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Working Paper
Innovation, investor sentiment, and firm-level experimentation
Due to frictions like informational externalities, firms invest too little in learning the productivity of newly available technologies through small-scale experimentation. I study the effect of investor sentiment on the relation between technological innovation and future firm-level R&D expenses, which include the resources used for small-scale experimentation. I find that rapidly improving investor sentiment strengthens the effect of technological innovation on one-year-ahead R&D expenses, and that the effect is more pronounced for high-tech firms with tighter financing constraints. The ...
Working Paper
The Display of Information and Household Investment Behavior
I exploit a natural experiment to show that household investment decisions depend on the manner in which information is displayed. Israeli retirement funds were prohibited from displaying returns for periods shorter than twelve months. In this setting, the information displayed was altered but the accessible information remained the same. Using differences-in-differences design, I find that this change caused reduction in fund flow sensitivity to past returns, decline in trade volume, and increased asset allocation toward riskier funds. These results are consistent with models of limited ...
Speech
Enhancing financial stability by improving culture in the financial services industry
Remarks at the Workshop on Reforming Culture and Behavior in the Financial Services Industry, Federal Reserve Bank of New York, New York City.
Working Paper
Foreclosure delay and consumer credit performance
Superseded by Working Paper 15-24.The deep housing market recession from 2008 through 2010 was characterized by a steep increase in the number of foreclosures. Foreclosure timelines ? the length of time between initial mortgage delinquency and completion of foreclosure ? also expanded significantly, averaging up to three years in some states. Most individuals undergoing foreclosure are experiencing serious financial stress. However, extended foreclosure timelines enable mortgage defaulters to live in their homes without making housing payments until the completion of the foreclosure process, ...
Working Paper
Does the Relative Income of Peers Cause Financial Distress? Evidence from Lottery Winners and Neighboring Bankruptcies
SUPERSEDED BY WP 18-22 We examine whether relative income differences among peers can generate financial distress. Using lottery winnings as plausibly exogenous variations in the relative income of peers, we find that the dollar magnitude of a lottery win of one neighbor increases subsequent borrowing and bankruptcies among other neighbors. We also examine which factors may mitigate lenders? bankruptcy risk in these neighborhoods. We show that bankruptcy filers can obtain secured but not unsecured debt, and lenders provide secured credit to low-risk but not high-risk debtors. In addition, we ...
Working Paper
IDENTITY THEFT AS A TEACHABLE MOMENT
SUPERCEDES 14-28. This paper examines how a negative shock to the security of personal finances due to severe identity theft changes consumer credit behavior. Using a unique data set of linked consumer credit data and alerts indicating identity theft, we show that the immediate effects of fraud on consumers are typically negative, small, and transitory. After those immediate effects fade, identity theft victims experience persistent, positive changes in credit characteristics, including improved risk scores (indicating lower default risk). We argue that these changes are consistent with ...
Speech
Opening remarks at the Workshop on Reforming Culture and Behavior in the Financial Services Industry.
Remarks at the Workshop on Reforming Culture and Behavior in the Financial Services Industry, Federal Reserve Bank of New York, New York City.
Working Paper
Supervisory Stress Testing For CCPs : A Macro-Prudential, Two-Tier Approach
Stress testing has become an increasingly important mechanism to support a variety of financial stability objectives. Stress tests can be used to test the individual resilience of a single entity or to assess the system-wide vulnerabilities of a network. This article examines the role of supervisory stress testing of central counterparties (CCPs), which has emerged in recent years. A key message is that crucial differences in CCPs? role, risk profile and financial structure, when compared to banks, are likely to require significant adaptation in the design of supervisory stress tests (SSTs). ...
Working Paper
Foreclosure delay and consumer credit performance
Supersedes Working Paper 14-8. The deep housing market recession from 2008 through 2010 was characterized by a steep rise in the number of foreclosures and lengthening foreclosure timelines. The average length of time from the onset of delinquency through the end of the foreclosure process also expanded significantly, averaging up to three years in some states. Most individuals undergoing foreclosure were experiencing serious financial stress. However, the extended foreclosure timelines enabled mortgage defaulters to live in their homes without making mortgage payments until the end of the ...
Working Paper
Credit access after consumer bankruptcy filing: new evidence
Supersedes Working Paper No. 13-24 This paper uses a unique data set to shed new light on credit availability to consumer bankruptcy filers. In particular, the authors? data allow them to distinguish between Chapter 7 and Chapter 13 bankruptcy filings, to observe changes in credit demand and credit supply explicitly, and to differentiate existing and new credit accounts. The paper has four main findings. First, despite speedy recovery in their risk scores after bankruptcy filing, most filers have much reduced access to credit in terms of credit limits, and the impact seems to be long lasting ...