This paper establishes a new empirical fact: mutual funds' flow-performance sensitivity is a hump-shaped function of aggregate risk-factor realizations. Explanations based on extant theories can only explain a fraction of the pattern. We thus develop a new parsimonious model. It assumes Bayesian...

Motivated by individuals' emotional response to risk at different time horizons, we model an 'anxious' agent - one who is more risk averse with respect to imminent risks than distant risks. Such preferences describe well-documented features of 1) individual behavior, 2) equilibrium prices, and...

We present a mechanism based on managerial incentives through which common ownership affects product market outcomes. Firm-level variation in common ownership causes variation in managerial incentives and productivity across firms, which leads to intra-industry and intra-firm cross-market...

Firms have inefficiently low incentives to innovate when other firms benefit from their inventions and the innovating firm therefore does not capture the full surplus of its innovations. We show that common ownership of firms mitigates this impediment to corporate innovation. By contrast,...

We document that central banks are significantly more likely to report slightly positive profits than slightly negative profits, especially amid greater political pressure, the public’s receptiveness to more extreme political views, and when governors are reappointable. The propensity to...