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

"Law and Finance Matter: Lessons from Externally Imposed Courts" (2015) w/ Jamie Brown and Tony Cookson 

AFA 2016, CFEA 2014, EFIC 2014, FIRS 2015, NBER-SI 2015

Under Revision for Resubmission: Review of Financial Studies

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?" (2015)

AFA Boston 2015, EFA Vienna 2015NFA 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.

"Can Leverage Constraints Make Overconfident Investors Better Off?" (2015)

EFA Lugano 2014, SFS Cavalcade 2015, NFA 2015, Reject and Resubmit: Review of Financial Studies 

Finalist for best paper award in Asset Pricing at the 2015 SFS Cavalcade

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

"YOLO: Can Subjective Life Expectancies Explain Household Investment Puzzles?" (2015) w/ Kristian Myrseth and Raphael Schoenle

Norman Award Grant for creative projects in the Social Sciences, NFA 2015, CESifo Behavioral Economics 2015

Subjective life-expectancies are fat-tailed. These expectation errors are correlated with different savings plans, financial participation rates, and financial literacy.  A run-of-the-mill life-cycle model calibrated to these beliefs can explain under-saving while young, under-consumption while retired, and the high equity premium.

"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

"Competition Creates Complexity" w/ Tony Cookson

"Do Traders Learn from Others' Failures?"