VictorJuiz/thesis huggingface dataset:
Essays in financial economics

This thesis consists of three essays, which examine several problems in active asset management and financial intermediation. The first essay demonstrates that skill and scale are significantly mismatched among actively managed equity mutual funds. The second essay models dealer balance sheet costs that arise from debt-overhang, and shows how these balance sheet costs affect valuation, pricing, and liquidity in dealer-intermediated market. The third essay shows that the funding costs to derivatives dealers' shareholders for carrying and hedging dealing inventory have an economically important impact on derivatives prices. An implication is that some supposed ``no-arbitrage" pricing relationships, such as put-call parity, frequently break down. Specifically, the first essay demonstrates that skill and scale are mismatched among actively managed equity mutual funds. Many mutual fund investors behave as though they rely on the Capital Asset Pricing Model. They confuse the effects of fund exposures to other common factors with managerial skill. Actively managed mutual funds with positive factor-related past returns thus accumulate assets to the point that they significantly underperform. I also show that the negative aggregate benchmark-adjusted performance of all actively managed equity mutual funds is caused mainly by the poor performance of this small subset of oversized funds. I find that less skilled active fund managers are inclined to tilt their portfolios toward common factors in order to gather more flows and collect more fees. The second essay, co-authored with Leif Andersen and Darrell Duffie, demonstrates that the funding value adjustments (FVAs) of major dealers are debt-overhang costs to their shareholders. In order to maximize shareholder value, dealer quotations therefore adjust for FVAs. Our case examples include interest-rate swap FVAs and violations of covered interest parity. Contrary to current valuation practice, FVAs are not themselves components of the market values of the positions being financed. Current dealer practice does, however, align incentives between trading desks and shareholders. We also establish a pecking order for preferred asset financing strategies and provide a new interpretation of the standard debit value adjustment (DVA). The third essay shows how debt-overhang funding costs to derivatives dealers' shareholders for carrying and hedging inventory affect mid-market derivatives prices. An implication is that some supposed ``no-arbitrage" pricing relationships, such as options put-call parity, frequently break down. I also explore the implications for measuring the term structure of S& P 500 dividend risk premia.

Keywords: Business.
Advisor: Duffie Darrell 
Lustig Hanno 
Singleton Kenneth J.
Essays in financial intermediation

This dissertation sheds light on how the interaction between banks affects the functioning of the financial intermediary by applying tools and concepts from industrial organization to financial intermediation. The first chapter studies systemic risk in the interbank market. We first establish that in the German interbank lending market, a few large banks intermediate funding flows between many smaller periphery banks. Shocks to these intermediary banks in the financial crisis spill over to the activities of the periphery banks. We then develop a network formation model in which banks trade off the costs and benefits of link formation to explain these patterns. The model is structurally estimated using banks' preferences as revealed by the observed network structure in the pre-crisis period. It explains why the interbank intermediation arrangement arises, estimates the frictions underlying the arrangement, and quantifies how shocks are transmitted across the network. Model estimates based on pre-crisis data successfully predict changes in network-links and in lending arising from the crisis-shocks to the intermediary banks. The model is used to quantify the systemic risk of a single intermediary and the impact of ECB funding in reducing this risk. The second chapter demonstrates the impact of Treasury supply on commercial banks' funding. We show that banks widen their deposit spread as Treasury supply increases, leading to a net deposit outflow. At the same time, wholesale funding ratios increase. Both effects are heterogeneous - banks in more competitive markets experience larger outflows and more pronounced jumps in wholesale funding. Results remain robust after controlling for investment opportunities and Fed funds rate changes. The empirical findings are rationalized with a search model, in which banks' market power stems from the presence of inattentive depositors. Consistent with \citet{drechsler2016deposits}, the model predicts the opposite effect for Fed fund rate hikes, i.e., a more substantial response in less competitive markets. We shed light on the interaction between monetary and fiscal policy by examining the effects of the recent Reverse Repurchase Facility.

Keywords: Business.
Advisor: Krishnamurthy Arvind 
Seru Amit 
Zwiebel Jeffrey
Essays in innovation and entrepreneurship

In this thesis, I study sources of innovation and the choices established firms, researchers/entrepreneurs, and venture capitalist make when pursuing innovation. There are three main sources of innovation. First, an innovation can be produced by researchers working inside a large firm. Second, it can result from a collaboration among established firms, researchers, and entrepreneurial start-ups. Finally, an innovation can be created by a start-up. In the latter case, the successful start-up can be either acquired by an established firm or continue to be a stand-alone company. In most cases such a start-up needs to raise outside funding, which is often provided by a venture capital fund. Chapter 1 considers the choices firms and researchers/entrepreneurs make when deciding to pursue innovation together. In this chapter I use an incomplete contracting framework to model the choice between three innovation strategies: an acquisition, an employment contract, and an alliance. Each of these options comes with different contracting frictions that lead to distortions in the agents' innovation effort levels. The agents choose the innovation strategy that maximizes their joint surplus by minimizing the effect of these distortions. In particular, the agents are trading off the hold-up costs characterizing acquisitions, wage restrictions in employment contracts, and possible IP rights conflicts in alliances. My theoretical model generates predictions about the organizational structures used to innovate, and can explain (1) why talent acquisitions were popular among tech companies in 2010--14, (2) why large pharmaceutical companies switched from conducting research internally to pursuing acquisitions, alliances, and licensing agreements, and (3) why some companies engage in alliances, while others don't. Chapter 2 considers start-ups and their origins. I find that people who work in VC-backed start-ups are more likely to become founders of VC-backed start-ups than employees of public companies or private companies not financed by venture capital. I also show that founders come from more successful VC-backed companies. Finally, workers leave their current employment to start new companies: after an IPO or after a failure of a VC-backed company to raise another round of funding. Chapter 3 considers one of the important decisions made by venture capitalists and other partnerships. In this chapter I model the choice of the optimal number of partners. As more partners join, the profits of the partnership grow due to synergy. However, each partner's share of the profits shrinks leading to moral hazard. In addition, as the founder needs to find more partners, it becomes harder to find good candidates and the type of the marginal partner decreases. The model suggests that higher benefits from starting a fund, faster decreasing type of a marginal partner and higher type of the founder can potentially explain why VC funds are smaller than professional service firms.

Keywords: Business.
Advisor: Strebulaev I. A. (Ilʹi͡a Alekseevich) 
Hodrick L. S. (Laurie Simon)
Zwiebel Jeffrey
Essays in labor and public economics

How do large-scale shocks affect individuals and firms? Answering that question has been a motivating theme in my research agenda, which is taken up here through the lens of foreclosures on home mortgages during the financial crisis. Foreclosures grew by 200-400% across counties and foreclosures per open mortgage grew by a factor of five between 2006 and 2011. The surge in foreclosures was unprecedented—far above levels observed in the post-war U.S. era. This dissertation examines the causal effects of these foreclosures on the real economy in several dimensions. The first chapter examines how county foreclosures affect local labor market outcomes, such as employment and hiring, and the mechanism behind these declines. Foreclosures are instrumented using quasi-experimental variation in the timing and magnitude of interest rate changes on adjustable rate mortgages, which involve contractually and pre-determined changes in monthly mortgage payments based on national interest rates. These interest rate changes generate substantial movement in the frequency of foreclosures, but are plausibly exogenous because of their idiosyncratic and discontinuous nature. I find declines in labor market operates operating primarily through a banking sector channel. The second chapter examines how zipcode foreclosures affect individual well-being and community dynamism. Measures of well-being are obtained based on a partnership with Gallup over their U.S. Daily Poll, capturing overall sentiment. Using the same identification strategy, I show that increases in foreclosures are associated with declines in well-being even among individuals who do not experience foreclosure themselves, consistent with spillover effects. The third chapter examines what happened to these individuals who were foreclosed upon and why. How did they fare and why did they move where they move? An important theme in this paper is the importance of local factors—for example, if local factors deteriorate, then individuals are less likely to move to a better subsequent location, reflecting the importance of bargaining power in the job search process. Much more work is required to understand how mortgage markets interact with firm outcomes and the underlying mobility decisions among individuals. I look forward to pursuing further work in these areas in the years that follow.

Keywords: Management Science and Engineering.
Advisor: Bloom Nick
Duggan Mark G. (Mark Gregory) 
Pistaferri Luigi 
Sweeney James L.
Essays in macroeconomics

This dissertation explores the role of risk and uncertainty in macroeconomics. Two aspects are covered. The first chapter studies the effect of countercyclical financial uncertainty shocks on firms and innovation and their implication for the aggregate economy. The second chapter focuses on uncertainty in individual labor earnings and documents the separate roles of employment and wages in driving the countercyclical dispersion of labor earnings growth.

Keywords: economics) degree supervisor.
Economics.
Advisor: Piazzesi Monika 
Auclert Adrien
Essays in macroeconomics and finance

This dissertation studies the role of financial frictions, uncertainty, and heterogeneity for financial markets and for the real economy. In terms of tools, it uses quantitative models with incomplete markets and heterogeneous agents, and disciplines these models with micro data. The dissertation consists of two essays. The first essay explores the role of unemployment scars - the large, long-lasting impact of unemployment on future earnings - for the U.S. housing bust. The second essay proposes a simple perturbation approach for dynamic models with agents who differ in their perception of exogenous shocks, and applies it, among other things, to study the asset premia that arise from Knightian uncertainty.

Keywords: economics) degree supervisor.
Economics.
Advisor: Hall Robert E. (Robert Ernest)
Piazzesi Monika
Essays in market and mechanism design

My dissertation consists of four chapters. In chapter 1, I study verifiable disclosure with multidimensional information. Chapter 2 (joint work with Piotr Dworczak) studies Bayesian persuasion when the Sender's preferences depend only on the mean of posterior beliefs. The first chapters present two contrasting ``persuasion'' models: in chapter 1, voluntary, verifiable disclosure (Sender has no commitment); in chapter 2, Bayesian persuasion or information design (Sender has full commitment). Chapter 3 (joint work with Nicolas Lambert and Michael Ostrovsky) studies a general model of quadratic games and characterizes their unique equilibrium. Finally, in chapter 4 I prove a novel impossibility theorem in the assignment problem.

Keywords: Business.
Advisor: Skrzypacz Andrzej
Lambert Nicolas
Ostrovsky Michael
Essays in microeconomic theory

This dissertation consists of three essays in microeconomic theory. They all concern strategic decisions or interactions under incomplete information. The first chapter, Armed Conflict Bargaining, is coauthored with James Fearon. In armed conflict bargaining, states (or governments and rebel groups) may exchange offers while they are fighting, and conflict can end either with a negotiated deal or a military victory. If fighting is driven by private information about military capabilities or costs relative to benefits, why doesn't the possibility of frequent offers lead to rapid learning and convergence on a settlement, as tends to occur in standard buyer-seller bargaining models? We show that when private information concerns military capability, equilibrium war durations can be quite long for reasonable parameter values, and the conditional probability of negotiated settlement is U-shaped. Armed conflict bargaining with private information about capabilities is an interdependent values (aka ``lemons") problem, but one that differs from buyer-seller contexts in that some fighting can directly reveal information about the value of more fighting. We also show that if, as makes sense for this setting, the sides can't contract to implement deals implying ``ex post regret, " then in equilibrium there can be long stretches of pure fighting with no exchange of serious offers. This is typically the case for both interstate and civil wars. The second chapter, Optimal Ordering in Sequential Auctions, is coauthored with Fanqi Shi and Yiqing Xing. It studies the optimal ordering of first-price and second-price (sealed-bid) sequential auctions. In the case of positive one-dimensional signal, we show sellers always want to order items in decreasing spread when such ordering exists. Moreover, the seller can achieve either fully efficient outcome or optimal revenue. Our analysis provides a (partial) explanation for the prevalence of sequential auctions. The third chapter, Robust Contracts with One-Sided Dynamic Impact, studies a repeated moral hazard setting in which the principal has nonquantifiable uncertainty and evaluates contracts by worse-case performances. In each period a distinct agent appears, and the principal knows only that the agent's action set contains a known base action set, but does not know the full action set. In addition, we assume the contracts cannot be legally enforced, and thus have to be self-enforcing, meaning that the principal will not renege on the previously agreed payment and this incentive must entirely come from that the potential benefits from the future contractual relationships outweigh the short-run payoffs from taking away the payment. In this case, a simple linear or affine contract does not work due to the lack of self-enforcement. We show that an also relatively simple form of contracts, ``capped-linear'' contracts, will satisfy the self-enforcement requirement and is optimal.

Keywords: Economics.
Advisor: Carroll Gabriel 
Fearon James D. 
Kojima Fuhito
Essays in public economics

Transfer programs based on income often generate non-convex kinks in budget sets, particularly in their phase-out regions. In such settings, optimizing agents may respond to changes in the schedule by "jumping" from one bracket of a tax and transfer schedule to another, a behavior that is ruled out by the widely used "first-order" approach in optimal tax theory. This paper presents evidence that such jumps are empirically important using administrative data on reported income that spans a reform of the Brazilian anti-poverty program Bolsa Familia. I develop a theoretical framework that allows for such jumping behavior and show that an additional set of "jumper shares" coupled with standard parameters yield sufficient statistics for welfare analysis. Estimating these shares using the Brazilian data, I document that for every marginal real (R$) transferred by the reform, 12 cents were lost due to the efficiency costs of jumping behavior. Simulations suggest that "jumping" behavior substantially affects the welfare analysis of more general reforms.

Keywords: Economics.
Advisor: Bernheim B. Douglas 
Chetty Raj 
Pistaferri Luigi
Essays in the economics of technology and innovation

The first two chapters of this dissertation study how companies find and organize highly skilled engineers and scientists. The first chapter examines the behavior of job seekers and recruiters in the labor market for software engineers. I obtained data from a recruiting platform where individuals can self-report their computer programming skills and recruiters can message individuals they wish to contact about job opportunities. I augment this dataset with measures of each individual's previous programming experience based on analysis of actual computer source code they wrote and shared within the open-source software community. This novel dataset reveals that female programmers with previous experience in a programming language are 9.40% less likely than their male counterparts to self-report knowledge of that programming language on their resume. Despite public pronouncements, however, recruiters do not appear more inclined toward recruiting female candidates who self-report knowing programming languages. The second chapter of this dissertation explores how and why scientific teams are formed as well as what factors contribute to their success. Richard Freeman, Ina Ganguli, and I investigate the connections among coauthors using data from an original survey of corresponding authors and the Web of Science data of articles that had at least one US coauthor in the fields of Particle and Field Physics, Nanoscience and Nanotechnology, and Biotechnology and Applied Microbiology. We have three main findings. First, we find that US collaborations have increased across US cities as well as across international borders, with the nature of collaborations across cities resembling that across countries. Second, face-to-face meetings are important in collaborations: most collaborators first met working in the same institution and communicate often through meetings with coauthors from distant locations. Third, the main reason for most collaborations is to combine the specialized knowledge and skills of coauthors. The third chapter of this dissertation explores how particular legal policies can inspire company investments in technology adoption. I evaluate if data breach notification laws--legal mandates that companies who have had their data accessed by unauthorized individuals inform their customers--encourage firms to invest in information technology security. To evaluate the impact of data breach notification laws, I collected data on the decisions of 2,185 public companies regarding when to update their web server software and apply security patches during the two years before and after California legislators created the first data breach notification law in the United States. Comparisons are made with groups of companies that were not directly affected by the this law. I find that following the data breach notification law in California, firms based in that state used web server software that was 4.88-12.06% newer.

Keywords: Economics.
Advisor: Levin Jonathan D. (Jonathan David)
Bresnahan Timothy F. 
Niederle Muriel
Essays in the empirical analysis of selling mechanisms

This dissertation empirically investigates the performance of different selling mechanisms. The first chapter addresses the tradeoff between auctions ans posted prices in the context of a scarce perishable good. It makes use of data on National Football League tickets offered at eBay and leverages the within-seller and within-product variation in mechanism choice to estimate a dynamic structural model in which heterogeneous, forward-looking sellers optimally choose between the different mechanisms and their features. Counterfactual results suggest that sellers would experience an average 87.75% decrease in expected revenues if auctions were removed and an almost 13% decrease if posted prices were. In turn, consumers would benefit from an auction-only platform since the expected number of transactions would increase and expected transaction prices would decrease. The second chapter is co-authored with Dom Coey, Brad Larsen, and Kane Sweeney and it focuses on online auctions. In particular, the majority of these auctions are effectively second-price auctions, which implies that to implement the optimal mechanism the seller's problem boils down to choosing the optimal reserve price. Hence, we propose a set of estimators to discover what the optimal reserve price should be and which remain valid under general conditions. We establish the asymptotic properties of these estimators, propose a learning policy for sellers who run absolute auctions to gather data to estimate what reserve price they should use, and illustrate our tools using data from eBay on smartphones. Finally, we also discuss how the approach we propose can be extended to explicitly account for asymmetric bidders and implement the Myerson (1981) optimal auction. The final chapter is also co-authored with Dom Coey, Brad Larsen, and Kane Sweeney. It addresses the empirical analysis of ascending auctions, which is often complicated by severe data restrictions. In particular, we extend the methodology proposed by Aradillas-López et al. (2013) by first proving it remains valid under bidder asymmetries even when the identities of bidders are not observed and then by showing how this information, when available, can be used to improve upon existing tools. We demonstrate the advantages of this approach using USFS timber auctions.

Keywords: Economics.
Advisor: Larsen Bradley J. 
Nair Harikesh S. (Harikesh Sasikumar)
Hong Han
Essays on entrepreneurship and firm dynamics in emerging markets

This dissertation explores three leading frictions to entrepreneurial behavior and firm dynamics in emerging markets, focusing on the context of Brazil. In the first chapter (joint with Mounu Prem), I study the role of corruption in public procurement, and I find that randomized anti-corruption initiatives have positive effects on local economic activity and on the growth of firms who depend on government relationships. In the second chapter (joint with Mounu Prem and Edoardo Teso), I investigate whether and how political considerations distort hiring decisions within public organizations, and I show that patronage practices lead to a misallocation of talent in the public sector. In the third and final chapter (joint with Shai Bernstein, Davide Malacrino, and Tim McQuade), I characterize how local economic shocks affect the composition of entrepreneurs in the economy, finding that young and skilled individuals are the most responsive to investment opportunities in the non-tradable sector, thus playing a key role for aggregate job creation and productivity growth.

Keywords: Economics.
Advisor: Bloom Nick
Dupas Pascaline 
Bernstein Shai
Rauh Joshua 
Seru Amit