Named for World's Best 40 Business School Professors Under 40, Poets & Quants
Information Acquisition in Rumor-Based Bank Runs has been accepted for publication in the Journal of Finance. In the paper, Zhiguo He and I study information acquisition and dynamic withdrawal decisions when a spreading rumor exposes a solvent bank to a run. Uncertainty about the bank's liquidity and potential failure motivates depositors who hear the rumor to acquire additional noisy signals. Depositors with less informative signals may wait before gradually running on the bank, leading to an endogenous aggregate withdrawal speed and bank survival time.
Best Paper Award, Financial Research Association Meetings 2013
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: UCLA (Anderson), UNC (Kenan-Flagler), Wharton Conference on Liquidity and Financial Crises, FDIC-JFSR Fall Banking Research Conference, FRA Meetings in Las Vegas.
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 Alan Moreira, we construct a text-based measure of uncertainty starting in 1890 using front-page articles 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.