Journal of Finance最新文献

We show that incorporating defined benefit pension funds in an incomplete markets asset pricing model improves its ability to match the historical equity premium and riskless rate and has important risk-sharing implications. We document the importance of the pension fund's size and asset demands, and a new risk channel arising from fluctuations in the fund's returns. We use our calibrated model to study the implications of a shift to an economy with defined contribution plans. The new steady state is characterized by a higher riskless rate and a lower equity premium. Consumption volatility increases for retirees but decreases for workers.

We assess the long-term effects of managerial stress on aging and mortality. Using a difference-in-differences design, we apply neural network–based machine-learning techniques to CEOs' facial images and show that exposure to industry distress shocks during the Great Recession produces visible signs of aging. We estimate a one-year increase in “apparent” age. Moreover, using data on CEOs since the mid-1970s, we estimate a 1.1-year decrease in life expectancy after an industry distress shock, but a two-year increase when antitakeover laws insulate CEOs from market discipline. The estimated health costs are significant, both in absolute terms and relative to other health risks.

Can banks’ reputational concerns improve the quality of opaque, off-balance sheet securities, such as mortgage-backed securities? We study this question in a uniquely parsimonious setting. In the 1760s, Dutch banking partnerships securitized West-Indian plantation mortgages that were risky and opaque. High-reputation banks originated better mortgages and issued securities that, on average, retained 17.5% more of their value during a market collapse. Reputational effects are attenuated when the managing partners were married into wealth or received a large share of profits in the short term, suggesting that bank reputation only works if bankers are personally exposed to (long-run) reputational losses.

We introduce the concept of subtle discrimination—biased acts that cannot be objectively ascertained as discriminatory. When candidates compete for promotions by investing in skills, firms' subtle biases induce discriminated candidates to overinvest when promotions are low-stakes (to distinguish themselves from favored candidates) but underinvest in high-stakes settings (anticipating low promotion probabilities). This asymmetry implies that subtle discrimination raises profits in low-productivity firms but lowers them in high-productivity firms. Although subtle biases are small, they generate large gaps in skills and promotion outcomes. We derive further predictions in contexts such as equity analysis, lending, fund flows, banking careers, and entrepreneurial finance.

Short-sale costs eliminate the abnormal returns on asset pricing anomaly portfolios. While many anomalies persist out-of-sample before accounting for short-sale costs, they cannot be exploited with long-short strategies due to stock borrow fees. Using a comprehensive sample of 162 anomalies, the average long-short portfolio return is a significant 0.14% per month before short-sale costs, and the returns are due to the short leg. However, the average is −0.01% once returns are adjusted for borrow fees. Moreover, anomalies are not profitable even before fees if the high-fee observations, representing 12% of stock dates, are excluded from the analysis.

This paper establishes that mutual funds strategically time their trades in environmental, social, and governance (ESG) stocks around disclosure dates to inflate their sustainability ratings. This claim is supported by three empirical findings. First, we show that funds' ESG betas increase shortly before disclosure and decrease shortly afterwards. Second, we document that post-disclosure fund returns are higher but have lower ESG exposure than disclosed portfolios. Third, we provide evidence that ESG stock prices temporarily rise before disclosure and decline afterwards. Overall, we establish that green window dressing positively impacts fund sustainability ratings, performance, and flows.