? Research

Research Papers

    Journal Articles

  1. Housing Collateral, Consumption Insurance and Risk Premia: an Empirical Perspective, with Hanno Lustig,
    Nominated for the 2005 Smith Breeden Prize for the Best Paper in the Journal of Finance
    Journal of Finance, June 2005, Vol. 60 (3), pp.1167-1219 -
    [pdf] [abstract] [annual data file(xls, updated August 2005)] - [quarterly data file(xls, updated August 2005)] - [data appendix(pdf)]

  2. Stock Market Development and Economic Growth in Belgium, with Frans Buelens and Ludo Cuyvers,
    Explorations in Economic History, January 2006, Vol. 43 (1), pp. 13-38
    [pdf] [abstract]

  3. Inside Information and the Own Company Stock Puzzle, with Laura Veldkamp,
    Journal of the European Economic Association P&P, Vol. 4(2-3), April-May 2006
    [pdf] [abstract]

  4. Learning Asymmetries in Real Business Cycles, with Laura Veldkamp,
    Journal of Monetary Economics, May 2006, Vol. 53(4), pp. 753-772
    [pdf] [abstract]

  5. Reconciling the Return Predictability Evidence, with Martin Lettau,
    Review of Financial Studies, July 2008, Vol. 21(4), pp. 1607-1652
    [pdf] [abstract]

  6. The Returns on Human Capital: Good News on Wall Street is Bad News on Main Street, with Hanno Lustig,
    Review of Financial Studies, September 2008, Vol. 21(5), pp. 2097-2137
    [pdf] [abstract] [separate appendix] [quarterly data (xls)] [annual data (xls)]

  7. Information Immobility and the Home Bias Puzzle, with Laura Veldkamp,
    2005 FMA Competitive Paper Award in Investments - First Prize
    2006 Glucksman Institute Research Prize - First Prize
    Journal of Finance, June 2009, Vol. 64 (3), pp. 1187-1215
    [pdf] [abstract] [separate appendix]

  8. Mortgage Timing, with Ralph Koijen and Otto van Hemert,
    2007-08 Glucksman Institute Research Prize - First Prize
    Journal of Financial Economics, August 2009, Vol. 93 (2), pp. 292-324
    [pdf] [abstract]

  9. Information Acquisition and Under-Diversification, with Laura Veldkamp,
    Review of Economic Studies, April 2010, Vol. 77 (2), pp. 779-805
    [pdf] [abstract]

  10. How Much Does Household Collateral Constrain Regional Risk Sharing?, with Hanno Lustig,
    Review of Economic Dynamics, April 2010, Vol. 13(2), pp. 265-294
    [pdf] [abstract] [Separate appendix for non-separable preferences] [data appendix (pdf)]

  11. Long-Run Risk, the Wealth-Consumption Ratio, and the Temporal Pricing of Risk, with Ralph Koijen, Hanno Lustig, and Adrien Verdelhan,
    American Economic Review P&P, May 2010, Vol. 100 (2), pp. 552-556
    [pdf] [Online Appendix]

  12. Why Has House Price Dispersion Gone up?, with Pierre-Olivier Weill,
    Review of Economic Studies, October 2010, Vol. 77 (4), pp. 1567-1606
    [pdf] [abstract]

  13. Technological Change and the Growing Inequality in Managerial Compensation, with Hanno Lustig and Chad Syverson,
    Journal of Financial Economics, March 2011, Vol 99(3), pp. 601-627
    [pdf] [abstract]

  14. The Joy of Giving or Assisted Living? Using Strategic Surveys to Separate Bequest and Precautionary Motives, with with John Ameriks, Andrew Caplin, and Steven Laufer,
    Journal of Finance, April 2011, Vol 66(2), pp. 519-561
    [pdf] [abstract] [Internet Appendix]

  15. Predictability of Stock Returns and Cash Flows, with Ralph Koijen,
    Annual Review of Financial Economics, December 2011, Vol 3, pp. 467-491
    [pdf]

  16. The Wealth-Consumption Ratio, with Hanno Lustig and Adrien Verdelhan,
    Review of Asset Pricing Studies, 2013, vol. 3(1), pp. 38-94
    [pdf] [abstract]

  17. Guaranteed to Fail: Fannie Mae and Freddie Mac and What to Do about Them, with V. Acharya, M. Richardson, S. Van Nieuwerburgh and L. White,
    Economist Voice, 2013, vol. 10 (1), pp. 15-19
    [pdf]

  18. Time-Varying Fund Manager Skill, with Marcin Kacperczyk and Laura Veldkamp,
    Q-group Research Grant, 2009
    Journal of Finance, August 2014, vol. 69(4), pp. 1455-1484 - lead article
    [pdf] [abstract]

  19. The Common Factor in Idiosyncratic Volatility: Quantitative Asset Pricing Implications, with Bernard Herskovic, Bryan Kelly, and Hanno Lustig,
    Journal of Financial Economics, February 2016, vol. 119(2), pp. 249-283 - lead article
    [pdf] [abstract]

  20. Rational Attention Allocation Over the Business Cycle, with Marcin Kacperczyk and Laura Veldkamp,
    Econometrica, March 2016, vol. 84(2), pp. 571-626
    [pdf] [abstract] [separate appendix (pdf)]

  21. Breaking the Sovereign?Bank Diabolic Loop: A Case for ESBies,, with Markus Brunnermeier, Luis Garicano, Philip Lane, Marco Pagano, Ricardo Reis, Tano Santos, David Thesmar, and Dimitri Vayanos,
    American Economic Review P&P, May 2016, Vol. 106 (5), pp. 1-5
    [pdf] [Online Appendix]

  22. Health and Mortality Delta: Assessing the Welfare Cost of Household Insurance Choice, with Ralph Koijen and Motohiro Yogo
    Netspar Grant 2010
    Utah Winter finance Conference Best Paper Award 2012
    Q-group Best Paper Prize (3rd prize) 2013
    Journal of Finance, April 2016, Vol. 71 (2), pp. 957-1010
    [pdf ] [abstract]

  23. Too-Systemic-To-Fail: What Option Markets Imply About Sector-wide Government Guarantees, with Bryan Kelly and Hanno Lustig
    JP Morgan Best Paper Award, WFA 2012
    2014 Glucksman Institute Research Prize - First Prize
    American Economic Review, June 2016, Vol. 106 (6), pp. 1278-1319
    [pdf] [abstract]

  24. Phasing Out the GSEs, with Vadim Elenev and Tim Landvoigt,
    Journal of Monetary Economics, August 2016, Vol. 81, pp. 111-132
    [pdf] [abstract]

  25. Macroeconomic Implications of Housing Wealth, Housing Finance, and Limited Risk-Sharing in General Equilibrium, with Jack Favilukis and Sydney Ludvigson
    Utah Winter finance Conference Best Paper Award 2010
    Journal of Political Economy, February 2017, Vol. 125 (1), pp. 140-223
    [pdf] [abstract]

  26. ESBies: Safety in the Tranches, with Markus Brunnermeier, Sam Langfield, Marco Pagano, Ricardo Reis, and Dimitri Vayanos
    Economic Policy, April 2017, forthcoming
    [pdf]
  27. Books, Book Chapters, and Conference Volume Contributions

  28. Exercises in Recursive Macroeconomic Theory, 1st Edition, with Lars Ljungqvist, Thomas Sargent, and Pierre-Olivier Weill

  29. Annuity Valuation Given Long-term Care Concerns and Bequest Motives, with John Ameriks, Andrew Caplin, and Steven Laufer,
    in Recalibrating Retirement Spending and Saving, John Ameriks and Olivia S. Mitchell, Editors, Pension Research Council, September 2008
    [pdf]

  30. Financial Economics, Market Efficiency and Return Predictability, with Ralph Koijen,
    Encyclopedia of Complexity & System Science, Robert Meyers (Ed.), 2009, pp. 3448-3456
    [pdf]

  31. Mortgage Origination and Securitization in the Financial Crisis, with Dwight Jaffee, Anthony Lynch, and Matthew Richardson,
    in Restoring Financial Stability: How to Repair a Failed System, John Wiley and Sons, 2009, edited by V. Acharya and M. Richardson, Chapter 1.

  32. What to Do About the Government Sponsored Enterprises?, with Dwight Jaffee, Matthew Richardson, Lawrence White, and Robert Wright,
    in Restoring Financial Stability: How to Repair a Failed System, JJohn Wiley and Sons, 2009, edited by V. Acharya and M. Richardson, Chapter 4.

  33. Towards a New Architecture for U.S. Mortgage Markets: The Future of the Government Sponsored Enterprises, with Viral Acharya, Stanley Kon, Matthew Richardson, Sabri Oncu, and Lawrence White,
    in Regulating Wall Street, JJohn Wiley and Sons, 2010, edited by V. Acharya, T. Cooley, M. Richardson, and I. Walter.

  34. Consumer Financial Protection, with Thomas Cooley, Xavier Gabaix, Samuel Lee, Thomas Mertens, Vicki Morowitz, Shelle Sanatana, Anjolein Schmeits, and Robert Whitelaw,
    in Regulating Wall Street, John Wiley and Sons, 2010, edited by V. Acharya, T. Cooley, M. Richardson, and I. Walter.

  35. Guaranteed To Fail: Freddie, Fannie, and the Debacle of U.S. Mortgage Finance, V. Acharya, M. Richardson, S. Van Nieuwerburgh, and L. White, Princeton University Press, March 2011

  36. Reforming the U.S. Housing Finance System: A Proposal, with Thomas Cooley, Xavier Gabaix, Samuel Lee, Thomas Mertens, Vicki Morowitz, Shelle Sanatana, Anjolein Schmeits, and Robert Whitelaw, Viral Acharya, Matthew Richardson, and Lawrence White,
    in Financial Development Report 2011, World Economic Forum, Chapter 1.4

  37. ESBies: A realistic reform of Europe’s financial architecture, with Markus Brunnermeier, Luis Garicano, Philip Lane, Marco Pagano, Ricardo Reis, Tano Santos, David Thesmar, and Dimitri Vayanos Vayanos
    in The Future of Banking, Ed. T. Beck

  38. The Research Agenda: Stijn Van Nieuwerburgh on Housing and the Macroeconomy,
    in Economic Dynamics Newsletter, vol. 13 (2), April 2012
    [pdf]

  39. International Capital Flows and House Prices: Theory and Evidence, Jack Favilukis, David Kohn, and Sydney Ludvigson,
    in Housing and the Financial Crisis, NBER, Cambridge, MA. Chapter 8, 2013
    [pdf]

  40. Judging the Quality of Survey Data by Comparison with "Truth" as Measured By Administrative Records: Evidence from Sweden, with Ralph Koijen and Roine Vestman,
    in Improving the Measurement of Consumption Expenditures, NBER Book Series in Income and Wealth, University of Chicago Press, edited by C. Carroll, T. Crossley, and J. Sabelhaus, 2015
    [pdf nber] [pdf ssrn]

  41. Housing, Finance, and the Macroeconomy, with Morris Davis,
    in Handbook of Regional and Urban Economics, Volume 5, Chapter 12, 2015
    [pdf]

  42. A review of real estate and infrastructure investments by the Norwegian Government Pension Fund Global, with Richard Stanton and Leo de Bever,
    [pdf]

  43. The Infrastructure Finance Challenge, NYU Stern faculty team, ed. I. Walter, Open Book Publishers, December 2016
    [link]

  44. Papers under Submission or Revision

  45. The Cross-Section and Time Series of Stock and Bond Returns, with Ralph Koijen and Hanno Lustig, February 2016

    ABSTRACT: Value stocks have higher exposure to innovations in the nominal bond risk premium than growth stocks. Since the nominal bond risk premium measures cyclical variation in the market's assessment of future output growth, this results in a value risk premium provided that good news about future output lowers the marginal utility of wealth today. In support of this mechanism, we provide new historical evidence that low return realizations on value minus growth, typically at the start of recessions when nominal bond risk premia are low and declining, are associated with lower future dividend growth rates on value minus growth and with lower future output growth. Motivated by this connection between the time series of nominal bond returns and the cross-section of equity returns, we propose a parsimonious three-factor model that jointly prices the cross-section of returns on portfolios of stocks sorted on book-to-market dimension, the cross-section of government bonds sorted by maturity, and time series variation in expected bond returns. Finally, a structural dynamic asset pricing model with the business cycle as a central state variable is quantitatively consistent with the observed value, equity, and nominal bond risk premia.


  46. Firm Volatility in Granular Networks, with Bryan Kelly and Hanno Lustig, March 2013

    ABSTRACT:We propose a model of firm volatility based on customer-supplier connectedness. We assume that customers' growth rate shocks influence the growth rates of their suppliers, larger suppliers have more customers, and the strength of a customer-supplier link depends on the size of the customer firm. When the size distribution becomes more dispersed, economic activity is concentrated among a smaller number of firms, the typical supplier becomes less diversified and its volatility increases. The model is consistent with a set of new stylized facts. At the macro level, the firm volatility distribution is driven by firm size dispersion; the latter explains common movements in firm-level total and residual volatility. At the micro level, we show that the concentration of customer networks is an important determinant of firm-level volatility.


  47. Foreign Ownership of U.S. Safe Assets: Good or Bad?, with J. Favilukis, S. Ludvigson, S. Van Nieuwerburgh, SSRN Working Paper, January 2016

    ABSTRACT:The last 20 years have been marked by a sharp rise in international demand for U.S. reserve assets, or safe stores-of-value. We argue that these trends in international capital flows are likely to be a boon for some (by a lot) but a bane for others (by less). Conversely, a sell-off of foreign government holdings of U.S. safe assets could be tremendously costly for some individuals, while the possible benefits to others are several times smaller. In a general equilibrium lifecycle model with aggregate and idiosyncratic risks, we find that the young and oldest households are likely to benefit substantially from a capital inflow, but middle-aged savers may suffer because they are crowded out of the safe bond market and exposed to greater systematic risk in equity and housing markets. In some states, the youngest working-age households would be willing to give up 0.20% while the oldest retired households would be willing to give up over 1% of lifetime consumption in order to avoid just one year of a typical annual decline in foreign holdings of the safe asset. By contrast, middle-aged savers could benefit from an outflow. Under the veil of ignorance, a newborn in the lowest wealth quantile would be willing to give up 2.7% of lifetime consumption to avoid a large capital outflow.


  48. Working Papers and Works in Progress

  49. Can Housing Collateral Explain Long-Run Swings in Asset Returns?, with Hanno Lustig, December 2006 2009 Q-Group Research Award

    ABSTRACT: To explain the low-frequency variation in US equity and debt returns in the 20th century, we solve an equilibrium model in which households face housing collateral constraints. An increase in the ratio of housing to human wealth loosens these borrowing constraints. Borrowing enables risk sharing and decreases the rate of return that households require for holding equity. Feeding the historical time series of US housing collateral into the model replicates four features of long-run asset returns. (1) It produces a fifteen percent equity premium during the 1930s and a slow decline of the equity premium from eleven percent in the 1960s to four percent in 2003. (2) It generates large unexpected capital gains for equity holders, especially in the 1990s. (3) The risk-free rate and the housing collateral ratio are strongly positively correlated at low frequencies. (4) The model mimics the slow decline in the volatility of stock returns and the riskless interest rate.

    [separate appendix (pdf)]

  50. A Macroeconomic Model with Financially Constrained Producers and Intermediaries, with Vadim Elenev and Tim Landvoigt, October 2016

    ABSTRACT: We evaluate the quantitative effects of macroprudential policy. To do so, we solve a general equilibrium model with three types of agents and a government. Borrower-entrepreneurs produce output financed with long-term debt issued by financial intermediaries, subject to a leverage constraint. Intermediaries fund these loans combining deposits and their own equity, and are subject to a regulatory capital constraint. Savers provide funding to banks and to the government. Both entrepreneurs and banks make optimal default decisions. The government issues debt to finance budget deficits and to pay for bank rescue operations. We solve for macroeconomic quantities, the price of capital, the yield on safe bonds, and the credit spread. We study how financial and non-financial recessions differ, show that high credit spreads forecasts future declines in economic activity, and study macro-prudential policies. Policies that limit corporate leverage and financial leverage reduce welfare. Their benefits for financial and macro-economic stability are outweighed by the costs from a smaller-sized economy. The two types of macroprudential policies have different implications for the wealth distribution.


  51. Identifying the Benefits from Home Ownership: A Swedish Experiment, with Paolo Sodini, Roine Vestman, and Ulf von Lilienfeld-Toal, December 2016

    ABSTRACT: This paper studies the economic benefits of home ownership. Exploiting a quasi-experiment surrounding privatization decisions of municipally-owned apartment buildings, we obtain random variation in home ownership for otherwise similar buildings with similar tenants. We link the tenants to their tax records to obtain high-quality information on demographics, income, mobility patters, housing wealth, financial wealth, and debt. This data allow us to construct high-quality measures of consumption expenditures. Home ownership causes households to move up the housing ladder, work harder, and save more. We find little effect for a housing collateral effect, whereby home owners who stay in place tap into their home equity to boost spending. Spending only increases for those who move and realize the capital gain embedded in their house. For this group, the marginal propensity to consume is large.


  52. Out-of-town Home Buyers and City Welfare, with Jack Favilukis, February 2017

    ABSTRACT: The major cities of the world have attracted a flurry of interest from out-of-town (OOT) home buyers. Such capital inflows in local real estate have implications for affordability through their effects on prices and rents, but also for construction, local labor markets, the spatial distribution of residents, and ultimately economic welfare. We develop a spatial equilibrium model of a city that features heterogeneous households that make optimal decisions on consumption, savings, labor supply, tenure status, and location. The model generates realistic wealth accumulation and home ownership patterns over the life-cycle and in the cross-section. An inflow of OOT real estate buyers pushes up prices, rents, and wages. It increases the concentration of young, high-productivity, and wealthy households in the city center (gentrification). When OOT investors buy 10% of the housing stock, city welfare goes down by 0.3% of permanent consumption levels. The average renter suffers a large welfare loss while the average owner gains modestly. We adapt the model to the New York metro area and obtain detailed data on OOT purchases. We find that the observed increase in OOT purchases is associated with 1.1% higher house prices and a 0.1% welfare loss.


  53. Are Mutual Fund Managers Paid For Investment Skill?, with Markus Ibert, Ron Kaniel, and Roine Vestman, February 2017

    ABSTRACT: A voluminous literature has studied mutual fund performance, drawn inference about skill, studied managerial risk-taking incentives, and investigated how investors direct new money flows in response to performance. This literature has been handicapped by a lack of information on how mutual fund managers are compensated. We hand collect a unique dataset on the labor income from tax records for the universe of Swedish mutual fund managers. We investigate the relationship between manager pay on the one hand and fund performance and fund size on the other hand. We find a weak relationship between pay and performance, but a strong relationship between pay and size, measured as fee revenue. It is the non-performance related components of size that drive the link with pay. Only at the top of the performance distribution do we find higher compensation, suggesting that performance-based pay components often expire out-of-the-money. Profitable fund companies pay higher wages and have wages that are more sensitive to performance and less sensitive to manager revenue. Results continue to hold for total income, which includes dividend income. Overall, the link between pay and performance is surprisingly weak.


  54. Financial Fragility with SAMs?, with Daniel Greenwald and Tim Landvoigt, February 2017

    ABSTRACT: Shared Appreciation Mortgages (SAM) feature mortgage payments that adjust with house prices. Such mortgage contracts can stave off home owner default by providing payment relief in the wake of a large house price shock. SAMs have been hailed as an innovative solution that could prevent the next foreclosure crisis, act as a work-out tool during a crisis, and alleviate fiscal pressure during a downturn. They have inspired Fintech companies to offer home equity contracts. However, the home owner's gains are the mortgage lender's losses. We consider a model with financial intermediaries who channel savings from saver households to borrower households. The financial sector has limited risk bearing capacity. SAMs pass through more aggregate house price risk and lead to financial fragility when the shock happens in periods of low intermediary capital. We compare house prices, mortgage rates, the size of the mortgage sector, default and refinancing rates, as well as borrower and saver consumption between an economy with standard mortgage contracts and an economy with SAMs.