Research



Andrea L. Eisfeldt

Professor of Finance

Anderson Faculty Term Chair in Finance





Curriculum Vitae



Work in Progress:


"Risk and Return in Segmented Markets with Expertise" (with Hanno Lustig and Lei Zhang.  Slides and paper available upon request.  Presented at SED 2013, Wharton, UNC).


"The Returns to Single Family Rental Strategies" (with Andrew Demers.  Slides and paper available upon request.  Presented at SED 2014, Structured Portfolio Management, LLC).


Working Papers:


"Entry and exit in OTC Derivatives Markets" (with Andrew Atkeson and Pierre-Olivier Weill) Third Round, Econometrica.  Online Appendix  

We develop a framework to address the positive and normative issues surrounding OTC credit derivatives, focusing on entry and exit incentives.  See also our policy commentary on Voxeu.org.


"The Market for OTC Derivatives(with Andrew Atkeson and Pierre-Olivier Weill

Develops the stylized facts characterizing CDS markets, along with the positive implications of a model of OTC derivatives markets.


"Aggregate External Financing and Savings Waves" (with Tyler MuirEisfeldt Muir Cost of External Finance Data  Online Appendix  


We use a structural model, along with information in the cross-section regarding firms' uses of the funds they raise, in order to construct a time series measure of the aggregate cost of external finance for US firms.   

 


    Estimated Average Cost of External Finance: US Firms 1980-2010



 

"The Financial Soundness of US Firms 1926-2012" (with Andrew Atkeson and Pierre-Olivier Weill)  


Building on the Merton (1974) and Leland (1994) structural models of credit risk, we develop a simple, transparent, and robust method for measuring the financial soundness of individual firms using data on their equity volatility. 


                    Insolvency Crises 1929-2012:  Median Distance below 1.




Financing Shortfalls and the Value of Aggregate Liquidity.” (with Adriano Rampini.)  


This paper studies the level and dynamics of the value of aggregate liquidity induced by firms’ financing shortfalls.


Colonies.” (with  Matthias Doepke.)  

We examine the endogenous dynamics of the distribution property rights in a framework in which people with property-rights protection trade off efficiency and exploitation in their decisions to award or limit the property rights of others.  


Publications:

"The Value and Ownership of Intangible Capital(with Dimitris Papanikolaou.)

American Economic Review, Papers and Proceedings, May 2014, 189-194.


We use a simple model of the sharing rule between key labor inputs and capital owners, along with accounting data, to measure the fraction of the US capital stock which is owned by key labor and thus missing from book and market values.


Eisfeldt Papanikolaou Aggregate and Industry Organization Capital Data




Organization Capital and the Cross-Section of Expected Returns  (with Dimitris Papanikolaou.)

Amundi Smith Breeden First Place Paper Award 2013.

Journal of Finance, August 2013, 1365-1406.


The supplementary appendix contains further details. 

The UCLA Anderson Blog provides a general audience summary.

We develop a model in which the outside option of the key talent determines the share of firm cash flows that accrue to shareholders. This outside option varies systematically and renders firms with high organization capital riskier from the shareholders' perspective. We find that firms with more organization capital have risk adjusted returns that are 4.7% higher than firms with less organization capital.



CEO Turnover in a Competitive Assignment Framework” (with Camelia Kuhnen)

Journal of Financial Economics, August 2013, 351-372.


We show that both absolute and relative performance driven turnover can be natural and efficient outcomes of a competitive assignment model in which CEOs and firms form matches based on multiple characteristics which are either general or firm-specific, and provide unique empirical support for our model.


Eisfeldt Kuhnen CEO Turnover Data:  CSV, Tab Delimited Text

 

Leasing, Ability to Repossess, and Debt Capacity.” (with Adriano Rampini.)
Review of Financial Studies, April 2009, 1621-1657.

We show theoretically why financially constrained firms lease vs. buy, and provide supporting empirical evidence for the key predictions of our model using census data.


Managerial Incentives, Capital Reallocation, and the Business Cycle.” (with Adriano Rampini.)
Jensen Prize 2008, second place.
Journal of Financial Economics, January 2008, 177-199.

We develop an analytical characterization of the effect of agency costs on capital reallocation and aggregate productivity to show that the agency problem between owners and managers makes bad times worse because capital is less productively deployed.  We quantitatively measure the impact of misallocation in the cross section on aggregate productivity.


New or Used? Investment with Credit Constraints.” (with Adriano Rampini.)
Journal of Monetary Economics, November 2007, 2656-2681.
(Supplementary appendix.)

We argue that the timing of investment cash outflows makes used capital attractive to financially constrained firms, since constrained firms discount future maintenance outflows more heavily.  Using census data, we provide empirical support for our model's main predictions.


Smoothing with Liquid and Illiquid Assets.”
Journal of Monetary Economics, September 2007, 1572-1586.
(Supplementary appendix.)

Explains that the low demand for liquid assets by consumer-savers is due to that fact that, with standard preferences, the auto-correlation of savings is an order of magnitude larger than that of income.  Thus, under any reasonable calibration of standard consumption-savings models, consumers' savings are much to smooth to induce substantial liquidity demand.


Capital Reallocation and Liquidity.” (with Adriano Rampini.)
Journal of Monetary Economics, April 2006, 369-399. (Lead Article). 

See updated time series, and a link to Eisfeldt Rampini Capital Reallocation Data, below.

Documents the fact that the amount of capital reallocation between firms is procyclical, whereas measures of productivity dispersion are countercyclical.  Uses a quantitative dynamic model to infer the aggregate dynamics for capital liquidity that reconciles these facts, and argue that capital is less liquid in recessions.


Endogenous Liquidity in Asset Markets.”
Smith Breeden Distinguished Paper Award.
Journal of Finance, February 2004, 59 1-30. (Lead Article).
Reprinted in “Liquidity and Crises,” edited by Franklin Allen, Elena Carletti, Jan Pieter Krahnen, and Marcel Tyrell (Oxford University Press, 2011)

The working paper contains additional comparative statics and details. 


Explores the link between macroeconomic fundamentals and asset market liquidity driven by adverse selection, and demonstrates the magnifying effects of liquidity on investment and volume.  Emphasizes the link between risk taking and market liquidity.  Explains why exogenous negative shocks alleviate adverse selection, but endogenous shocks from investor risk taking leads to procyclical asset market liquidity.





Capital Reallocation and the Business Cycle:  Data Update to EOY 2013

Updated version of Figure 1 from “Capital Reallocation and Liquidity” (joint with Adriano Rampini, JME 2006)


The correlation of the cyclical component of GDP with the cyclical component of sales of PP&E plus acquisitions over total book assets is 0.68 with a standard error of 0.10.