I propose that the nonfinancial component of financial firms' assets, in particular the growth opportunities associated with business operations, drives most of the variation in their equity valuation. I document this fact for a large class of intermediaries: life insurance companies. In particular, I decompose insurers' market equity returns into net financial asset returns and net business asset returns and show that these two components have very different risk exposures and are negatively correlated outside of the 2008-2009 financial crisis. The variation in life insurers' net business asset returns drives 81% of the aggregate time series variation and 100% of the cross-sectional variation in their market equity returns. For this reason, the current intense regulation on life insurers' net financial assets may be insufficient as a great deal of risk is derived from their net business assets which are comparatively under-regulated.

This study investigates whether increased diversification in insurance-linked securities (ILS) hedge funds improves their performance and identifies the underlying mechanisms. We develop a new measure of diversification based on cross-class return dispersion, which captures ILS funds' flexibility in adjusting their catastrophe risk exposure, financial market timing, and factor selection. Our findings show that more diversified ILS funds achieve higher returns without increasing risk, with performance driven primarily by factor returns rather than excess returns. These funds also outperform their counterparts during catastrophe market downturns by dynamically reallocating risk and exploiting market timing opportunities. An event study reveals that these funds actively manage their risk exposure before negative shocks, but adopt a risk-averse stance afterward, potentially sacrificing gains. Our results reconcile the conflicting findings in the literature, demonstrating that strategic and dynamic diversification enhances ILS fund performance through factor-driven mechanisms, rather than excessive specialization or passive risk allocation.

We investigate how niche assets (e.g., catastrophe bonds) affect fixed-income hedge fund portfolio performance. Using a portfolio choice model with adjustable weights for both niche and existing assets, we demonstrate that niche assets provide diversification or substitution benefits depending on time-varying correlations and relative Sharpe ratios between the asset types. We further find that diversification and substitution benefits are equally important when incorporating niche assets but are often neglected. We propose improving fixed-income funds by dynamically adjusting the portfolio allocations of niche and existing assets according to market conditions or including niche strategy funds in a fund-of-hedge-funds approach.

Capital reallocation is procyclical, despite measured productive reallocative opportunities being acyclical, or even countercyclical. This paper reviews the advances in the literature studying the causes and consequences of capital reallocation (or lack thereof). We provide a comprehensive set of capital reallocation stylized facts for the US, and an illustrative model of capital reallocation in equilibrium. We relate capital reallocation to the broader literatures on business cycles with financial frictions, and on resource misallocation and aggregate productivity. Finally, we provide directions for future research.

Superstar founders have enormous wealth, and their wealth is growing faster than even the very top of the overall wealth distribution.  We define superstar founders as  founders of firms that went public through a true IPO (i.e. not a spin-off or reverse-LBO) between 1996 and 2018, and we study their wealth at IPO and over their firms' life cycles. We show that considering founders' stake in their own firm understates their overall wealth by as much as 50% for firms ten years past their IPO.  Wealth from shares acquired post-IPO at below-market prices is around 5% of overall wealth.  The ultimate wealth outcomes for superstar founders varies widely with vast differences between average and median outcomes.  We demonstrate how much of this variation is due to differences in valuations at IPO, in ownership at IPO, in ownership over firms' life cycle, and variation in firm performance.  We also document the relationship between founder and VC ownership.

We study the relationship between entrepreneurs' human capital and their firms' outcomes, and its consequences for wealth inequality. High human capital enables entrepreneurs to earlier obtain financing from outside investors. This early financing enables entrepreneurs to grow their firms faster. We show that firms realize higher growth rates when entrepreneurs sell the firms sooner. For young firms, an additional one percent of firm ownership sold is associated with a fifteen percent increase in firms' growth rates. However, entrepreneurs who have earlier access to external financing tend to maintain larger ownership of their firms, leading to a lower growth rate despite high initial firm value.