Theory suggests that government aid to banks may either reduce or increase systemic risk. We are the first to address this issue empirically, analyzing the Troubled Assets Relief Program (TARP). Analysis suggests that TARP significantly reduced contributions to systemic risk, particularly for...

Using data on stocks held by individual investors at retail brokerage firm Robinhood, we document that these investors are actively engaged in both momentum and contrarian trading strategies. In response to the increased volatility and uncertainty in financial markets due to the COVID-19...

Large institutional investors own an increasing share of equity markets. We conjecture that a financial market in which large institutions dominate operates differently than a market populated by smaller independent investors. To support this view, we show that funds within the same family...

Is bitcoin money? We study the characteristics of bitcoin, following the theory of money demand first posited by Keynes (1935). Specifically, we answer three questions. First, is bitcoin used as a transactional currency? Yes. Second, is bitcoin used as a speculative currency? Yes. Third, is...

Using Bank for International Settlements (BIS) data on cross-border bank flows across 128 countries and over two decades, we find that heightened bank flows are associated with improved financial stability in a recipient country's bank system. The reductions in marginal expected shortfall (MES)...

We find that bank liquidity creation (LC) is statistically and economically significantly positively related to real economic output (GDP). This is robust to using instrumental variables and many robustness checks. LC also beats bank assets in “horse races.” On-balance sheet LC matters more...

While operational risk is generally perceived as idiosyncratic with limited systemic implications, we document that operational risk significantly threatens financial stability. Using supervisory data on large U.S. bank holding companies (BHCs) over 2002:Q1-2016:Q4, we find operational losses...

Prudential bank supervision is designed to enhance financial stability, but we are unaware of research linking this supervision to financial system risk. In particular, there are no prior findings on how supervisory enforcement actions (EAs) – major tools of supervisors – affect systemic...

This paper studies the interaction between governance mechanisms and the effectiveness of shareholder activism by examining shareholder-initiated proposals on poison pills. After contrasting companies along their governance regime, we observe that dictatorship firms, characterized with higher...