The Journal of Finance

High‐Frequency Trading around Large Institutional Orders

Published: 3/21/2019,  Volume: 74,  Issue: 3  |  DOI: 10.1111/jofi.12759  |  Cited by: 209

VINCENT VAN KERVEL, ALBERT J. MENKVELD

Liquidity suppliers lean against the wind. We analyze whether high‐frequency traders (HFTs) lean against large institutional orders that execute through a series of child orders. The alternative is HFTs trading with the wind, that is, in the same direction. We find that HFTs initially lean against these orders but eventually change direction and take positions in the same direction for the most informed institutional orders. Our empirical findings are consistent with investors trading strategically on their information. When deciding trade intensity, they seem to trade off higher speculative profits against higher risk of being detected and preyed on by HFTs.

Infrequent Rebalancing, Return Autocorrelation, and Seasonality

Published: 11/10/2016,  Volume: 71,  Issue: 6  |  DOI: 10.1111/jofi.12436  |  Cited by: 141

VINCENT BOGOUSSLAVSKY

A model of infrequent rebalancing can explain specific predictability patterns in the time series and cross‐section of stock returns. First, infrequent rebalancing produces return autocorrelations that are consistent with empirical evidence from intraday returns and new evidence from daily returns. Autocorrelations can switch sign and become positive at the rebalancing horizon. Second, the cross‐sectional variance in expected returns is larger when more traders rebalance. This effect generates seasonality in the cross‐section of stock returns, which can help explain available empirical evidence.

Liquidity Fluctuations in Over‐the‐Counter Markets

Published: 2/2022,  Volume: 77,  Issue: 2  |  DOI: 10.1111/jofi.13106  |  Cited by: 8

VINCENT MAURIN

This paper proposes a theory of excess price fluctuations in over‐the‐counter secondary markets. When heterogeneous assets trade under asymmetric information, a quality effect emerges: high liquidity lowers the quality of the pool of sellers and decreases future liquidity. Cyclical equilibria can arise even without fundamental shocks. In a cycle, investors speculate by bidding up the price of low‐quality assets, anticipating a high resale price at the peak. When this resale effect is strong, cycles disappear and multiple steady states coexist with different levels of liquidity. The model rationalizes empirical patterns for corporate bonds and housing in particular.

AN ECONOMETRIC STUDY OF EURODOLLAR BORROWING BY NEW YORK BANKS AND THE RATE OF INTEREST ON EURODOLLARS: COMMENT

Published: 9/1972,  Volume: 27,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1972.tb01325.x  |  Cited by: 0

Vincent G. Massaeo

PUBLIC FINANCING FOR SMALL CORPORATIONS*

Published: 3/1960,  Volume: 15,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1960.tb04844.x  |  Cited by: 0

Vincent M. Jolivet

Compensating Financial Experts

Published: 11/10/2016,  Volume: 71,  Issue: 6  |  DOI: 10.1111/jofi.12372  |  Cited by: 38

VINCENT GLODE, RICHARD LOWERY

We propose a labor market model in which financial firms compete for a scarce supply of workers who can be employed as either bankers or traders. While hiring bankers helps create a surplus that can be split between a firm and its trading counterparties, hiring traders helps the firm appropriate a greater share of that surplus away from its counterparties. Firms bid defensively for workers bound to become traders, who then earn more than bankers. As counterparties employ more traders, the benefit of employing bankers decreases. The model sheds light on the historical evolution of compensation in finance.

Liquidity, Volume, and Order Imbalance Volatility

Published: 6/5/2023,  Volume: 78,  Issue: 4  |  DOI: 10.1111/jofi.13248  |  Cited by: 44

VINCENT BOGOUSSLAVSKY, PIERRE COLLIN‐DUFRESNE

We examine the dynamics of liquidity using a comprehensive sample of U.S. stocks in the post‐decimalization period. Motivated by a continuous‐time inventory model, we compute a high‐frequency measure of order imbalance volatility to proxy for the inventory risk faced by liquidity providers. We show that high‐frequency order imbalance volatility is an important driver of liquidity and explains the often positive time‐series relation between spread and volume for large stocks, which seems to run counter to most theoretical models. Furthermore, order imbalance volatility is priced in the cross‐section of stock returns.

The Delisting Bias in CRSP's Nasdaq Data and Its Implications for the Size Effect

Published: 12/1999,  Volume: 54,  Issue: 6  |  DOI: 10.1111/0022-1082.00192  |  Cited by: 486

Tyler Shumway, Vincent A. Warther

We investigate the bias in CRSP's Nasdaq data due to missing returns for delisted stocks. We find that the missing returns are large and negative on average, and that delisted stocks experience a substantial decrease in liquidity. We estimate that using a corrected return of −55 percent for missing performance‐related delisting returns corrects the bias. We revisit previous work which finds a size effect among Nasdaq stocks. After correcting for the delisting bias, there is no evidence that there ever was a size effect on Nasdaq. Our results are inconsistent with most risk‐based explanations of the size effect.

Informed Trading Intensity

Published: 2/27/2024,  Volume: 79,  Issue: 2  |  DOI: 10.1111/jofi.13320  |  Cited by: 87

VINCENT BOGOUSSLAVSKY, VYACHESLAV FOS, DMITRIY MURAVYEV

We train a machine learning method on a class of informed trades to develop a new measure of informed trading, informed trading intensity (ITI). ITI increases before earnings, mergers and acquisitions, and news announcements, and has implications for return reversal and asset pricing. ITI is effective because it captures nonlinearities and interactions between informed trading, volume, and volatility. This data‐driven approach can shed light on the economics of informed trading, including impatient informed trading, commonality in informed trading, and models of informed trading. Overall, learning from informed trading data can generate an effective informed trading measure.

Dividends, Asymmetric Information, and Agency Conflicts: Evidence from a Comparison of the Dividend Policies of Japanese and U.S. Firms

Published: 6/1998,  Volume: 53,  Issue: 3  |  DOI: 10.1111/0022-1082.00038  |  Cited by: 234

Kathryn L. Dewenter, Vincent A. Warther

We compare dividend policies of U.S. and Japanese firms, partitioning the Japanese data into keiretsu, independent, and hybrid firms. We examine the correlation between dividend changes and stock returns, and the reluctance to change dividends. Results are consistent with the joint hypotheses that Japanese firms, particularly keiretsu‐member firms, face less information asymmetry and fewer agency conflicts than U.S. firms, and that information asymmetries and/or agency conflicts affect dividend policy. Japanese firms experience smaller stock price reactions to dividend omissions and initiations, they are less reluctant to omit and cut dividends, and their dividends are more responsive to earnings changes.

Financial Expertise as an Arms Race

Published: 9/12/2012,  Volume: 67,  Issue: 5  |  DOI: 10.1111/j.1540-6261.2012.01771.x  |  Cited by: 109

VINCENT GLODE, RICHARD C. GREEN, RICHARD LOWERY

We show that firms intermediating trade have incentives to overinvest in financial expertise. In our model, expertise improves firms’ ability to estimate value when trading a security. Expertise creates asymmetric information, which, under normal circumstances, works to the advantage of the expert as it deters opportunistic bargaining by counterparties. This advantage is neutralized in equilibrium, however, by offsetting investments by competitors. Moreover, when volatility rises the adverse selection created by expertise triggers breakdowns in liquidity, destroying gains to trade and thus the benefits that firms hope to gain through high levels of expertise.

Second Chance: Life with Less Student Debt

Published: 12/14/2025,  Volume: 81,  Issue: 1  |  DOI: 10.1111/jofi.70002  |  Cited by: 3

MARCO DI MAGGIO, ANKIT KALDA, VINCENT YAO

We exploit an episode of plausibly random debt discharge due to the loss of paperwork for thousands of defaulted borrowers to examine the effects of private student debt relief on borrower outcomes. We find that borrowers who receive debt relief (treated) experience declines in debt balances and delinquency rates on other accounts, and increases in mobility and income relative to those who bear the costs of default like wage garnishment and collections (control). Borrowers in both groups contribute to our findings through different mechanisms. While our estimates may not directly apply to blanket student loan forgiveness, they speak to the benefits of forgiveness in reducing the consequences of debt burden for distressed borrowers.

Johannes Stroebel: Winner of the 2023 Fischer Black Prize

Published: 9/2023,  Volume: 78,  Issue: 5  |  DOI: 10.1111/jofi.13269  |  Cited by: 0

STIJN VAN NIEUWERBURGH

LIQUIDITY PREFERENCE, INTEREST‐RATE RISK, AND THE TERM STRUCTURE OF INTEREST RATES*

Published: 9/1965,  Volume: 20,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1965.tb02924.x  |  Cited by: 0

James Van Horne

Rumors

Published: 7/15/2003,  Volume: 58,  Issue: 4  |  DOI: 10.1111/1540-6261.00575  |  Cited by: 194

Jos Van Bommel

A Kyle (1985) model with private information diffusion is used to examine the motivation to spread stock tips. An informed investor with limited investment capacity spreads imprecise rumors to an audience of followers. Followers trade on the advice and move the price. Due to the imprecision of the rumor, the price overshoots with positive probability. This gives the rumormonger the opportunity to trade twice: First when she receives information, then when she knows the price to be overshooting. In equilibrium, rumors are informative and both rumormongers and followers increase their profits at the expense of uninformed liquidity traders.

NEW LISTINGS AND THEIR PRICE BEHAVIOR

Published: 9/1970,  Volume: 25,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1970.tb00552.x  |  Cited by: 25

James C. Van Horne

THE EFFECT OF FHLB BOND OPERATIONS ON SAVINGS INFLOWS AT SAVINGS AND LOAN ASSOCIATIONS: COMMENT

Published: 3/1973,  Volume: 28,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1973.tb01361.x  |  Cited by: 7

James C. Van Horne

Good‐Specific Habit Formation and the Cross‐Section of Expected Returns

Published: 7/13/2016,  Volume: 71,  Issue: 4  |  DOI: 10.1111/jofi.12397  |  Cited by: 35

JULES H. VAN BINSBERGEN

I study asset prices in a general equilibrium framework in which agents form habits over individual varieties of goods rather than over an aggregate consumption bundle. Goods are produced by monopolistically competitive firms whose elasticities of demand depend on consumers' habit formation. Firms that produce goods with a high habit level relative to consumption have low demand elasticities, set high prices for their product, have low expected returns on their stock, and have low asset pricing betas and stock return volatilities. I find supportive evidence for these predictions in the data.

Flow‐Driven ESG Returns

Published: 10/7/2026,  Volume:
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  |  DOI: 10.1111/jofi.70083  |  Cited by: 0

PHILIPPE VAN DER BECK

I show that the recent returns to environmental, social, and governance (ESG) investing are strongly driven by price impact from flows toward ESG portfolios. Using data on trades, I estimate the market's ability to accommodate ESG flows, which is given by the elasticity of substitution between ESG and other stocks. I show that every dollar flowing toward a representative ESG portfolio increases the market value of ESG stocks by $0.8. The growing institutional flows into the ESG portfolio are the main driver of ESG returns and have caused an annual flow‐driven return of 1.9%. In the absence of flows, ESG stocks would not have outperformed the market from 2012 to 2023.

AN ANALYSIS OF OBJECTIVE INDICATORS OF SPECULATIVE ACTIVITY UNDER A SYSTEM OF FLEXIBLE EXCHANGE RATES*

Published: 12/1974,  Volume: 29,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1974.tb03152.x  |  Cited by: 1

John J. Van Belle

Of Financial Innovations and Excesses

Published: 7/1985,  Volume: 40,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1985.tb04984.x  |  Cited by: 89

JAMES C. VAN HORNE

DISCUSSION

Published: 5/1980,  Volume: 35,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1980.tb02154.x  |  Cited by: 1

JAMES C. VAN HORNE

OPTIMAL INITIATION OF BANKRUPTCY PROCEEDINGS BY DEBT HOLDERS

Published: 6/1976,  Volume: 31,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1976.tb01932.x  |  Cited by: 14

James C. Van Horne

Risk‐Free Rates and Convenience Yields around the World

Published: 5/11/2026,  Volume: 81,  Issue: 4  |  DOI: 10.1111/jofi.70045  |  Cited by: 7

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.

Valuing Private Equity Investments Strip by Strip

Published: 8/23/2021,  Volume: 76,  Issue: 6  |  DOI: 10.1111/jofi.13073  |  Cited by: 100

ARPIT GUPTA, STIJN VAN NIEUWERBURGH

We propose a new valuation method for private equity (PE) investments. It constructs a replicating portfolio using cash flows on listed equity and fixed‐income instruments (strips). It then values the strips using an asset pricing model that captures the risk in the cross‐section of bonds and equity factors. The method delivers a risk‐adjusted profit on each PE investment and a time series for the expected return on each fund category. We find negative risk‐adjusted profits for the average PE fund, with substantial heterogeneity and some persistence in the performance. Expected returns and risk‐adjusted profit decline in the later part of the sample.

Out‐of‐Town Home Buyers and City Welfare

Published: 6/3/2021,  Volume: 76,  Issue: 5  |  DOI: 10.1111/jofi.13057  |  Cited by: 74

JACK FAVILUKIS, STIJN VAN NIEUWERBURGH

Many cities have attracted a flurry of out‐of‐town (OOT) home buyers. Such capital inflows affect house prices, rents, construction, labor income, wealth, and ultimately welfare. We develop an equilibrium model to quantify the welfare effects of OOT home buyers for the typical U.S. metropolitan area. When OOT investors buy 10% of the housing in the city center and 5% in the suburbs, welfare among residents falls by 0.61% in consumption‐equivalent units. House prices and rents rise substantially, resulting in welfare gains for owners and losses for renters. Policies that tax OOT buyers or mandate renting out vacant property mitigate welfare losses.

Information Immobility and the Home Bias Puzzle

Published: 5/20/2009,  Volume: 64,  Issue: 3  |  DOI: 10.1111/j.1540-6261.2009.01462.x  |  Cited by: 743

STIJN VAN NIEUWERBURGH, LAURA VELDKAMP

Many argue that home bias arises because home investors can predict home asset payoffs more accurately than foreigners can. But why does global information access not eliminate this asymmetry? We model investors, endowed with a small home information advantage, who choose what information to learn before they invest. Surprisingly, even when home investors can learn what foreigners know, they choose not to: Investors profit more from knowing information others do not know. Learning amplifies information asymmetry. The model matches patterns of local and industry bias, foreign investments, portfolio outperformance, and asset prices. Finally, we propose new avenues for empirical research.

Session Topic: Corporate Finance and Capital Budgeting

Published: 5/1974,  Volume: 29,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1974.tb03071.x  |  Cited by: 1

James Van Horn, William L. White

GROWTH AND COMMON STOCK VALUES

Published: 12/1954,  Volume: 9,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1954.tb01245.x  |  Cited by: 5

John C. Clendenin, Maurice Van Cleave

SOME SUGGESTED CHANGES IN THE CORPORATE TAX STRUCTURE

Published: 12/1950,  Volume: 5,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1950.tb03804.x  |  Cited by: 4

Eli Schwartz, Roger C. Van Tassel

EXPECTED INFLATION IMPLIED BY CAPITAL MARKET RATES

Published: 5/1973,  Volume: 28,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1973.tb01773.x  |  Cited by: 14

Patric H. Hendershott, James C. Van Horne

THE IMPACT OF UNANTICIPATED CHANGES IN INFLATION ON THE VALUE OF COMMON STOCKS

Published: 12/1972,  Volume: 27,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1972.tb03025.x  |  Cited by: 11

James C. Van Horne, William F. Glassmire

DIVIDEND POLICY AND NEW EQUITY FINANCING

Published: 5/1971,  Volume: 26,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1971.tb00911.x  |  Cited by: 14

James C. Van Horne, John G. McDonald

Government Security Dealers' Positions, Information and Interest‐Rate Expectations: A Note

Published: 12/1983,  Volume: 38,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1983.tb03847.x  |  Cited by: 1

JAMES C. VAN HORNE, HAL B. HEATON

THE IMPACT OF OUTSTANDING CONVERTIBLE BONDS ON CORPORATE DIVIDEND POLICY

Published: 5/1976,  Volume: 31,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1976.tb01902.x  |  Cited by: 1

James C. Van Horne, Dileep R. Mehta

ABANDONMENT VALUE AND CAPITAL BUDGETING: REPLY

Published: 3/1969,  Volume: 24,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1969.tb00346.x  |  Cited by: 16

Alexander A. Robichek, James C. Van Horne

Regulation of Charlatans in High‐Skill Professions

Published: 2/26/2022,  Volume: 77,  Issue: 2  |  DOI: 10.1111/jofi.13112  |  Cited by: 26

JONATHAN B. BERK, JULES H. VAN BINSBERGEN

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.

ABANDONMENT VALUE AND CAPITAL BUDGETING*

Published: 12/1967,  Volume: 22,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1967.tb00293.x  |  Cited by: 22

Alexander A. Robichek, James C. Van Horne

DISCUSSION

Published: 5/1977,  Volume: 32,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1977.tb03276.x  |  Cited by: 1

Bernell K. Stone, James C. Van Horne

Real Anomalies

Published: 4/2/2019,  Volume: 74,  Issue: 4  |  DOI: 10.1111/jofi.12771  |  Cited by: 94

JULES H. van BINSBERGEN, CHRISTIAN C. OPP

We examine the importance of cross‐sectional asset pricing anomalies (alphas) for the real economy. To this end, we develop a novel quantitative model of the cross‐section of firms that features lumpy investment and informational inefficiencies, while yielding distributions in closed form. Our findings indicate that anomalies can cause material real inefficiencies, which raises the possibility that agents who help eliminate them add significant value to the economy. The model shows that the magnitude of alphas alone is a poor indicator of real outcomes, and highlights the importance of the alpha persistence, the amount of mispriced capital, and the Tobin's q of firms affected.

Time‐Varying Fund Manager Skill

Published: 7/18/2014,  Volume: 69,  Issue: 4  |  DOI: 10.1111/jofi.12084  |  Cited by: 522

MARCIN KACPERCZYK, STIJN VAN NIEUWERBURGH, LAURA VELDKAMP

We propose a new definition of skill as general cognitive ability to pick stocks or time the market. We find evidence for stock picking in booms and market timing in recessions. Moreover, the same fund managers that pick stocks well in expansions also time the market well in recessions. These fund managers significantly outperform other funds and passive benchmarks. Our results suggest a new measure of managerial ability that weighs a fund's market timing more in recessions and stock picking more in booms. The measure displays more persistence than either market timing or stock picking alone and predicts fund performance.

ELIMINATION OF THE DOUBLE TAXATION OF DIVIDENDS AND CORPORATE FINANCIAL POLICY

Published: 6/1978,  Volume: 33,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1978.tb02015.x  |  Cited by: 21

Robert H. Litzenberger, James C. Van Horne

The Exchange Rate in the Presence of Transaction Costs: Implications for Tests of Purchasing Power Parity

Published: 9/1995,  Volume: 50,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1995.tb04060.x  |  Cited by: 288

PIET SERCU, RAMAN UPPAL, CYNTHIA VAN HULLE

With transaction costs for trading goods, the nominal exchange rate moves within a band around the nominal purchasing power parity (PPP) value. We model the behavior of the band and of the exchange rate within the band. The model explains why there are below‐unity slope coefficients in regression tests of PPP, and why these increase toward unity under hyperinflation or with low‐frequency data. Our results are independent of the presence of nontraded goods in the economy.

Housing Collateral, Consumption Insurance, and Risk Premia: An Empirical Perspective

Published: 5/3/2005,  Volume: 60,  Issue: 3  |  DOI: 10.1111/j.1540-6261.2005.00759.x  |  Cited by: 434

HANNO N. LUSTIG, STIJN G. VAN NIEUWERBURGH

In a model with housing collateral, the ratio of housing wealth to human wealth shifts the conditional distribution of asset prices and consumption growth. A decrease in house prices reduces the collateral value of housing, increases household exposure to idiosyncratic risk, and increases the conditional market price of risk. Using aggregate data for the United States, we find that a decrease in the ratio of housing wealth to human wealth predicts higher returns on stocks. Conditional on this ratio, the covariance of returns with aggregate risk factors explains 80% of the cross‐sectional variation in annual size and book‐to‐market portfolio returns.

Predictive Regressions: A Present‐Value Approach

Published: 7/15/2010,  Volume: 65,  Issue: 4  |  DOI: 10.1111/j.1540-6261.2010.01575.x  |  Cited by: 402

JULES H. Van BINSBERGEN, RALPH S. J. KOIJEN

We propose a latent variables approach within a present‐value model to estimate the expected returns and expected dividend growth rates of the aggregate stock market. This approach aggregates information contained in the history of price‐dividend ratios and dividend growth rates to predict future returns and dividend growth rates. We find that returns and dividend growth rates are predictable with  values ranging from 8.2% to 8.9% for returns and 13.9% to 31.6% for dividend growth rates. Both expected returns and expected dividend growth rates have a persistent component, but expected returns are more persistent than expected dividend growth rates.

Health and Mortality Delta: Assessing the Welfare Cost of Household Insurance Choice

Published: 3/18/2016,  Volume: 71,  Issue: 2  |  DOI: 10.1111/jofi.12273  |  Cited by: 115

RALPH S.J. KOIJEN, STIJN VAN NIEUWERBURGH, MOTOHIRO YOGO

We develop a pair of risk measures, health and mortality delta, for the universe of life and health insurance products. A life‐cycle model of insurance choice simplifies to replicating the optimal health and mortality delta through a portfolio of insurance products. We estimate the model to explain the observed variation in health and mortality delta implied by the ownership of life insurance, annuities including private pensions, and long‐term care insurance in the Health and Retirement Study. For the median household aged 51 to 57, the lifetime welfare cost of market incompleteness and suboptimal choice is 3.2% of total wealth.

Financial Fragility with SAM?

Published: 12/11/2020,  Volume: 76,  Issue: 2  |  DOI: 10.1111/jofi.12992  |  Cited by: 36

DANIEL L. GREENWALD, TIM LANDVOIGT, STIJN VAN NIEUWERBURGH

Shared appreciation mortgages (SAMs) feature mortgage payments that adjust with house prices. They are designed to stave off borrower default by providing payment relief when house prices fall. Some argue that SAMs may help prevent the next foreclosure crisis. However, home owners' gains from payment relief are mortgage lenders' losses. A general equilibrium model in which financial intermediaries channel savings from saver to borrower households shows that indexation of mortgage payments to aggregate house prices increases financial fragility, reduces risk‐sharing, and leads to expensive financial sector bailouts. In contrast, indexation to local house prices reduces financial fragility and improves risk‐sharing.

From Wall Street to Main Street: The Impact of the Financial Crisis on Consumer Credit Supply

Published: 5/11/2016,  Volume: 71,  Issue: 3  |  DOI: 10.1111/jofi.12209  |  Cited by: 68

RODNEY RAMCHARAN, STÉPHANE VERANI, SKANDER J. VAN DEN HEUVEL

How did the collapse of the asset‐backed securities (ABS) market during the 2007 to 2009 financial crisis affect the supply of credit to the broader economy? Using new data on the U.S. credit union industry, we find that ABS‐related losses are associated with a large contraction in the supply of credit to consumers, especially among those credit unions that began the crisis with weaker capitalization. We also find that this credit supply shock restricted the availability of mortgage and automobile credit. These results show how movements in the prices of financial assets can affect the real economy.

A Horizon‐Based Decomposition of Mutual Fund Value Added Using Transactions

Published: 4/4/2024,  Volume: 79,  Issue: 3  |  DOI: 10.1111/jofi.13331  |  Cited by: 17

JULES VAN BINSBERGEN, JUNGSUK HAN, HONGXUN RUAN, RAN XING

We decompose mutual fund value added by the length of funds' holdings using transaction‐level data. We motivate our decomposition with a model featuring horizon‐specific investment ideas, where short‐term ideas are less scalable because the associated trades cannot be spread over time. Fund turnover correlates negatively with the horizon over which value is added and positively with price impact costs. As predicted, holdings of high‐turnover funds add a substantial amount of value in the first two weeks, of which more than 80% is earned on Federal Open Market Committee (FOMC) and earnings announcement days. Holdings of low‐turnover funds add value only over longer horizons.

Firm‐Level Climate Change Exposure

Published: 3/31/2023,  Volume: 78,  Issue: 3  |  DOI: 10.1111/jofi.13219  |  Cited by: 1421

ZACHARIAS SAUTNER, LAURENCE VAN LENT, GRIGORY VILKOV, RUISHEN ZHANG

We develop a method that identifies the attention paid by earnings call participants to firms' climate change exposures. The method adapts a machine learning keyword discovery algorithm and captures exposures related to opportunity, physical, and regulatory shocks associated with climate change. The measures are available for more than 10,000 firms from 34 countries between 2002 and 2020. We show that the measures are useful in predicting important real outcomes related to the net‐zero transition, in particular, job creation in disruptive green technologies and green patenting, and that they contain information that is priced in options and equity markets.