Households who wish to extract home equity through refinancing their mortgage face a hidden transaction cost. The real value of the fixed nominal mortgage payment declines over time with inflation. The change in the real value of the mortgage payments from taking on a new mortgage is positive...

We confront the generalized recursive smooth ambiguity aversion preferences of Klibanoff, Marinacci, and Mukerji (2005, 2009) with data using Bayesian methods introduced by Gallant and McCulloch (2009) to close two existing gaps in the literature. First, we use macroeconomic and financial data...

We construct a model of a bank's optimal funding choice, where the bank negotiates with both safety-driven short-term bondholders and (mostly) risk-taking long-term bondholders. We establish that investor demands for safety create a negative relationship between the bank's capital choices and...

We examine the effects of a 2012 regulatory reform that mandated fee and performance disclosures for the investment options in 401(k) plans. We show that participants became significantly more attentive to expense ratios and short-term performance after the reform. The disclosure effects are...

In recent years, the scale and scope of major central banks' intervention in financial markets has expanded in unprecedented ways. In this paper, we demonstrate how monetary policy implementation that relies on such intervention in financial markets can displace private transactions....

This paper studies Leveraged and Inverse Exchange Traded Funds (LETFs) from a financial stability perspective. Mechanical positive-feedback rebalancing of LETFs resembles the portfolio insurance strategies, which contributed to the stock market crash of October 19, 1987 (Brady Report, 1988). I...

The past couple of decades have seen a significant shift from active to passive investment strategies. We examine how this shift affects financial stability through its impacts on: (i) funds' liquidity and redemption risks, (ii) asset-market volatility, (iii) asset-management industry...

We develop a parsimonious model to study the equilibrium structure of financial markets and its efficiency properties. We find that regulations aimed at improving market outcomes can cause inefficiencies. The welfare benefit of such regulation stems from endogenously improving market access for...

We show that when only a few investors own a substantial portion of a hedge fund's net asset value, flow volatility increases because investors' exogenous, idiosyncratic liquidity shocks are not diversified away. Using confidential regulatory filings, we confirm that high investor concentration...

This paper develops a framework for measuring digital services in the face of ongoing innovations in the delivery of content to consumers. We capture what Brynjolfsson and Saunders (2009) call "free goods" as the capital services generated by connected consumers' stocks of IT digital goods; this...