"Quantitative Easing and Bank Risk Taking: Evidence from Lending"(with J. Kandrac), Journal of Money, Credit and Banking, accepted
"The Effect of Bank Supervision on Risk Taking: Evidence from a Natural Experiment" (with J. Kandrac), Review of Financial Studies, forthcoming
"Follow the Leader: Using the Stock Market to Uncover Information Flows Between Firms" (with A. Scherbina), Review of Finance, Vol. 24, pp. 189–225, 2020
"Measuring Stress in Money Markets: A Dynamic Factor Approach" (with S. Carpenter, S. Demiralp, and Z. Senyuz), Economics Letters, Vol. 125, pp. 101-106, 2014
"Asset Price Bubbles: A Survey" (with A. Scherbina), Quantitative Finance, Vol. 14, pp. 589-604, 2014
"Flow Effects of Large-Scale Asset Purchases" (with J. Kandrac), Economics Letters, Vol. 121, pp. 330-335, 2013
"The Federal Reserve's Balance Sheet and Overnight Interest Rates: Empirical Modeling of Exit Strategies" (with J. Marquez and A. Morse), Journal of Banking & Finance, Vol. 37, pp. 5300-5315, 2013
"Market Reaction to Corporate Press Releases" (with A. Neuhierl and A. Scherbina), Journal of Financial and Quantitative Analysis, Vol. 48, pp. 1207-1240, 2013
"Asset Bubbles: An Application to Residential Real Estate" (with A. Scherbina), European Financial Management, Vol. 18, pp. 464-491, 2012
"Data Snooping and Market-Timing Rule Performance" (with A. Neuhierl), Journal of Financial Econometrics, Vol. 9, pp. 550-587, 2011
"Price Formation in Spot and Futures Markets: Exchange Traded Funds vs. Index Futures," Journal of Derivatives, Vol. 17, pp. 26-40, 2009
"Arbitrage Capital of Global Banks" (with A. Anderson and W. Du)
Abstract: We document a new business model for global banks in the post-crisis environment: use wholesale funding to finance near risk-free arbitrage positions, in particular, the interest on excess reserves arbitrage and the covered interest rate parity arbitrage. Under this new business model, we examine the effects of a large negative wholesale funding shock for global banks as a result of the US money market mutual fund reform implemented in 2016. We find that the primary response of global banks to the reform was a cutback in arbitrage positions that relied on unsecured funding. Contrary to the traditional bank lending channel, we do not find a reduction in loan provision.
"Career Outcomes of Mutual Fund Managers" (with B. Barber and A. Scherbina)
Abstract: We investigate the determinants of mutual fund manager career outcomes. We find that, although career outcomes are largely determined by past performance, measured by returns and fund flows, personal attributes also factor in. All else equal, female managers are less likely to be promoted and have shorter tenures than male fund managers. This finding applies to a greater extent to women who co-manage funds with other managers, which suggests that working in teams negatively affects women's careers when compared to men's. Moreover, we show that, all else equal, younger managers, U.S.-educated managers, and managers who attended elite schools experience better career outcomes than otherwise similar managers.
"Monetary Policy Options at the Effective Lower Bound: Assessing the Federal Reserve's Current Policy Toolkit" (with H. Chung, E. Gagnon, T. Nakata, M. Paustian, J. Trevino, Diego Vilan, and W. Zheng), Finance and Economics Discussion Series 2019-003, Board of Governors of the Federal Reserve System (U.S.), revise and resubmit at the International Journal of Central Banking
Abstract: We simulate the FRB/US model and a number of statistical models to quantify some of the risks stemming from the effective lower bound (ELB) on the federal funds rate and to assess the efficacy of adjustments to the federal funds rate target, balance sheet policies, and forward guidance to provide monetary policy accommodation in the event of a recession. Over the next decade, our simulations imply a roughly 20 to 50 percent probability that the federal funds rate will be constrained by the ELB at some point. We also find that forward guidance and balance sheet polices of the kinds used in response to the Global Financial Crisis are modestly effective in speeding up the labor market recovery and return of inflation to 2 percent following an economic slump. However, these policies have only small effects in limiting the initial rise in the unemployment rate during a recession because of transmission lags. As with any model-based analysis, we also discuss a number of caveats regarding our results.
"An Agency Problem in the MBS Market and the Solicited Refinancing Channel of Large-Scale Asset Purchases" (with J. Kandrac), Finance and Economics Discussion Series 2015-027, Board of Governors of the Federal Reserve System (U.S.)
Abstract: In this paper, we document that mortgage-backed securities (MBS) held by the Federal Reserve exhibit faster principal prepayment rates than MBS held by the rest of the market. Next, we show that this stylized fact persists even when controlling for factors that affect prepayment behavior, and thus determine the MBS that are delivered to the Federal Reserve. After ruling out several potential explanations for this result, we provide evidence that points to an agency problem in the secondary market for MBS, which has not previously been documented, as the most likely explanation for the abnormal prepayment behavior of Federal Reserve-held MBS. This agency problem -- a key feature of the MBS market -- arises when originators of mortgages that underlie the MBS no longer share in the prepayment risk of the securities, thereby increasing incentives to solicit refinancing activity. Therefore, Federal Reserve MBS holdings acquired from originators as a result of large-scale asset purchases can help stimulate economic activity through a so-called "solicited refinancing channel.'' Finally, we provide an estimate of the additional refinancing activity resulting from the solicited refinancing channel in the years after the Federal Reserve's first MBS purchase program, demonstrating that this channel conveyed savings on monthly mortgage payments to homeowners.
"Economic Linkages Inferred from News Stories and the Predictability of Stock Returns" (with A. Scherbina)
Abstract: We show that news stories contain information about economic linkages between firms and document that information diffuses slowly across linked stocks. Specifically, we identify linked stocks from co-mentions in news stories and find that linked stocks cross-predict one another's returns in the future. Our results indicate that information can flow from smaller to larger stocks and across industries. Content analysis of common news stories reveals many types of firm linkages that have not been previously studied. We find that the cross-predictability in returns remains even after firm pairs with customer-supplier ties are removed. Results show that both limited attention and slow processing of complex information contribute to slow information diffusion.
"Issues in the Use of the Balance Sheet Tool" (with M. Carlson, S. D'Amico, C. Fuentes-Albero, and P. Wood), Finance and Economics Discussion Series 2020-071. Board of Governors of the Federal Reserve System (U.S.)
"Demand for M2 at the Zero Lower Bound: The Recent U.S. Experience" (with R. Judson and V. Wong), Finance and Economics Discussion Series 2014-22, Board of Governors of the Federal Reserve System (U.S.)
"The Federal Reserve's Balance Sheet and Overnight Interest Rates" (with J. Marquez and A. Morse), Finance and Economics Discussion Series 2012-66, Board of Governors of the Federal Reserve System (U.S.)
"An Investigation of Corporate Risk Shifting Behavior" (with T. Berg, A. Neuhierl, and A. Scherbina)
"Commonality in Legal Risks" (with A. Mathur and A. Scherbina)
"Empirical Evidence of Age Discrimination in the Workplace'' (with A. Scherbina)