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Working Paper
Effects of Information Overload on Financial Markets: How Much Is Too Much?
Bernales, Alejandro; Valenzuela, Marcela; Zer, Ilknur (2023-03-09)
Motivated by cognitive theories verifying that investors have limited capacity to process information, we study the effects of information overload on stock market dynamics. We construct an information overload index using textual analysis tools on daily data from The New York Times since 1885. We structure our empirical analysis around a discrete-time learning model, which links information overload with asset prices and trading volume when investors are attention constrained. We find that our index is associated with lower trading volume and predicts higher market returns for up to 18 ...
International Finance Discussion Papers , Paper 1372

Working Paper
Uncovering Retail Trading in Bitcoin: The Impact of COVID-19 Stimulus Checks
Divakaruni, Anantha; Zimmerman, Peter (2021-07-16)
In April 2020, the US government sent economic impact payments (EIPs) directly to households, as part of its measures to address the COVID-19 pandemic. We characterize these stimulus checks as a wealth shock for households and examine their effect on retail trading in Bitcoin. We find a significant increase in Bitcoin buy trades for the modal EIP amount of $1,200. The rise in Bitcoin trading is highest among individuals without families and at exchanges catering to nonprofessional investors. We estimate that the EIP program has a significant but modest effect on the US dollar–Bitcoin ...
Working Papers , Paper 21-13

Working Paper
The Impact of Labels on Real Asset Valuations
Demyanyk, Yuliya; Lopez, Luis; Tzur-Ilan, Nitzan (2025-01-15)
Expectations and sentiment of economic agents about financial prospects are both the drivers and the leading indicators of economic phenomena. This paper shows that neighborhood labels, frequently used in realtors’ property descriptions, have a causal impact on the demand for housing. Results indicate that appraised values, house prices and rents increased in minority neighborhoods upon removal of neighborhood labels. The underlying mechanism likely works through forming expectations about future growth in housing markets, as documented by the decrease in the rent-to-price ratio and lack of ...
Working Papers , Paper 2504

Report
The Financial Consequences of Undiagnosed Memory Disorders
Gresenz, Carole Roan; Mitchell, Jean M; Rodriguez, Belicia; Turner, R. Scott; Van der Klaauw, Wilbert (2024-05-01)
We examine the effect of undiagnosed memory disorders on credit outcomes using nationally representative credit reporting data merged with Medicare data. Years prior to eventual diagnosis, average credit scores begin to weaken and payment delinquency begins to increase, overall and for mortgage and credit card accounts specifically. Credit outcomes consistently deteriorate over the quarters leading up to diagnosis. The harmful financial effects of undiagnosed memory disorders exacerbate the already substantial financial pressure households face upon diagnosis of a memory disorder. Our ...
Staff Reports , Paper 1106

Working Paper
Flight to Safety: Evaluating Stablecoin’s Role as a Safe-Haven Asset in DeFi Markets
Chernoff, Alan; Jagtiani, Julapa; Yoshida, Nathaniel (2026-05-07)
This study examines the impact of the stablecoin Tether (USDT) on systemic liquidity across the Ethereum and Bitcoin markets, utilizing an event study approach that integrates on-chain wallet data, pricing, and financial metrics. By analyzing cryptocurrency market responses to key protocol and market-moving events, augmented by nonlinear volatility models, we identify distinct, chain-specific flight-to-safety behaviors. Our results show that USDT acts as a primary liquidity lifeline for Ethereum holders during stress, particularly among retail investors, whereas its role for Bitcoin holders ...
Working Papers , Paper 26-24

Working Paper
Improving the 30-Year Fixed-Rate Mortgage
von Hafften, Alexander H.; Passmore, Wayne (2017-08-25)
The 30-year fixed-rate fully amortizing mortgage (or "traditional fixed-rate mortgage") was a substantial innovation when first developed during the Great Depression. However, it has three major flaws. First, because homeowner equity accumulates slowly during the first decade, homeowners are essentially renting their homes from lenders. With so little equity accumulation, many lenders require large down payments. Second, in each monthly mortgage payment, homeowners substantially compensate capital markets investors for the ability to prepay. The homeowner might have better uses for this ...
Finance and Economics Discussion Series , Paper 2017-090

Working Paper
Macroeconomic Expectations and Cognitive Noise
Sung, Yeji (2025-05-06)
This paper examines forecast biases through cognitive noise, moving beyond the conventional view that frictions emerge solely from using external data. By extending Sims’s (2003) imperfect attention model to include imperfect memory, I propose a framework where cognitive constraints impact both external and internal information use. This innovation reveals horizon-dependent forecast sensitivity: short-term forecasts adjust sluggishly while long-term forecasts may overreact. I explore the macroeconomic impact of this behavior, showing how long-term expectations, heavily influenced by current ...
Working Paper Series , Paper 2024-19

Working Paper
Identifying Taste-Based Discrimination: Effect of Black Electoral Victories on Racial Prejudice and Economic Gaps
Sakong, Jung (2021-05-17)
I test for the causal impact of Black electoral victories in local elections on White Americans’ attitude toward Black Americans. Using Race Implicit Attitude Test scores as a measure of racial prejudice and close-election regression-discontinuity design for causal inference, I find Black electoral victories cause measures of racial bias to rise, by 4% of the average Black-White difference in IAT scores. Simultaneously, they widen racial gaps in unemployment and mortgage denials. Interpreting these close electoral victories as instrumental variables, I find a large causal effect of ...
Working Paper Series , Paper WP-2021-07

Working Paper
The Missing Tail Risk in Option Prices
Brown, Jason; Çakır Melek, Nida; Matschke, Johannes; Sattiraju, Sai (2023-03-31)
This paper contributes to the literature on deviations from rational expectations in financial markets and to the literature on evaluating density forecasts. We first develop a novel statistic to evaluate the overall accuracy of distributional forecasts, and find two methods that yield accurate distributional forecasts. We then propose another statistic to examine the relative accuracy over the entire distribution range. Our results indicate more oil price realizations in the left tail than predicted. We argue that this finding points to a persistent behavioral forecasting bias and a ...
Research Working Paper , Paper RWP 23-02

Working Paper
Social Network and Sentiment Contagion: Evidence from the Bitcoin Market
Han, Bing; Liu, Haoyang; Sui, Pengfei (2026-03-02)
Using new data on social interactions and individual trading records in the Bitcoin market, we show that investor sentiment spreads across social connections. Investors systematically revise their beliefs about Bitcoin prices in the direction of average peer sentiment—even though that sentiment does not predict future prices. We document specific patterns in the diffusion of beliefs across networks, including evidence consistent with confirmation bias. Moreover, this social-sentiment contagion influences both individual trading decisions and overall market dynamics. Our novel measure of ...
Working Papers , Paper 2605

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