Research

Research Interests

Household Finance | Investor Behavior | Financial & Economic History | Derivatives Regulation

Publications

Does Speculation Increase Volatility in Grain Futures Markets? Evidence from the Interwar Chicago Board of Trade, with Alexander Pütz

European Review of Economic History, September 2024, Vol. 29 (1)

A key justification for futures regulation in the interwar period was the idea that speculators were making grain prices volatile, and therefore speculative activity needed to be restricted. This paper uses new data on grain futures contracts traded at the Chicago Board of Trade to empirically assess whether speculators Granger caused volatility in futures markets during the interwar period. We find that speculators did not Granger cause volatility, but volatile markets Granger caused speculative activity. These results suggest that speculators entered volatile markets but did not increase volatility.

Working Papers

Does Options Trading Stabilize Underlying Markets? Insights from the 1936 Options Ban, with Fiona F. Höllmann

SSRNThis paper examines the causal effect of options trading on underlying markets, using the 1936 U.S. ban on commodity options as a natural experiment. Using a newly digitized panel of Chicago and London grain futures, we show that banning options raised futures volatility in Chicago relative to London. This finding is robust to controls for trading volume, trader composition, and local macro-financial factors. We then study the reintroduction of grain options between 1984 and 1987, finding that volatility fell when options trading resumed. These results suggest that options stabilize underlying prices by facilitating an efficient incorporation of information into prices.

Mental Barriers to Investing: Psychological Fixed Costs and Stock Market Participation, with Fiona F. Höllmann

SSRNThis study examines how affective states, referring to individuals’ mood, psychological condition, and ability to process uncertainty, influence household stock market participation. Using mental health data from the German Socio-Economic Panel (SOEP) as a proxy for affective states, we show that better mental health significantly increases the likelihood of stock ownership, while symptoms of depression and chronic worry reduce participation. Our estimates suggest that a one-standard-deviation improvement in overall mental health translates to approximately 120,000 stock market entering households annually in Germany. To address endogeneity, we exploit the COVID-19 pandemic as a natural experiment using a Difference-in-Differences Instrumental Variables (DiD-IV) approach. We find that individuals with weaker pre-crisis social networks experienced larger declines in mental health during the pandemic and are significantly less likely to become stockholders than those with stronger social ties. Conceptually, we identify three channels through which mental health affects financial decision-making: external beliefs (expectations about returns), internal beliefs (perceived capability to invest), and preferences (risk tolerance).

150 Years of U.S. Inflation Expectations, with Kuntara Pukthuanthong and William Quinn

SSRNWe develop two long-run monthly proxies for inflation expectations in the United States: a market-based measure derived from commodity prices from 1877-2020, and a narrative intensity measure based on the text of all New York Times articles from 1870-2020. The market-based measure, despite having been influential in extant literature, is found to be largely unrelated to subsequent inflation. However, the narrative intensity measure is a strong and consistent predictor of future inflation. For the period of overlap with the Michigan Survey of Consumers, its correlation with survey-based inflation expectations is 0.74. We then use this measure to provide new evidence on debates surrounding historical inflations and deflations. Our most notable result is that, contrary to the current consensus, the deflation of 1930-33 became anticipated relatively early. An unsupervised article-level topic analysis over the 150-year sample documents a shift from inflation narratives based on commodities, currency, and market quotations to narratives based on energy, central banks, and monetary policy. Finally, we find that unexpectedly hawkish monetary policy predicts an increase in inflationary narrative intensity, but that this relationship is driven entirely by the element of monetary surprises that is a linear function of macroeconomic conditions. Inflationary news media narratives respond to the same macroeconomic news as the Federal Reserve, but the monetary policy response to this news does not itself appear to have an effect on inflationary narratives.

Ongoing Projects

Social Networks and Investor Behavior in Historical Financial Markets, with Olga Balakina, Jonas Backhus and William Quinn

This research project contributes to the social finance literature by examining how social networks and peer interactions influenced investor behavior in British financial markets between 1862 and 1970. Extensive shareholder registers are being digitized using AI-based handwriting recognition to construct a novel dataset capturing investors’ names, gender, occupation, addresses, ownership holdings, and transfers over time. This newly collected archival data address key measurement and identification challenges, enabling the isolation of causal peer effects from homophily and shared economic shocks in a pre-digital environment. The project is expected to provide novel insights into how neighborhood characteristics, word-of-mouth communication, and socio-demographic factors shaped stock market entry, holding periods, and risk-taking behavior. By uncovering the mechanisms through which localized networks facilitated information diffusion and influenced financial decision-making, the findings aim to deepen our understanding of thow social networks influence financial behavior and open new avenues for research in behavioral and historical finance.
This project is supported by a data collection grant from Behavioral Finance e.V.

Portfolio Choice in Times of War: Evidence from Germany, 1931-1945, with Sibylle Lehmann-Hasemeyer

What shapes how ordinary households invest and how do they react when the economic and political ground shifts beneath them? These questions are central to household finance, yet hard to answer: we rarely observe individual portfolios over long horizons that contain large, sharp shocks. This project builds a dataset that speaks to those debates. Using newly digitized records from a private bank in Germany, we reconstruct the securities holdings of roughly 1,800 investors at successive year-ends from 1931 to 1945 and follow them over time. The setting offers something modern brokerage data cannot: real portfolios spanning the Great Depression, an authoritarian regime change, and the Second World War - a sequence of natural experiments for studying how personal experiences shape risk-taking, whether households rebalance or stay inert under uncertainty, and how political shocks transmit into financial decisions. Combining the portfolios with historical stock-exchange prices and biographical data lets us test these mechanisms at the individual level.
This project is supported by a data collection grant from Behavioral Finance e.V.

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