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Author:Cipriani, Marco 

Discussion Paper
Are Economic Values Transmitted from Parents to Children?

Economic research shows that differences in cultural traits and values—for example, trust, or the propensity to cooperate and not free-ride on others—are important determinants of economic outcomes, such as growth, economic and financial development, and international trade. It’s much less clear, however, where these differences in economic-relevant values come from. While economists generally assume that they’re transmitted from parents to children, the empirical evidence to this effect is almost nonexistent.
Liberty Street Economics , Paper 20140106

Report
Strategic Sophistication and Trading Profits: An Experiment with Professional Traders

We run an experiment where professional traders, endowed with private information, trade an asset over multiple periods. After the trading game, we gather information about the professional traders’ characteristics by having them carry out a series of tasks. We study which of these characteristics predict profits in the trading game. We find that strategic sophistication, as measured in the Guessing Game (for example, through level-k theory), is the only significant determinant of professional traders’ profits. In contrast, profits are not driven by individual characteristics such as ...
Staff Reports , Paper 1044

Discussion Paper
The Fed’s Balance Sheet Runoff: The Role of Levered NBFIs and Households

In a Liberty Street Economics post that appeared yesterday, we described the mechanics of the Federal Reserve’s balance sheet “runoff” when newly issued Treasury securities are purchased by banks and money market funds (MMFs). The same mechanics would largely hold true when mortgage-backed securities (MBS) are purchased by banks. In this post, we show what happens when newly issued Treasury securities are purchased by levered nonbank financial institutions (NBFIs)—such as hedge funds or nonbank dealers—and by households.
Liberty Street Economics , Paper 20220412

Discussion Paper
The New Overnight Bank Funding Rate

The Federal Reserve Bank of New York will begin publishing the overnight bank funding rate (OBFR) sometime in the first few months of 2016. The OBFR will be a broad measure of U.S. dollar funding costs for U.S.-based banks as it will be calculated using both fed funds and Eurodollar transactions, as reported in a new data collection?the FR 2420 Report of Selected Money Market Rates. In a recent post, ?The Eurodollar Market in the United States,? we described the Eurodollar activity of U.S.-based banks and compared recent fed funds and Eurodollar rates. Here, we look at the historical ...
Liberty Street Economics , Paper 20151109

Discussion Paper
The Premium for Money-Like Assets

Several academic papers have documented investors? willingness to pay a premium to hold money-like assets and focused on its implications for financial stability. In a New York Fed staff report, we estimate such premium using a quasi-natural experiment, the recent reform of the money market fund (MMF) industry by the Securities and Exchange Commission (SEC).
Liberty Street Economics , Paper 20180718

Report
Noncognitive Skills at the Time of COVID-19: An Experiment with Professional Traders and Students

We study the stability of noncognitive skills by comparing experimental results gathered before and during the COVID-19 pandemic. Using a sample of professional traders, we find a significant decrease in agreeableness and locus of control and a moderate decrease in grit. These patterns are primarily driven by those with more negative experiences of the pandemic. Other skills, such as trust, conscientiousness, and self-monitoring, are unchanged. We contrast these results with those from a sample of undergraduate students whose noncognitive skills remain constant (except conscientiousness). Our ...
Staff Reports , Paper 1055

Report
Risk Preferences at the Time of COVID-19: An Experiment with Professional Traders and Students

We study whether the COVID-19 pandemic has impacted risk preferences, comparing the results of experiments conducted before and during the outbreak. In each experiment, we elicit risk preferences from two sample groups: professional traders and undergraduate students. We find that, on average, risk preferences have remained constant for both pools of participants. Our results suggest that the increases in risk premia observed during the pandemic are not due to changes in risk appetite; rather, they are solely due to a change in beliefs by market participants. The findings of our paper support ...
Staff Reports , Paper 927

Discussion Paper
Sophisticated and Unsophisticated Runs

In March 2020, U.S. prime money market funds (MMFs) suffered heavy outflows following the liquidity shock triggered by the COVID-19 crisis. In a previous post, we characterized the run on the prime MMF industry as a whole and the role of the liquidity facility established by the Federal Reserve (the Money Market Mutual Fund Liquidity Facility) in stemming the run. In this post, based on a recent Staff Report, we contrast the behaviors of retail and institutional investors during the run and explain the different reasons behind the run.
Liberty Street Economics , Paper 20210602

Report
Investors’ appetite for money-like assets: the money market fund industry after the 2014 regulatory reform

This paper uses a quasi-natural experiment to estimate the premium investors are willing to pay to hold money-like assets. The 2014 SEC reform of the money market fund (MMF) industry reduced the money-likeness only of prime MMFs, by increasing the information sensitivity of their shares, and left government MMFs unaffected. As a result, investors fled from prime to government MMFs, with total outflows exceeding $1 trillion. By comparing investors’ response to the regulatory change with past episodes of industry dislocation (for example, the 2008 MMF run), we highlight the difference between ...
Staff Reports , Paper 816

Report
Estimating a structural model of herd behavior in financial markets

We develop a new methodology for estimating the importance of herd behavior in financial markets. Specifically, we build a structural model of informational herding that can be estimated with financial transaction data. In the model, rational herding arises because of information-event uncertainty. We estimate the model using 1995 stock market data for Ashland Inc., a company listed on the New York Stock Exchange. Herding occurs often and is particularly pervasive on certain days. In an information-event day, on average, 2 percent (4 percent) of informed traders herd-buy (sell). In 7 percent ...
Staff Reports , Paper 561

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