estimate safe asset convenience yields in 10 G11 currencies. Countries' convenience yields increase with the level of their interest rates, with U.S. convenience yields fifth largest. During financial crises, convenience yields grow, but the difference between United States and foreign convenience yields generally does not. Covered interest parity (CIP) deviations using our option‐implied rates are a similar size between the United States and each other country. A model in which convenience yields depend on domestic financial intermediaries, but CIP deviations reflect the funding costs of international arbitrageurs financed with dollar‐denominated debt, explains these results.
The Equilibrium Effects of Eviction Policies
Version of Record online: 5/11/2026 | DOI: 10.1111/jofi.70046
BOAZ ABRAMSON
I propose a dynamic equilibrium model of rental markets that endogenously gives rise to defaults on rents and evictions. In the model, eviction protections make it harder to evict delinquent renters, but higher default costs to landlords increase equilibrium rents. I quantify the model using micro data on evictions, rents, and homelessness. I find that stronger eviction protections exacerbate housing insecurity and lower welfare. The key empirical driver of this result is the persistent nature of risk underlying rent delinquencies. Rental assistance reduces housing insecurity and improves welfare because it lowers the likelihood that renters default ex ante.
Version of Record online: 5/8/2026 | DOI: 10.1111/jofi.70042
JOSEPH ENGELBERG, JORGE GUZMAN, RUNJING LU, WILLIAM MULLINS
Republicans start more firms than Democrats. In a sample of 40 million party‐identified Americans between 2005 and 2017, we find that 5.5% of Republicans and 3.7% of Democrats become entrepreneurs. This partisan entrepreneurship gap is time‐varying—Republicans increase their relative entrepreneurship during Republican administrations and decrease it during Democratic administrations, amounting to a partisan reallocation of 170,000 new firms over our 13‐year sample. We find sharp changes in partisan entrepreneurship around the elections of President Obama and President Trump, with the strongest effects among the most politically active partisans: those that donate and vote.
Learning in the Limit: Income Inference from Credit Extensions
Version of Record online: 5/7/2026 | DOI: 10.1111/jofi.70040
XIAO YIN
Combining a randomized controlled trial with administrative and survey data, this paper shows that credit limit extensions significantly increase total spending and income expectations. By controlling for changes in personal income expectations, the spending response to credit limit extensions weakens by approximately 30%. For financially unconstrained consumers, expectation changes account for around two‐thirds of the spending responses to limit extensions. These findings are consistent with consumers inferring future income from credit supply.