John Sedunov - Research

Publications (Ordered Chronologically)

The Life Cycle of Systemic Risk and Crises (With Allen N. Berger) - Journal of Money, Credit, and Banking, Volume 56(8), Pg. 1923-1961. (Lead Article)
The Role of Investor Sentiment in Bank Liquidity Creation (with Jin Cai and Michael Pagano) - Finance Research Letters, December 2023, 58(D), 104663.
Cross-Border Bank Flows and Systemic Risk (with Andrew Karolyi and Alvaro Taboada) - Review of Finance, September 2023, 27(5), 1563-1614.
Operational Risk Is More Systemic than You Think: Evidence from U.S. Bank Holding Companies (with Allen N. Berger, Filippo Curti, and Atanas Mihov) - Journal of Banking and Finance, October 2022, Volume 143, Article 106619.
Supervisory Enforcement Actions Against Banks and Systemic Risk (With Allen N. Berger, Jin Cai, and Raluca A. Roman) - Journal of Banking and Finance, July 2022, Volume 140, Article 106222.
Federal Reserve Intervention and Systemic Risk during Financial Crises - Journal of Banking and Finance, December 2021, Volume 133, Article 106210.
How did Retail Investors Respond to the COVID-19 Pandemic? The Effect of Robinhood Brokerage Customers on Market Quality (With Michael Pagano and Raisa Velthuis) - Finance Research Letters, November 2021, Volume 43, Article 101946.
The Granular Nature of Large Institutional Investors (With Itzhak Ben-David, Francesco A. Franzoni, and Rabih Moussawi) - Management Science, November 2021, Volume 63, Issue 11, 6629-7289. Featured Article (Blog Post).
- Media Coverage: VoxEU; ProMarket; Forbes; CIO; Harvard Law School Forum; The Street; Financial Times
Small Banks and Consumer Satisfaction - Journal of Corporate Finance, February 2020, Volume 60, Article 101517.
Do Bank Bailouts Reduce or Increase Systemic Risk? The Effects of TARP on Financial System Stability (With Allen N. Berger and Raluca A. Roman) - Journal of Financial Intermediation, July 2020, Volume 43.
Governance Mechanisms and Effective Activism: Evidence from Shareholder Proposals on Poison Pills (With Mireia Gine and Rabih Moussawi) - Journal of Empirical Finance, September 2017, Volume 43, Pg. 185-202.
Bank Liquidity Creation and Real Economic Output (With Allen N. Berger) - Journal of Banking and Finance, August 2017, Volume 81, Pg. 1-19 (Lead Article)
Does Bank Technology Impact Small Business Lending Decisions? - Journal of Financial Research, Spring 2017, Volume 40 (1), Pg. 5-32 (Lead Article)
What Is The Systemic Risk of Financial Institutions? - Journal of Financial Stability, June 2016, Volume 24, 71-87
A Comprehensive Approach to Measuring the Relation between Systemic Risk Exposure and Sovereign Debt (With Michael Pagano) - Journal of Financial Stability, April 2016, Volume 23, Pg. 62-78

Books (Ordered Chronologically)

Managing Financial Institutions: An Integrated Valuation Approach (with Michael Pagano) - Forthcoming, World Scientific

Book Chapters (Ordered Chronologically)

Systemic Risks and Economic, Banking, and Financial Market Crises in The Oxford Handbook of Banking, 4th Edition (with Allen Berger, Jose Luis-Peydro, and Alvaro Taboada), 2025, ISBN: 9780198897071

Working Papers

Under Regulatory Pressure: Local Housing Price Hikes from Bank Stress Tests and Population Outflows (With Lily Li and Raluca Roman)

Abstract: We find that counties subject to more shocks related to bank stress tests experience higher housing price growth rates. Our empirical design exploits heterogeneity over time and in the cross-section in counties’ exposure to regulatory pressure related to bank stress tests. Our result is robust to alternative stress test measures and alternative housing price datasets. The effect occurs through a credit exclusion channel: banks facing stress test shocks reduce the credit supply to low-income, high-risk borrowers, resulting in a shift in housing market transactions toward the purchase of more expensive houses. Counties with more intense stress test shocks experience net population outflows, and the remaining population have a lower growth rate in the percentage of low-income families and a higher growth rate in average taxable income.

ETF Failures-to-Deliver: Naked Short-Selling or Operational Shorting? (With Richard B. Evans, Rabih Moussawi and Michael Pagano)

Abstract: Unlike common stocks, ETF failures-to-deliver (FTDs) remain high even after the implementation of SEC rules banning naked shorting and removing market maker exemptions for short sales. We find that ETF-related FTDs are growing at a disproportionately high rate in dollar volume. While the prior literature and SEC rule-making would point to a rise in naked short-selling as a possible explanation for this growth in FTDs, we identify an alternative cause related to the market making activities associated with the ETF creation/redemption process, which we label “operational shorting”. We propose a simple methodology to estimate operational shorting and show that our measure is consistent with the economics behind the mechanism. Examining the market implications of operational shorting, we find that it is associated with improved ETF liquidity but that it is also predictive of market wide indicators of systemic and counterparty risk. In exploring possible mechanisms for that predictive relationship, we find that there is commonality in operational shorting across ETFs with the same lead market maker/authorized participant, suggestive of an increase in counterparty risk.

- - Media coverage: WSJ; Yahoo! Finance
Bitcoin ETFs' Contribution to Price Discovery (with Monyka Sywak and Raisa Velthuis)

Abstract: We evaluate the price discovery process for various bitcoin securities and assess their relative importance following the introduction of the spot bitcoin ETF in January 2024. We compute (generalized) information shares utilizing minute-level spot, ETF, and futures contract price data and find that price discovery has moved away from futures markets towards spot markets and spot bitcoin ETFs. Using millisecond level ETF data, we also document that price discovery among ETFs predominantly comes from changes in quotes rather than trades, implying that there is limited informed trading in this new market space.

Permanent Working Papers

Bitcoin and the Demand for Money (With Michael Pagano)

Abstract: Is bitcoin money? We study the characteristics of bitcoin in the context of its use as money, following the theory of money demand first posited by Keynes (1935). Specifically, we answer three questions. First, is bitcoin used as a transactional currency? Yes. Second, is bitcoin used as a speculative currency? Yes. Third, is bitcoin used in a precautionary sense? No, although there are some weak results in support of this motive. We find this evidence using data on bitcoin returns and volume from 2010-2016, using a principal components analysis framework, supplemented with tests that incorporate specific elements of each component.

Return Home