Publications
Wealth Inequality, Stock Market Participation, and the Equity Premium, Journal of Financial Economics, March 2013, Vol. 107 (3), pp. 740-759
An Estimation of Economic Models with Recursive Preferences, with Xiaohong Chen and Sydney Ludvigson, Quantitative Economics, March 2013, Vol 4 (1), pp. 39-83
International Capital Flows and House Prices: Theory and Evidence, with David Kohn, Sydney Ludvigson and Stijn Van Nieuwerburgh, in: Housing and the Financial Crisis, NBER, Cambridge, MA. Chapter 8. 2013
Long Run Productivity Risk and Aggregate Investment, with Xiaoji Lin, Journal of Monetary Economics, September 2013, Vol. 60 (6), pp. 737-751. Online Appendix
Wage Rigidity: A Quantitative Solution to Several Asset Pricing Puzzles, with Xiaoji Lin, Review of Financial Studies, January 2016, Vol. 29 (1), pp. 148-192. Online Appendix
Does Wage Rigidity Make Firms Riskier? Evidence from Long-Horizon Return Predictability, with Xiaoji Lin, Journal of Monetary Economics, April 2016, Vol. 78, pp. 80-95. Online Appendix
The Macroeconomic Effects of Housing Wealth, Housing Finance, and Limited Risk Sharing in General Equilibrium, with Sydney Ludvigson and Stijn Van Nieuwerburgh, Journal of Political Economy, Jan 2017, Vol. 125 (1), pp. 140-223.
The Elephant in the Room: the Impact of Labor Obligations on Credit Risk, with Xiaoji Lin and Xiaofei Zhao, American Economic Review, June 2020, Vol. 110 (6), pp. 1673-1712. Online Appendix
Out-of-town Home Buyers and City Welfare, with Stijn Van Nieuwerburgh, Journal of Finance, Oct 2021, Vol 76 (5), pp. 2577-2638.
Media coverage: New York Times, The Globe and Mail, Global News, Vancouver Courier, Business Vancouver, Vancouver Real Estate Podcast.
Affordable Housing and City Welfare, with Pierre Mabille and Stijn Van Nieuwerburgh, Review of Economic Studies, Jan 2023, Vol 90 (1), pp. 293-330.
Media coverage: LA Times, NPR, NY Daily News, Gothamist, VoxEU, PR Newswire.
Why Momentum Concentrates Among Overvalued Assets, with Terry Zhang, Review of Finance, March 2024, Vol 28 (2), pp 389-412.
Labor Market Frictions and Asset Prices, with Frederico Belo and Xiaoji Lin, forthcoming Annual Review of Financial Economics, 2026, Vol 18.
Working Papers
Why zoning is too restrictive with Jaehee Song. June 2025. Revise and Resubmit Management Science
Abstract: Zoning regulations lowered aggregate growth by 36 percent (Hsieh and Moretti, 2019), yet remain widespread. We solve a model in which fragmented zoning authority leads to overly strict regulations: homeowners impose stricter regulations to mitigate local congestion but fail to internalize the broader impact on metro-wide affordability. Empirically, the HHI of local governments explains 12 percent of the variation in zoning restrictiveness. Using an instrument based on 19th-century municipal fragmentation, we show that fragmentation leads to stricter zoning and higher housing costs. These findings suggest that centralizing zoning decisions could alleviate housing affordability challenges.
Tax-Loss Carry Forwards and Firms' Risk, with Ron Giammarino, Jose Pizarro, and Mike Simutin. November 2025. Revise and Resubmit Journal of Financial Economics
Abstract: Tax loss carryforwards (TLCF) --- accumulated losses that reduce taxable income --- are an important and risky corporate asset. We show theoretically how TLCF affect equity risk: If TLCF are low and will be used with certainty, equity risk is decreasing with TLCF because TLCF represent a safe cash flow; if TLCF are high, equity risk is increasing in TLCF because TLCF are likely to expire unused when cash flow is low. In a calibrated model the latter effect dominates and risk is increasing in TLCF on average. Empirically, TLCF positively forecast firms’ volatility, beta, return, and cost of capital.
House prices, quantities, and the propagation of shocks when developers are imperfectly competitive, with Elena Pikulina and Tianping Wu. December 2025.
Abstract: We create a novel dataset identifying the quantity, location, and timing of home sales by national and local U.S. developers in order to study concentration in housing construction markets. Smaller markets and more regulated markets are more concentrated, suggesting the importance of fixed entry or operating costs. Concentration matters, with more concentrated CBSAs having higher prices and lower quantities. Negative price shocks originating in one CBSA cause developers to shrink or exit other markets, thus propagating through the CBSA-developer network, reducing competition and raising prices in connected CBSAs. These patterns provide new evidence on how imperfect competition in housing construction and financial frictions propagate local housing shocks across space.
Evaluating the impact of portfolio mandates with Lorenzo Garlappi and Raman Uppal. October 2025.
Abstract: We examine how responsible investing mandates influence capital allocation. The prevailing wisdom---obtained from endowment-economy models---equates mandate effectiveness to large cost-of-capital changes. In contrast, we demonstrate that in a production economy, mandates can change the quantity of capital with negligible changes in the cost of capital. Calibrating a production economy to U.S. data, we estimate that recent responsible-investing mandates will result in a 4% long-run increase in the share of green capital with little impact on the cost of capital. These findings imply that cost-of-capital changes alone can misrepresent the real economic effects of portfolio mandates.
The Great Resignation was caused by the Covid-19 housing boom with Gen Li. January 2023.
Abstract: Following the Covid-19 pandemic, U.S. labor force participation declined significantly in 2020, slowly recovering in 2021 and 2022 -- this has been referred to as the Great Resignation. The decline has been concentrated among older Americans. By 2022, the labor force participation of workers in their prime returned to its 2019 level, while older workers' participation has continued to fall, responsible for almost the entire decline in the overall labor force participation rate. At the same time, the U.S. experienced large booms in both the equity and housing markets. We show that the Great Resignation among older workers can be fully explained by increases in housing wealth. MSAs with stronger house price growth tend to have lower participation rates, but only for home owners around retirement age -- a 65 year old home owner's unconditional participation rate of 44.8% falls to 43.9% if he experiences a 10% excess house price growth. A counterfactual shows that if housing returns in 2021 would have been equal to 2019 returns, there would have been no decline in the labor force participation of older Americans.
Do bankers matter for main street? The financial intermediary labor channel with Yuchen Chen, Xiaoji Lin, and Xiaofei Zhao. April 2025.
Abstract: Financial intermediary (FI) stress, measured by leverage, is an important driver of asset prices and quantities. We identify a new and equally important FI channel driving risk and the real sector: FIs are stressed when FI labor share (FLS) is high. FLS negatively forecasts aggregate output, investment, and credit growth; it positively forecasts the cost of credit. High FLS banks lend less and are riskier. Firms connected to such banks borrow less, grow less, and pay more to borrow. A DSGE model where FIs endogenously use labor to increase screening in bad times explains these findings.
Do politicians profit from real estate? with Markus Baldauf, Lorenzo Garlappi, and Keling Zheng. January 2026.
Abstract: We construct a novel dataset of US politicians' real estate transactions by combining several publicly available sources. Election winners transact more while in office and outperform both average homeowners and runners-up by more than 3 percentage points, even in close elections. A Buy-Minus-Sell index of politician transactions forecasts housing returns. The outperformance disappears after leaving office, suggesting that political tenure, not superior skill, is the main driver. Our findings illustrate how, even in systems with strong electoral accountability, politicians may exploit less transparent markets through strategic timing, location choices, and federal resource allocations.
Are Demographics Responsible for the Declining Interest Rates? Evidence from U.S. Metropolitan Areas, with Jinfei Sheng and Terry Zhang. November 2025.
Abstract: Conventional wisdom, based on Hansen (1939) and Samuelson (1958), is that older populations are associated with lower interest rates. We show the opposite is true for average deposit rates in the cross-section of U.S. MSAs. This is largely explained by composition – older people prefer less liquid, longer maturity, higher-yielding accounts. An OLG model with a cash-in-advance constraint leading to more liquidity demand by the young can explain this. As a result, empirically, banks in older MSAs have more expensive, but more stable deposit funding, hold less cash, and choose longer maturity assets.
Foreign Ownership of U.S. Debt: Good or Bad? with Sydney Ludvigson and Stijn Van Nieuwerburgh. Jan 2016.
Abstract: The last 20 years have been marked by a sharp rise in international demand for U.S. reserve assets, or safe stores-of-value. This paper analyzes the welfare consequences of these fluctuations in international capital flows in a two-sector general equilibrium model with uninsurable idiosyncratic and aggregate risks. The model implies that such fluctuations have potentially sizable welfare consequences for individuals that vary by agae, wealth, and income. The young benefit from a capital inflow due to lower interest rates, which reduce the costs of home ownership and of borrowing against higher expected future income. Middle-aged savers are hurt because they are crowded out of the safe bond market and exposed to greater systematic risk in equity and housing markets. Although they are partially compensated for this in equilibrium by higher risk premia, they still suffer from lower expected rates of return on their savings. By contrast, retired individuals, who are drawing down assets and who receive social security income that is least sensitive to the current aggregate state, benefit handsomely from the rise in asset values that accompanies a capital inflow. Under the "veil of ignorance," newborns gain from foreign purchases of the safe asset and would be willing to forgo up to 1% oflifetime consumption in order to avoid a large capital outflow.
The Carry Trade and UIP when Markets are Incomplete, with Lorenzo Garlappi and Sajjad Neamati. May 2015.
Abstract: Many of the leading models of the carry trade imply that, contrary to the empirical evidence, a country's currency depreciates in times of high consumption and output growth, a manifestation of the Backus and Smith (1993) puzzle. We propose a modification of these models to account for financial market incompleteness and show that such a modification can induce positive correlation between currency appreciation and consumption or output growth while, at the same time, helping resolve the Backus and Smith (1993) and Brandt, Cochrane, and Santa-Clara (2006) puzzles. Furthermore, in many of the existing models, the assumed fundamental cross-country differences responsible for interest rate differentials also appear at odds with the data. We show that default risk and financial openness are strongly related to interest rate differentials and carry trade profits in the data. The incomplete markets model we propose is consistent with these novel empirical facts.
New In Town: Demographics, Immigration, and the Price of Real Estate, with Dragana Cvijanovic and Christopher Polk. April 2010.
Abstract: We link cross-sectional variation in both realized and expected state-level house price appreciation to cross-sectional variation in demographic changes. In particular, we extract two components of expected population growth: 1) a natural component due to predictable demographic changes related to fertility and mortality rates and 2) a non-natural component due to immigration. Our analysis shows that only the second component forecasts cross-sectional variation in state-level house price appreciation. We find that the sensitivity of both realized and expected returns to these demographic changes is stronger for states with greater population density, consistent with population growth actually causing the price appreciation rather than merely being correlated with some other phenomenon. We also document that building permits anticipate a portion of future population growth and house price appreciation. However, lagged measures of building activity do not subsume the ability of our expected immigration proxy to forecast price appreciation. Our findings are consistent with fundamentals driving an economically important portion of cross-sectional variation in state-level housing returns. However, markets appear to significantly under-react to the component of fundamentals that is arguably more difficult for market participants to anticipate.