We propose a Capital Asset Pricing Model where investors exhibit prospect preferences. In equilibrium, we find that agents seek an optimal trade-off between expected returns, variance, and skewness. All assets in the economy are then priced by a three-factor model, which augments the security...

Major geopolitical events have global repercussions, but their economic impact differs vastly across space. Analyzing stock market reactions to the war in Ukraine, we detect a large “proximity penalty.” Neighboring countries, on average, incurred an abnormal decline in equity indices of...

Russia and Germany both industrialized later than England and the United States, and both countries retained authoritarian autocracies until World War I. But the two countries diverged in their regulation of industrial corporations during the mid-19th century, with Russia retaining strict...

A merger of two companies that are active in seemingly unrelated markets creates data linkage: by selling a product in one market, the merged company acquires informational advantage in a competitive insurance market. In the insurance market, the informed insurer earns an economic rent through...

We use the universe of USPTO data on patents and inventors from 1976 to 2019 to look at the dynamics of coauthorship on patents and its relationship with competition. First, we find an inverted-U relationship between competition and the growth in coauthorship: the number of new collaborators on...

We address the paradox that financial innovations aimed at risk-sharing appear to have made the world riskier. Financial innovations facilitate hedging idiosyncratic risks among agents; however, aggregate risks can be hedged only with liquid assets. When risk-sharing is primitive, agents...

I examine the noncooperative equilibrium of an asylum provision game in which asylum is an international public good. I show the game can generate multiple equilibria similar to those of the hawk-dove game; the hawkish country is less open to asylum seekers than the dovish is. An inefficient...

We conduct a controlled laboratory experiment in which subjects dynamically choose to allocate their portfolio between (i) a safe asset, (ii) a risky asset and (iii) a skewed asset with negative expected value (a bet ), in an environment where they can sometimes choose to acquire some...

Rejecting a common assumption in the sovereign debt literature, we document that creditor losses ("haircuts") during sovereign restructuring episodes are asymmetric across debt instruments. We code a comprehensive dataset on instrument-specific haircuts for 28 debt restructurings with private...

Many financial assets are disseminated to final investors via chains of over-the-counter transactions between intermediaries (dealers). We model such an intermediation process as a game with successive take-it-or-leave-it offers: An agent buying some units of an asset can offer to sell part of...