The Tragedy of Complexity
Complexity can create value. At the same time, understanding more complex goods requires more of an agent’s attention. We show that equilibrium...
Forecasting Crashes with a Smile
We derive option-implied bounds on the probability of a crash in an individual stock, and argue a priori that the lower bound should be close to the...
Artificial intelligence and financial crises
The rapid adoption of artificial intelligence (AI) poses new and poorly understood threats to financial stability. We use a game-theoretic model to...
Shadow Banks on the Rise: Evidence Across Market Segments
This paper uses credit bureau data on 648 million retail loans in India to examine the comparative advantages of shadow banks across market segments...
The Structure of Leveraged Buyouts and the Free-Rider Problem
We study the structure of public firm buyouts in a model that features both the Berle-Means problem (lack of incentives) and the Grossman-Hart problem...
Polarization, Purpose and Profit
We present a model in which firms compete for workers who value nonpecuniary job attributes, such as purpose, sustainability, political stances, or...
Marketwide Memory
We propose a novel measure that allows us to study memory associations in financial markets over the course of several decades. Using our measure, we...
The surprising leadership effect accelerators have on startup employees
Entrepreneurship training programs across the world aim at boosting the success of startups. But even when startups fail, these programs bring...
Bond Supply, Yield Drifts, and Liquidity Provision Before Macroeconomic Announcements
UK government bond yields tend to rise in a two-day window before labor market data releases and monetary policy news. This effect, particularly...
Causal Narratives
We study causal narratives – narratives which describe a (potentially incorrect) causal relationship between variables. In a series of experiments...
Research highlight
Reaching for Yield: Evidence from Households
Journal of Financial Economics, 168, 104057
Arbitrage Networks
This paper studies the general equilibrium implications of arbitrage trades in segmented financial markets. Arbitrageurs choose a category of trades...
When Private Firms Provide Public Goods: The Allocation of CSR Spending
This paper studies how firms allocate their Corporate Social Responsibility (CSR) expenditures to inform the welfare effects of corporate...
How central banks can meet the financial stability challenges arising from artificial intelligence
The growing use of artificial intelligence (AI) poses difficult challenges for the financial authorities. AI allows private-sector firms to optimise...
