Martin C. Schmalz

I am a financial economist with a wide range of research interests, including

(A) Bayesian Learning, Behavioral Finance, and Asset Pricing

(B) Corporate Finance, Entrepreneurship, and Security Design

(C) Ownership Structure, Firm Strategy, and Market Behavior


PhD, Economics, Princeton University, USA

Dipl.-Ing., Mechanical Engineering, Universität Stuttgart, Germany

    Current Academic Appointments

    CEPR, Research Affiliate (since 2017)

    University of Michigan, Stephen M. Ross School of Business

    •     NBD Bancorp Assistant Professor in Business Administration (since 2016)
    •     Harry H. Jones Research Scholar (since 2015)
    •     Assistant Professor of Finance (since 2012)

    Peer-Reviewed Publications

    1. (A) Anxiety in the Face of Risk (with Thomas Eisenbachdescribes the behavior of an agent that is more risk-averse for imminent than for distant risks. [Journal of Financial Economics, 121(2), 2016, pp. 414-426]

    2. (B) Can Changes in the Cost of Carry Explain the Dynamics of Corporate Cash Holdings? (with José Azar and Jean-François Kagy) provides evidence that changes in the costs of holding cash can explain secular trends in U.S. corporate cash holdings, as well as cross-country variation in the level of cash. [Review of Financial Studies, 29(8), 2016, pp. 2194-2240]

    3. (B) Housing Collateral and Entrepreneurship (with David Sraer and David Thesmar) shows that collateral constraints restrict entrepreneurial activity. [The Journal of Finance, 72(1), 2017, pp. 99-132]

    4. (A) Fund Flows and Market States (with Francesco Franzonidocuments that retail investors reallocate more capital to outperforming mutual funds when the market moves sideways, compared to times with more extreme factor realizations. A simple Bayesian learning model predicts the documented pattern. [Review of Financial Studies, 30(8), 2017, pp. 2621-2673]

    5. (C) Anti-Competitive Effects of Common Ownership (with José Azar and Isabel Tecu) provides evidence that joint ownership of natural competitors causes higher consumer prices. [The Journal of Finance, forthcoming]

    Book Chapters
    1. (B) Payout Policy (with Joan Farre-Mensa and Roni Michaely) reviews the literature on corporate payouts. [In: Robert Jarrow (Ed.), Annual Review of Financial Economics, 2014] 

    2. (C) Common Ownership Concentration and Corporate Conduct reviews the literature on common ownership concentration, firm behavior, and equilibrium outcomes. [In: Patrick Bolton (Ed.), Annual Review of Financial Economics, 2017]

    Working Papers

    (A) Bayesian Learning, Behavioral Finance, and Asset Pricing

    Revealing Downturns [Online Appendix(with Sergey Zhuk) shows that rational investors respond more to information in downturns than in upturns; Bayesian learning is sufficient to cause negatively skewed stock returns and conditional volatility. [conditionally accepted, Review of Financial Studies]

    Anxiety, Overconfidence, and Excessive Risk Taking (with Thomas Eisenbach) provides an explanation why some people sometimes become overconfident and take excessive risks.

    Asset Pricing with Horizon-dependent Risk Aversion (with Marianne Andries and Thomas Eisenbach) reconciles long-run risk models with a downward-sloping term structure of risk prices without requiring a preference for the early or late resolution of uncertainty. [On the Fall 2014 NBER Asset Pricing and 2016 AFA program.]

    The Term Structure of the Price of Variance Risk (with Marianne AndriesThomas Eisenbach, and Yichuan Wang) finds that the price of variance risk decreases with maturity, and thus helps distinguish between alternative asset pricing models.

    (B) Corporate Finance and Security Design

    Disagreement and Optimal Security Design (with Juan Ortner) proves that disagreement between issuers and market participants can make debt, pooling, tranching, and convertibles optimal. [On the AEA 2016 program]

    Financing Payouts (with Joan Farre-Mensa and Roni Michaely) documents that a large fraction of dividends and repurchases are financed with simultaneous securities issuances. [On the AFA 2017 program]

    Unionization, Cash, and Leverage uses a regression discontinuity design on unionization elections to identify the causal effect of unionization on firms' financial policies.

    (C) Common Ownership, Competition, and Corporate Behavior

    Common Ownership, Competition, and Top Management Incentives (with Miguel AntónFlorian Ederer, and Mireia Ginéshows that managers in more commonly owned industries have reduced incentives to compete. [On the Fall 2016 NBER Organizational Economics program.]

    Ultimate Ownership and Bank Competition (with José Azar and Sahil Raina) develops an index of ultimate ownership concentration and relates it to market-level prices of deposit banking products. [On the 2016 NBER SI IO program.]

    (*) Central Banking & Monetary Economics

    (Why) Do Central Banks Care About Their Profits? (with Igor Goncharov and Vasso Ioannidou) shows that central banks care about their profitability, especially when political pressure or career concerns are more pronounced. These findings have implications for the effectiveness and sustainability of non-traditional monetary policy.