Published Paper

1.  Aspirational Utility and Investment Behavior with Andreas Aristidou, Aleks Giga and Fernando Zapatero

Forthcoming, Journal of Financial Economics

We explore the extent to which aspirations -such as those forged in the course of social interactions- explain 'puzzling' behavioral patterns in investment decisions. We motivate an aspirational utility, reminiscent of FriedmanSavage (1948), where social considerations (e.g., status concerns provide an economic foundation for aspirations. We show this utility can explain a range of observed investor behaviors, such as the demand for both right- and left-skewed assets; aspects of the disposition effect; and patterns in stock-market participation consistent with empirical observations. We corroborate our theoretical findings with two novel laboratory experimental studies, where we observed participants' preference for skewness in risky lotteries shift as lab-induced aspirations shifted. 

Working Papers (in order of "recently updated")

2. Clining Onto the Cliff: A Model of Financial Misconduct, with AJ Chen and Fernando Zapatero

We introduce a model of financial misconduct where white-collar crime manifests as an optimal choice of skewness in response to managerial pressure. The literature discusses multiple sources of such managerial pressure, some pecuniary (e.g., meeting analyst forecasts), others non-pecuniary (e.g., managerial hubris or "tunnel vision"). Our model's focus on skewness-seeking provides a novel tool to analyze non-pecuniary sources of managerial pressure, offering an improvement on the conventional use of Becker's framework of crime (1968). The model delivers several interesting predictions and provides a plausible mechanism for the "slippery slope to crime" that is finding growing support in the literature.

3. Distribution-Dependent Value of Money: A Coalition-Proof Approach to Monetary Equilibrium, with Ohik Kwon and Byoung-Ki Kim

We present a monetary model tailored to cryptocurrencies. Motivated by the heavily skewed (cross-sectional) distribution of cryptocurrency observed in reality, we firstly aim to understand how the distribution of money affects its value as medium of exchange. We document a network effect: the value of a given unit of money is higher when its distribution is even, rather than skewed. We also find some distributions to be destabilizing: there is a strong incentive to form coalitions to repudiate the incumbent and re-issue new currency when the distribution is skewed, calling for a "coalition-proof" refinement. While our focus on distribution-dependence and coalition-proofness is theoretically novel on its own, our model also provides constructive advice to future designers of cryptocurrency.

4. Two Reasons to Covet Social Status: A Model of Status-Driven Choice, with Fernando Zapatero

The status literature has suggested two reasons why social status may be desirable. First, higher status gives a sense of advancement vis-a-vis peers -other agents in a reference group. Second, similar to a firm's investment, higher status can improve the individual's wealth prospects in the future. We study the optimal strategy of an individual who maximizes multiperiod utility from consumption and from status (through the previous two channels). We find many realistic features that are consistent with empirical evidence, for example, a preference to be the "big fish in a small pond". The model also generates a single-period utility function that reminisces Friedman and Savage (1948).

5. Disaster in My Heart: A Visceral Explanation for Asset Pricing Puzzles 

Best Paper Award: AFBC PhD Forum 2018, Best Dissertation Award: KAFA 2018

I introduce the notion of 'dis-utility shocks': rare but large negative idiosyncratic deviations from the consumption-implied utility level. Dis-utility shocks represent an unmistakable aspect of human life - that it can sometimes be unusually painful. I propose to adjoin dis-utility shocks to a standard consumption-based asset pricing model and develop a method to compute their impact on asset prices numerically. Despite their idiosyncratic nature, calibration results show that they are priced. Moreover, contrary to many other asset pricing models, I embed dis-utility shocks in a parsimonious manner - in just three parameters - yet show that they help address many of the standard asset pricing puzzles.