Journal of Finance最新文献

Portfolio allocation decisions increasingly incorporate social values. We develop a tractable framework to study how competition between investors to own socially valuable assets affects social welfare. Relative to the most common social-investing strategies, we identify alternative strategies that result in higher impact and higher financial returns. We identify strategies for investors to have impact when impact is difficult to measure. From the firm's perspective, increasing profitability can have greater impact than directly increasing social value. We present new empirical evidence on the social preferences of investors that demonstrates the practical relevance of our theory.

I introduce and test for preference for simplicity in choice under risk. I characterize the theory axiomatically, and derive its properties and unique predictions relative to canonical models. By designing and running theoretically motivated experiments, I document that people value simplicity in ways not fully captured by existing models that study risk premia in financial markets. Participants' risk premia increase as complexity increases, holding moments fixed; their dominance violations increase in complexity; their behavior is predicted by simplicity's characterizing axiom; and their complexity aversion is heterogeneous in cognitive ability. None of expected utility theory, cumulative prospect theory, prospect theory, rational inattention, sparsity, salience, or probability weighting that differs by number of outcomes fully capture the experimental findings. I generalize the underlying theory to additionally capture broader measures of complexity, including obfuscation, computation, and language effects.

The aggregate leverage of broker-dealers responds to demand and supply disturbances that have opposite effects on financial markets. Specifically, leverage supply shocks that relax broker-dealers' funding constraints increase leverage, liquidity, and returns and carry a positive price of risk, while leverage demand shocks also increase leverage but reduce liquidity and returns and carry a negative price of risk. Disentangling demand- and supply-like shocks resolves existing puzzles around the price of leverage risk and yields consistent evidence across many markets of a central role for intermediation frictions and dealers' aggregate leverage in asset pricing.

Uniswap is a system of smart contracts on the Ethereum blockchain and is the largest decentralized exchange with a liquidity balance worth up to 4 billion USD and daily trading volume of up to 7 billion USD. It is a new model of liquidity provision, so-called automated market making. For this new market form, we characterize equilibrium in the liquidity pools. We collect all 95.8 million Uniswap interactions and compare this automated market maker (AMM) to a centralized limit order book. We document absence of long-lived arbitrage opportunities, and show conditions under which the AMM dominates a limit order market.

Corporate credit lines are drawn more heavily when funding markets are stressed. This elevates expected bank funding costs. We show that credit supply is dampened by the associated debt-overhang cost to bank shareholders. Until 2022, this impact was reduced by linking the interest paid on lines to a credit-sensitive reference rate like the London interbank offered rate (LIBOR). We show that transition to risk-free reference rates may exacerbate this friction. The adverse impact on credit supply is offset if drawdowns are expected to be deposited at the same bank, which happened at some of the largest banks during the global financial crisis and COVID recession.