Are stock valuation ratios mainly informative about future earnings growth or future returns? Using a variance decomposition, we find that over 70% of cross-sectional variation in price-earnings ratios is reflected in cross-sectional differences in future returns, while less than 30% is...

Does the observed relationship between mutual fund flows and recent performance represent irrational “return chasing” or rational learning about unobserved fund manager skill in the presence of decreasing returns to scale? We estimate a structural model of investor beliefs implicit in the...

Exchange-traded funds (ETFs) are typically viewed as passive index trackers. In contrast, we show that corporate bond ETFs actively manage their portfolios, trading off index tracking against liquidity transformation. In our model, ETFs optimally choose creation and redemption baskets that...

This paper constructs risk-free interest rates implicit in index option prices for 9 of the major G10 currencies. We compare these rates to the yields of government bonds to provide international estimates of the convenience yield earned by safe assets. Average convenience yields across...

Using bid-level data from discriminatory auctions for Mexican government bonds, we demonstrate that asymmetric information about default risk is a key friction in sovereign bond markets. We document that large bidders achieve higher bid acceptance rates than other bidders despite paying no more...

How do collateral requirements impact consumer borrowing behavior? Using administrative loan application and performance data from the U.S. Federal Disaster Loan Program, we exploit a loan amount threshold above which households must post their residence as collateral. One-third of all borrowers...

We examine the economic consequences of a rule designed to improve consumers' understanding of mortgage information. The 2015 TILA-RESPA Integrated Disclosures (TRID) rule simplifies the disclosures provided to consumers, reducing their information processing costs and increasing lenders'...

We document challenges to the notion of a trade-off between systematic risk and expected returns when analyzing the empirical ability of stock characteristics to predict excess returns. First, we measure individual stocks' exposures to all common latent factors using a novel high-dimensional...

In the loan markets for distressed corporate borrowers, a few specialized lenders finance a large fraction of loans. Ultra-high yield spreads prevail even after removing the credit- and liquidity-risk component. Borrowers are in desperate need of financing but face limited funding options, while...

Will an introduction of CBDC cause disintermediation? I provide empirical and theoretical evidence that CBDC will not necessarily crowd out bank deposits in economies with significant demand for currency. I estimate the model for the US using data on households' payment choices and find that...