Newsletter

The Rodney White Center’s newsletter, A Bite of Finance, is designed to highlight some of the Finance Department’s current research in a way that is interesting, relevant, and comprehensible to both academic and general audiences. Each month the topics will range from current trends to customary themes relating to financial economics.  Scroll down for the latest issue.

JANUARY ISSUE

2023

THE RODNEY WHITE CENTER FOR FINANCIAL RESEARCH

A Bite Of Finance: The Latest From Wharton

FEATURE

Professor Sasha Indarte uncovers racial bias in personal bankruptcy outcomes

Racial disparities exist across the board in the finances of U.S. households, from the median wealth they control to the interest rates they pay. In a new study, Professor Indarte sheds light on yet another instance of racial disparity: personal bankruptcy outcomes. Black Chapter 13 filers are 21% more likely to have their personal bankruptcy petitions dismissed without any debt relief relative to non-Black filers. Moreover, when Black Chapter 13 filers are randomly assigned to a white trustee, their dismissal rate rises by 10%, consistent with racial bias.

 

 

ARTICLE

Professor Amy Huber documents imperfect competition in the Triparty repo market

The $2 trillion Triparty repo market is a key part of the money and bond markets. Security dealers in this market obtain short-term funding from cash-lenders using repurchase agreements, or repos. Surprisingly, when cash-lenders (e.g., BlackRock) lend to different dealers simultaneously (e.g., Goldman Sachs and Wells Fargo), the rates that cash-lenders accept show persistent cross-dealer differences. Professor Huber links these differences to imperfect competition, showing that dealers gain substantial market power due to cash-lenders’ aversion to portfolio concentration and preference for stable lending.

 

 

ARTICLE

Professor Lu Liu shows strong behavioral biases in the housing market

Two central principles in behavioral economics are reference dependence, the idea that people measure outcomes relative to a reference point, and loss aversion, the notion that losses reduce utility more than equivalent gains increase it. Professor Liu shows that both behaviors have large impacts on the housing market. Households derive substantial utility from selling their homes at a profit relative to the original purchase price, and losses impact households’ utility 2 to 2.5 times more than equivalent gains.

 

ARTICLE

Professor Urban Jermann provides optimal strategies for crypto issuers

Levels of government debt have risen in the wake of the Covid crisis. Who holds this debt, and does it matter to borrowers in this market? Professor Lewis answers these questions by collecting data on the sovereign debt of 95 countries over 20 years. Private non-bank investors have absorbed most of the increase in sovereign debt supply. Emerging-market sovereigns are highly vulnerable to losing their foreign non-bank investors.

 

ARTICLE

Ph.D. candidate Felix Nockher shows a bright side to low diversification

The benefits of portfolio diversification are well understood and widely praised. Undiversified institutional investors, however, play an important role in the financial system. Ph.D. candidate Felix Nockher shows that companies owned by such undiversified investors are monitored more in corporate conference calls and have higher profits as well as valuations than those owned by large, diversified shareholders. These results suggest that having a lot of skin in the game incentivizes greater shareholder engagement, which improves firms’ performance through better corporate monitoring.

 

Recent Past Issues

NOVEMBER 2022

IN THIS ISSUE

In this issue: How does democracy impact the stock market?  Do growth stocks really have higher growth?  How does under-diversification affect the economy?  Who owns government debt?  How passive are passive ETF

SEPTEMBER 2022

IN THIS ISSUE

In this issue:  a challenge to the risk-return tradeoff, the sources of wealth inequality, the effects of underfunded state pensions on households, the sensitivity of bank deposits to transparency, and arms sales in financial markets.

JULY 2022

IN THIS ISSUE

In this issue: the impacts of impact investing, collusion in the distressed-loan market, the macro effects of aging, new predictability in stock market returns, and political pushback to ESG.

MAY 2022

IN THIS ISSUE

In this issue: the economic effects of Roe v. Wade, the active side of passive ETFs, the post-LIBOR world, risk anomalies in stock returns, and the effects of interest rates on bank lending.

MARCH 2022

IN THIS ISSUE

In this issue: the link between volatility and liquidity; the unintended consequences of Quantitative Easing; why some households hold more stocks than others; how size matters in bond trading; and the effects of technological progress on rent-seeking.

JANUARY 2022

IN THIS ISSUE

In this issue: paying off the national debt, the effect of rising sea levels on muni bonds, gold’s value as an investment, the effects of capital controls on currency crises, and the environmental impacts of private equity.

NOVEMBER 2021

IN THIS ISSUE

Reassessing stock versus bond performance, synergies in FinTech lending, fracking’s long-term effects, the performance of ESG strategies, and PE investors’ effects on healthcare costs

SEPTEMBER 2021

IN THIS ISSUE

New findings on CEO stress, mutual fund flows, distressed stock returns, cash windfalls and entrepreneurship, information technology, and expectation errors

JULY 2021

IN THIS ISSUE

Professor Erik Gilje organized a Virtual Conference on Climate and Commodities that took place on April 23 and included a panel discussion with Professor Jeremy Siegel.

Research includes important studies on inflation risks for investors and the recent behavior of the Yuan;  a truly insightful new discussion on how government intervention can impact the renegotiation of private debts and help stop default waves across linked borrowers;  as well as a historical assessment of the role of banks in pre-WWI sovereign defaults.

MAY 2021

IN THIS ISSUE

Student loan forgiveness, decline in Entrepreneurship and collateralized debt obligations

 

MARCH 2021

IN THIS ISSUE

Social Security, bank debt, COVID -19 financial fragility, venture capitalists and more

JANUARY 2021

IN THIS ISSUE

COVID-19 bailouts, financing education and re-examining history

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