Assistant Professor of Finance
Washington University in St. Louis
Olin Business School
The Value of Diffusing Information, a paper based on my dissertation has been accepted for publication in the Journal of Financial Economics. In the paper I study how the speed by which information diffuses affects its value to a stock market investor. Faster-diffusing information means quicker and less noisy profits, but also increases competing informed trading, impounding more information into prices and eroding profits. Structural empirical analysis of stock market reaction to drug approvals using media coverage as a proxy for the transmission rate of information finds that the value of information is hump-shaped in its future transmission rate.
In a new paper with Roni Kisin, we estimate the shadow cost of capital requirements for banks using data on their participation in a costly regulatory loophole. We estimate that a ten percentage point increase in capital requirements would cost $2.2 billion a year for all banks that exploited the loophole combined, and no more than $3.7 billion for all US banks. The average cost per bank is $143 million, or 4 percent of annual profits.
Presentations: UNC (Kenan-Flagler), Wharton Conference on Liquidity and Financial Crises, FDIC-JFSR Fall Banking Research Conference, FRA Meetings in Las Vegas.
In a new paper with Alan Moreira, we extend back to 1890 the volatility implied by options index (VIX), available only since 1986, using the frequency of words on the front-page of the Wall Street Journal. Consistent with a time-varying rare disaster risk model, high news implied volatility (NVIX) predicts periods of above average stock returns, or periods of large economic disasters.
Presentations: Ohio State (Fisher), Rothschild Caesarea Center Conference, SFS Cavalcade, Texas Finance Festival, and AFA Meetings in Philadelphia.
Asset Pricing, Financial Intermediation, Information Economics.