Research Interests

Behavioral Finance, Household Finance, Social Networks, Retail Trading and Asset Prices, Financial Intermediation

Publications

"Friends Do Let Friends Buy Stocks Actively" (2014)

Forthcoming: Journal of Economic Behavior and Organization, Special Issue in Empirical Behavioral Finance, Media: Wall Street Journal

Working Papers

"Does Law and Finance Matter? Lessons from Externally Imposed Courts" (2014)            w/ Jamie Brown and Tony Cookson
CFEA 2014, EFIC 2014, FRA 2014 invitation, FIRS 2015

Legal jurisdiction affects the development of credit markets causing economic growth. U.S. Congress allows the state legal system to adjudicate contracts on a subset of Native American reservations.  Reservations that adopt the state's legal system have stronger credit markets.  Credit affects real incomes with a stronger effect in sectors that depend on external financing.

"Peer Pressure: Does Social Interaction Explain the Disposition Effect?" (2014)             AFA Boston 2015, NFA Ottawa 2014

Social considerations can produce behavioral biases. Using novel data from a social network linked to individual investment accounts, traders increase their susceptibility to the disposition effect following exposure to the network. To claim causality, I used the staggered entry of retail brokerages into partnerships with the social networking platform, which is a necessary precursor for traders to access the network. Data on common stock trading at a discount brokerage and a comparison to network simulations provides additional evidence. These findings are consistent with traders strategically waiting until good states to exchange information and reallocate resources.

"Can Leverage Constraints Make Overconfident Investors Better Off?" (2013)
EFA Lugano 2014, SFS Cavalcade 2015, Under Revision for Resubmission: Review of Financial Studies 

Leverage is inversely related to individual investor performance. Causality comes from CFTC regulation capping the maximum permissible leverage available to U.S. retail traders in the foreign exchange spot market and a comparison to a control group of unregulated European traders who trade on the same brokerages. Overconfidence jointly explains high leverage and subsequent poor performance. Supplemental Materials

"Facebook Finance: How Social Interaction Propagates Active Investing" (2014)         w/ David Simon
AFA San Diego 2013, Media: Wall Street Journal

The patterns of communication between traders supports the growth of active strategies. Using novel data from a social network linked to individual investment accounts, traders broadcast their own successes, while recipients trade more when their peers perform well.

Selected Works in Progress

"Does Retail Trading Improve Stock Price Efficiency?"
w/ Zahi Ben-David and Kewei Hou

This paper is among the first to make causal claims about the role of retail trading in the formation of asset prices. We examine a plausibly exogenous source of variation in retail stock trading that has both time-series and cross-sectional variation across the U.S. This frictions made trading less costly for retail investors and increased their ownership of local stocks. We then examine how this friction effects the efficiency of stock prices.

"The Adverse Selection Problem in Retail Markets: A Field-Experiment on a Discount Brokerage" w/ Juhani Linnainmaa, FRA Early Ideas Session

"YOLO: Can Subjective Life Expectancies Explain Life-Cycle Puzzles?" w/ Kristian Myrseth and Raphael Schoenle, Norman Award Grant for creative projects in the Social Sciences

"Competition Creates Complexity" w/ Tony Cookson

"Do Traders Learn from Others' Failures?"