Using credit bureau data, we show that nearly half the increase in student debt since 2010 is due to deferred payments and the expansion of income-driven repayment (IDR) plans. These plans help borrowers smooth consumption, insure income risk, and reduce the effective debt cost. Using a life-cycle model, we quantify the welfare gains from this payment deferment and the channels through which welfare increases. We show that an optimally calibrated plan can achieve similar welfare gains at a much lower cost to taxpayers, and without encouraging additional borrowing. Finally, we use our quantitative framework to evaluate recent proposals to reform IDR rules.
{"title":"How do income-driven repayment plans benefit student debt borrowers?","authors":"Sylvain Catherine , Mehran Ebrahimian , Constantine Yannelis","doi":"10.1016/j.jfineco.2026.104253","DOIUrl":"10.1016/j.jfineco.2026.104253","url":null,"abstract":"<div><div>Using credit bureau data, we show that nearly half the increase in student debt since 2010 is due to deferred payments and the expansion of income-driven repayment (IDR) plans. These plans help borrowers smooth consumption, insure income risk, and reduce the effective debt cost. Using a life-cycle model, we quantify the welfare gains from this payment deferment and the channels through which welfare increases. We show that an optimally calibrated plan can achieve similar welfare gains at a much lower cost to taxpayers, and without encouraging additional borrowing. Finally, we use our quantitative framework to evaluate recent proposals to reform IDR rules.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"178 ","pages":"Article 104253"},"PeriodicalIF":10.4,"publicationDate":"2026-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146160353","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-04-01Epub Date: 2026-02-03DOI: 10.1016/j.jfineco.2026.104240
John W. Barry , Bruce I. Carlin , Alan D. Crane , John R. Graham
CFOs report using elevated hurdle rates that average 6.6 percentage points above the cost of capital. We show that hurdle rate buffers act as a commitment device and convey a bargaining advantage over counterparties during project development and M&A. This benefit can exceed the opportunity cost of forgone projects and acquisitions, preserving firm value. Consistent with our model, bidders’ elevated hurdle rates in M&A deals associate with higher surplus capture ex post; in CFO survey data, hurdle rate buffers negatively relate to ex ante bargaining power, and realized returns cluster just above elevated hurdle rates.
{"title":"Hurdle rate buffers and bargaining power in asset acquisition","authors":"John W. Barry , Bruce I. Carlin , Alan D. Crane , John R. Graham","doi":"10.1016/j.jfineco.2026.104240","DOIUrl":"10.1016/j.jfineco.2026.104240","url":null,"abstract":"<div><div>CFOs report using elevated hurdle rates that average 6.6 percentage points above the cost of capital. We show that hurdle rate buffers act as a commitment device and convey a bargaining advantage over counterparties during project development and M&A. This benefit can exceed the opportunity cost of forgone projects and acquisitions, preserving firm value. Consistent with our model, bidders’ elevated hurdle rates in M&A deals associate with higher surplus capture ex post; in CFO survey data, hurdle rate buffers negatively relate to ex ante bargaining power, and realized returns cluster just above elevated hurdle rates.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"178 ","pages":"Article 104240"},"PeriodicalIF":10.4,"publicationDate":"2026-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146111046","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-04-01Epub Date: 2026-02-05DOI: 10.1016/j.jfineco.2026.104249
Francesco Sannino
In a “lemons” market, a shock to gains from trade precedes the buyers’ offer. Lower gains exacerbate adverse selection. Trading with intermediaries before observing the shock commits sellers not to keep high-quality assets in such states, improving surplus despite impeding efficient use of information. To add value, intermediaries need not possess superior skills or information. If sellers choose intermediaries to overcome search frictions, traded assets’ quality and welfare increase with search costs. The theory offers a novel perspective on the underwrite-to-distribute model in leveraged loans, and predicts that dealers’ shift from market-making to match-making may worsen adverse selection in over-the-counter markets.
{"title":"Committing to trade: A theory of intermediation","authors":"Francesco Sannino","doi":"10.1016/j.jfineco.2026.104249","DOIUrl":"10.1016/j.jfineco.2026.104249","url":null,"abstract":"<div><div>In a “lemons” market, a shock to gains from trade precedes the buyers’ offer. Lower gains exacerbate adverse selection. Trading with intermediaries before observing the shock commits sellers not to keep high-quality assets in such states, improving surplus despite impeding efficient use of information. To add value, intermediaries need not possess superior skills or information. If sellers choose intermediaries to overcome search frictions, traded assets’ quality and welfare increase with search costs. The theory offers a novel perspective on the underwrite-to-distribute model in leveraged loans, and predicts that dealers’ shift from market-making to match-making may worsen adverse selection in over-the-counter markets.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"178 ","pages":"Article 104249"},"PeriodicalIF":10.4,"publicationDate":"2026-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146134344","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-04-01Epub Date: 2026-02-01DOI: 10.1016/j.jfineco.2026.104250
Amit Goyal , Sunil Wahal , M. Deniz Yavuz
We study the selection of private market managers (GPs) for over 61,000 capital commitments by institutional investors (LPs) from a feasible opportunity set. LPs chase past performance but also seem surprisingly willing to invest in GPs without a track record: the probability that LPs select first-time or young GPs is quantitatively similar to GPs in the highest quartile of past performance. The most plausible explanation is that there is demand for exposure to private markets that is not fulfilled by incumbent GPs. The proclivity to invest in first-time or young GPs is not associated with higher future performance.
{"title":"Picking partners: Manager selection in private markets","authors":"Amit Goyal , Sunil Wahal , M. Deniz Yavuz","doi":"10.1016/j.jfineco.2026.104250","DOIUrl":"10.1016/j.jfineco.2026.104250","url":null,"abstract":"<div><div>We study the selection of private market managers (GPs) for over 61,000 capital commitments by institutional investors (LPs) from a feasible opportunity set. LPs chase past performance but also seem surprisingly willing to invest in GPs without a track record: the probability that LPs select first-time or young GPs is quantitatively similar to GPs in the highest quartile of past performance. The most plausible explanation is that there is demand for exposure to private markets that is not fulfilled by incumbent GPs. The proclivity to invest in first-time or young GPs is not associated with higher future performance.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"178 ","pages":"Article 104250"},"PeriodicalIF":10.4,"publicationDate":"2026-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146109866","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-04-01Epub Date: 2026-02-11DOI: 10.1016/j.jfineco.2026.104248
Jules H. van Binsbergen
Using a panel of international government bond data, I construct fixed income portfolios that match the duration of the dividend strips of the local aggregate stock market index. I find that these bond portfolios have similar realized return performance as their stock counterparts while also exhibiting similar or higher levels of volatility. These results provide novel insights regarding the equity risk premium and excess volatility puzzles (bubbles) and their measurement. I present several potential explanations, including secular stagnation, and discuss further the implications for macroeconomics, monetary economics, asset pricing, and corporate finance.
{"title":"Duration-based stock valuation: Reassessing stock market performance and volatility","authors":"Jules H. van Binsbergen","doi":"10.1016/j.jfineco.2026.104248","DOIUrl":"10.1016/j.jfineco.2026.104248","url":null,"abstract":"<div><div>Using a panel of international government bond data, I construct fixed income portfolios that match the duration of the dividend strips of the local aggregate stock market index. I find that these bond portfolios have similar realized return performance as their stock counterparts while also exhibiting similar or higher levels of volatility. These results provide novel insights regarding the equity risk premium and excess volatility puzzles (bubbles) and their measurement. I present several potential explanations, including secular stagnation, and discuss further the implications for macroeconomics, monetary economics, asset pricing, and corporate finance.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"178 ","pages":"Article 104248"},"PeriodicalIF":10.4,"publicationDate":"2026-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146160354","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-04-01Epub Date: 2026-01-31DOI: 10.1016/j.jfineco.2026.104239
Jason Allen , Kyra Carmichael , Robert Clark , Shaoteng Li , Nicolas Vincent
In many countries, the cost of housing has greatly outpaced income growth, leading to an affordability crisis. Leveraging Canadian loan-level data, we document an increasing reliance of first-time home-buyers on financial help from their parents through mortgage co-signing. We show that parental support can effectively relax the borrowing constraints of their adult children, and allow them to enter the housing market early. However, we also identify a novel channel through which parental support could increase borrower vulnerabilities. Co-signing incentivizes adult children to lever up and purchase housing beyond what they can afford, exposing them to a greater risk of financial stress.
{"title":"Housing affordability and parental income support: The role of mortgage co-signing","authors":"Jason Allen , Kyra Carmichael , Robert Clark , Shaoteng Li , Nicolas Vincent","doi":"10.1016/j.jfineco.2026.104239","DOIUrl":"10.1016/j.jfineco.2026.104239","url":null,"abstract":"<div><div>In many countries, the cost of housing has greatly outpaced income growth, leading to an affordability crisis. Leveraging Canadian loan-level data, we document an increasing reliance of first-time home-buyers on financial help from their parents through mortgage co-signing. We show that parental support can effectively relax the borrowing constraints of their adult children, and allow them to enter the housing market early. However, we also identify a novel channel through which parental support could increase borrower vulnerabilities. Co-signing incentivizes adult children to lever up and purchase housing beyond what they can afford, exposing them to a greater risk of financial stress.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"178 ","pages":"Article 104239"},"PeriodicalIF":10.4,"publicationDate":"2026-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146081587","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-04-01Epub Date: 2026-02-03DOI: 10.1016/j.jfineco.2025.104225
Manuel Ammann , Alexander Cochardt , Lauren Cohen , Stephan Heller
We provide novel evidence suggestive of insider trading through concealed relationships identified using information from over 100,000 Facebook profiles and their 35 million friends. Focusing on connections between fund managers and firm officers, we demonstrate that hidden ties are linked to substantial abnormal returns averaging 135 basis points per month (exceeding 16% alpha annually, t-stat = 3.54) across the universe of mutual funds and public firms. These hidden ties emerge as the most powerful predictor of future stock returns among documented network characteristics, with predictive power increasing over time through the present day. The premium associated with such connections arises not from endogenous selection or familiarity bias; instead, fund managers exhibit specific timing ability in deciding when to hold (or avoid) stocks of firm officers linked through hidden ties. The value of trading information rises with the degree of concealment and is concentrated around earnings and M&A events. The premium is absent in index funds, where strategic stock selection and timing are infeasible. Our findings on the value of hidden ties remain robust across industries, investment styles, time periods, and firm types.
{"title":"Hidden alpha","authors":"Manuel Ammann , Alexander Cochardt , Lauren Cohen , Stephan Heller","doi":"10.1016/j.jfineco.2025.104225","DOIUrl":"10.1016/j.jfineco.2025.104225","url":null,"abstract":"<div><div>We provide novel evidence suggestive of insider trading through concealed relationships identified using information from over 100,000 Facebook profiles and their 35 million friends. Focusing on connections between fund managers and firm officers, we demonstrate that hidden ties are linked to substantial abnormal returns averaging 135 basis points per month (exceeding 16% alpha annually, <em>t</em>-stat = 3.54) across the universe of mutual funds and public firms. These hidden ties emerge as the most powerful predictor of future stock returns among documented network characteristics, with predictive power increasing over time through the present day. The premium associated with such connections arises not from endogenous selection or familiarity bias; instead, fund managers exhibit specific timing ability in deciding when to hold (or avoid) stocks of firm officers linked through hidden ties. The value of trading information rises with the degree of concealment and is concentrated around earnings and M&A events. The premium is absent in index funds, where strategic stock selection and timing are infeasible. Our findings on the value of hidden ties remain robust across industries, investment styles, time periods, and firm types.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"178 ","pages":"Article 104225"},"PeriodicalIF":10.4,"publicationDate":"2026-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146109864","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-04-01Epub Date: 2026-01-27DOI: 10.1016/j.jfineco.2026.104237
George C. Nurisso
Short sellers convey negative information to securities lenders when borrowing shares. I model how this information generates novel interactions between institutional investors’ lending and trading decisions. Lower lending fees improve information quality by facilitating more shorting, but also make it less costly for lenders to strategically recall shares to enhance their trading profits. Lenders may then need to raise fees to commit not to recall shares and thereby attract short sellers. Conversely, index fund lenders cannot trade on lending market information. This restriction enables them to attract greater shorting demand and potentially improve price efficiency—despite charging higher fees.
{"title":"Learning by lending securities","authors":"George C. Nurisso","doi":"10.1016/j.jfineco.2026.104237","DOIUrl":"10.1016/j.jfineco.2026.104237","url":null,"abstract":"<div><div>Short sellers convey negative information to securities lenders when borrowing shares. I model how this information generates novel interactions between institutional investors’ lending and trading decisions. Lower lending fees improve information quality by facilitating more shorting, but also make it less costly for lenders to strategically recall shares to enhance their trading profits. Lenders may then need to raise fees to commit not to recall shares and thereby attract short sellers. Conversely, index fund lenders cannot trade on lending market information. This restriction enables them to attract greater shorting demand and potentially improve price efficiency—despite charging higher fees.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"178 ","pages":"Article 104237"},"PeriodicalIF":10.4,"publicationDate":"2026-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146045173","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-03-21DOI: 10.1016/j.jfineco.2026.104275
John M. Griffin, Samuel Kruger, Prateek Mahajan
{"title":"Did pandemic relief fraud inflate house prices?","authors":"John M. Griffin, Samuel Kruger, Prateek Mahajan","doi":"10.1016/j.jfineco.2026.104275","DOIUrl":"https://doi.org/10.1016/j.jfineco.2026.104275","url":null,"abstract":"","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"66 1","pages":""},"PeriodicalIF":8.9,"publicationDate":"2026-03-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"147496746","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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