Pub Date : 2026-02-01Epub Date: 2025-12-10DOI: 10.1016/j.jfineco.2025.104174
Michael Boutros
I study how the cognitive demands of financial planning shape household decisionmaking with respect to consumption out of windfall income shocks. I build a quantitative model of bounded rationality in which reoptimization is costly. Households respond to windfall income shocks by choosing a finite planning horizon over which to reoptimize, and the optimal planning horizon is increasing in wealth and the magnitude of the income shock. Calibrated to U.S. data, the model’s distribution of consumption responses is consistent with three key facts: even highly liquid households have large consumption responses out of income shocks, the fraction of households with positive consumption responses increases with shock size, and conditional on responding, larger shocks generate smaller consumption responses.
{"title":"Windfall income shocks with finite planning horizons","authors":"Michael Boutros","doi":"10.1016/j.jfineco.2025.104174","DOIUrl":"10.1016/j.jfineco.2025.104174","url":null,"abstract":"<div><div>I study how the cognitive demands of financial planning shape household decisionmaking with respect to consumption out of windfall income shocks. I build a quantitative model of bounded rationality in which reoptimization is costly. Households respond to windfall income shocks by choosing a finite planning horizon over which to reoptimize, and the optimal planning horizon is increasing in wealth and the magnitude of the income shock. Calibrated to U.S. data, the model’s distribution of consumption responses is consistent with three key facts: even highly liquid households have large consumption responses out of income shocks, the fraction of households with positive consumption responses increases with shock size, and conditional on responding, larger shocks generate smaller consumption responses.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"176 ","pages":"Article 104174"},"PeriodicalIF":10.4,"publicationDate":"2026-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145731005","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 : 2026-02-01Epub Date: 2025-11-20DOI: 10.1016/j.jfineco.2025.104204
João Granja , Nuno Paixão
We evaluate how bank mergers affect consumer welfare when banks set deposit rates with a high degree of uniformity across their branch networks. First, we document that merger-induced changes to local market concentration are only weakly correlated with pricing decisions. Second, we develop a structural model of the banking sector to simulate equilibrium post-merger deposit rates with and without uniform pricing. The simulated deposit rates from the model with uniform pricing best match the observed changes in deposit rates following bank mergers. We use the model to evaluate antitrust decisions that force acquirers to divest branches in order to contain local market concentration levels. Our counterfactual exercises suggest that forced divestitures sometimes improve consumer welfare but can also impose consumer welfare losses when antitrust regulators do not consider that uniform pricing practices might lead to better deposit rates at acquired branches after a merger.
{"title":"Bank consolidation and uniform pricing","authors":"João Granja , Nuno Paixão","doi":"10.1016/j.jfineco.2025.104204","DOIUrl":"10.1016/j.jfineco.2025.104204","url":null,"abstract":"<div><div>We evaluate how bank mergers affect consumer welfare when banks set deposit rates with a high degree of uniformity across their branch networks. First, we document that merger-induced changes to local market concentration are only weakly correlated with pricing decisions. Second, we develop a structural model of the banking sector to simulate equilibrium post-merger deposit rates with and without uniform pricing. The simulated deposit rates from the model with uniform pricing best match the observed changes in deposit rates following bank mergers. We use the model to evaluate antitrust decisions that force acquirers to divest branches in order to contain local market concentration levels. Our counterfactual exercises suggest that forced divestitures sometimes improve consumer welfare but can also impose consumer welfare losses when antitrust regulators do not consider that uniform pricing practices might lead to better deposit rates at acquired branches after a merger.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"176 ","pages":"Article 104204"},"PeriodicalIF":10.4,"publicationDate":"2026-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145575672","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 : 2026-02-01Epub Date: 2025-12-26DOI: 10.1016/j.jfineco.2025.104223
Bryan Seegmiller
Stocks with similar characteristics but different levels of ownership by financial institutions have returns and risk premia that comove very differently with shocks to the risk-bearing capacity of dealer banks. After observable stock characteristics are accounted for, excess returns on more intermediated stocks have higher betas on contemporaneous shocks to intermediary willingness to take risk and are more predictable by state variables that proxy for intermediary health. Intermediary risk-bearing capacity also explains a substantial and increasing fraction of the variation in conditional risk premia for portfolios sorted on intermediation. These effects are concentrated in stocks held by hedge funds or mutual fund investors who are more likely to be exposed to dealer banks. The empirical evidence supports the predictions of asset pricing models in which financial intermediaries are marginal investors but face frictions that induce changes in their risk-bearing capacity.
{"title":"Intermediation frictions in equity markets","authors":"Bryan Seegmiller","doi":"10.1016/j.jfineco.2025.104223","DOIUrl":"10.1016/j.jfineco.2025.104223","url":null,"abstract":"<div><div>Stocks with similar characteristics but different levels of ownership by financial institutions have returns and risk premia that comove very differently with shocks to the risk-bearing capacity of dealer banks. After observable stock characteristics are accounted for, excess returns on more intermediated stocks have higher betas on contemporaneous shocks to intermediary willingness to take risk and are more predictable by state variables that proxy for intermediary health. Intermediary risk-bearing capacity also explains a substantial and increasing fraction of the variation in conditional risk premia for portfolios sorted on intermediation. These effects are concentrated in stocks held by hedge funds or mutual fund investors who are more likely to be exposed to dealer banks. The empirical evidence supports the predictions of asset pricing models in which financial intermediaries are marginal investors but face frictions that induce changes in their risk-bearing capacity.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"176 ","pages":"Article 104223"},"PeriodicalIF":10.4,"publicationDate":"2026-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145839809","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 : 2026-02-01Epub Date: 2025-12-01DOI: 10.1016/j.jfineco.2025.104218
J. Anthony Cookson , Corbin Fox , Javier Gil-Bazo , Juan F. Imbet , Christoph Schiller
After the run on Silicon Valley Bank (SVB) in March 2023, U.S. regional banks entered a period of significant distress. We quantify social media’s role in this distress using comprehensive Twitter data. During the SVB run period, banks with high pre-existing exposure to Twitter lost 4.3 percentage points more stock market value. Moreover, Twitter pre-exposure interacts significantly with classical run risks to predict greater run severity and greater deposit outflows during Q1-2023, effects unexplained by other banking or market characteristics. At the hourly frequency during the run, high Twitter attention over the past four hours predicts stock market losses, especially for banks with high run risks. By contrast, we find that negative Twitter sentiment does not amplify bank run risks. Rather, our evidence points to a distinctive role of Twitter attention, particularly when tweets are retweeted broadly.
在硅谷银行（Silicon Valley Bank）于2023年3月遭遇挤兑之后，美国地区银行进入了一段严重的困境时期。我们使用全面的Twitter数据来量化社交媒体在这种困境中的作用。在瑞典银行挤兑期间，先前对Twitter敞口较高的银行股票市值损失了4.3个百分点。此外，Twitter预敞口与经典挤兑风险显著相互作用，以预测第一季度至2023年期间更大的挤兑严重程度和更大的存款流出，其他银行或市场特征无法解释的影响。在挤兑期间的每小时频率上，过去四个小时内Twitter的高度关注预示着股市的损失，尤其是对那些具有高挤兑风险的银行。相比之下，我们发现负面的Twitter情绪并没有放大银行挤兑风险。相反，我们的证据表明，推特的注意力起着独特的作用，尤其是当推文被广泛转发时。
{"title":"Social media as a bank run catalyst","authors":"J. Anthony Cookson , Corbin Fox , Javier Gil-Bazo , Juan F. Imbet , Christoph Schiller","doi":"10.1016/j.jfineco.2025.104218","DOIUrl":"10.1016/j.jfineco.2025.104218","url":null,"abstract":"<div><div>After the run on Silicon Valley Bank (SVB) in March 2023, U.S. regional banks entered a period of significant distress. We quantify social media’s role in this distress using comprehensive Twitter data. During the SVB run period, banks with high <em>pre-existing exposure</em> to Twitter lost 4.3 percentage points more stock market value. Moreover, Twitter pre-exposure interacts significantly with classical run risks to predict greater run severity and greater deposit outflows during Q1-2023, effects unexplained by other banking or market characteristics. At the hourly frequency during the run, high Twitter attention over the past four hours predicts stock market losses, especially for banks with high run risks. By contrast, we find that negative Twitter sentiment does not amplify bank run risks. Rather, our evidence points to a distinctive role of Twitter attention, particularly when tweets are retweeted broadly.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"176 ","pages":"Article 104218"},"PeriodicalIF":10.4,"publicationDate":"2026-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145651554","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 : 2026-02-01Epub Date: 2025-12-19DOI: 10.1016/j.jfineco.2025.104224
Jennifer N. Carpenter , Fangzhou Lu , Robert F. Whitelaw
We propose a new approach to modeling bond risk and risk premia, inspired by the equity risk-return literature, which does not impose the tight restrictions found in models that generate closed-form bond prices. We estimate the joint dynamics of the volatility and Sharpe ratio of principal-component bond-factor portfolios for the US and China. Predictors include yield curve variables and, for the US, VIX. We document complex time-varying relations between the price and quantity of interest rate risk inconsistent with the frameworks in existing studies. Interesting differences between the US and China further highlight the need for our more flexible approach.
{"title":"Government bond risk and return in the US and China","authors":"Jennifer N. Carpenter , Fangzhou Lu , Robert F. Whitelaw","doi":"10.1016/j.jfineco.2025.104224","DOIUrl":"10.1016/j.jfineco.2025.104224","url":null,"abstract":"<div><div>We propose a new approach to modeling bond risk and risk premia, inspired by the equity risk-return literature, which does not impose the tight restrictions found in models that generate closed-form bond prices. We estimate the joint dynamics of the volatility and Sharpe ratio of principal-component bond-factor portfolios for the US and China. Predictors include yield curve variables and, for the US, VIX. We document complex time-varying relations between the price and quantity of interest rate risk inconsistent with the frameworks in existing studies. Interesting differences between the US and China further highlight the need for our more flexible approach.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"176 ","pages":"Article 104224"},"PeriodicalIF":10.4,"publicationDate":"2026-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145797110","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 : 2026-02-01Epub Date: 2025-11-27DOI: 10.1016/j.jfineco.2025.104207
Yuchen Chen , Xuelin Li , Richard T. Thakor , Colin Ward
We assess how labor mobility affects intangible investment in a dynamic agency model featuring both knowledge appropriation and moral hazard. We argue that restricting worker mobility, while reducing employees’ appropriation of firm intangible capital, can hurt their incentives to exert effort. Our calibration to U.S. data targets responses of employee turnover and firms’ intangible investment to variations in workers’ outside option values, identified through exogenous shocks to non-compete enforcement. The model simulation shows that knowledge spillovers mitigate the costs of incentive provision when agency frictions are severe, and the optimal labor mobility regulation should balance this benefit against turnover risk. Finally, we highlight the use of deferred compensation bonuses in the optimal contract as a retention mechanism, even among under-performing firms.
{"title":"Appropriated growth","authors":"Yuchen Chen , Xuelin Li , Richard T. Thakor , Colin Ward","doi":"10.1016/j.jfineco.2025.104207","DOIUrl":"10.1016/j.jfineco.2025.104207","url":null,"abstract":"<div><div>We assess how labor mobility affects intangible investment in a dynamic agency model featuring both knowledge appropriation and moral hazard. We argue that restricting worker mobility, while reducing employees’ appropriation of firm intangible capital, can hurt their incentives to exert effort. Our calibration to U.S. data targets responses of employee turnover and firms’ intangible investment to variations in workers’ outside option values, identified through exogenous shocks to non-compete enforcement. The model simulation shows that knowledge spillovers mitigate the costs of incentive provision when agency frictions are severe, and the optimal labor mobility regulation should balance this benefit against turnover risk. Finally, we highlight the use of deferred compensation bonuses in the optimal contract as a retention mechanism, even among under-performing firms.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"176 ","pages":"Article 104207"},"PeriodicalIF":10.4,"publicationDate":"2026-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145609081","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 : 2026-02-01Epub Date: 2025-11-13DOI: 10.1016/j.jfineco.2025.104208
Mete Kılıç, Şelale Tüzel
We document that 20% of Compustat firms exhibit above-median investment rates despite having below-median marginal product of capital (MPK), seemingly “misallocating” resources. These firms are typically younger and more likely to experience substantial upwards jumps in sales and MPK in subsequent years. They contribute significantly to innovation, and their investments predict future aggregate productivity, creating value beyond their current MPK. We propose and estimate a simple endogenous firm growth model that captures key cross-sectional features and enables counterfactual analysis. Ignoring the potential for future jumps in hypothetical investment policies reduces MPK and investment dispersion but also lowers aggregate productivity.
{"title":"Investing in misallocation","authors":"Mete Kılıç, Şelale Tüzel","doi":"10.1016/j.jfineco.2025.104208","DOIUrl":"10.1016/j.jfineco.2025.104208","url":null,"abstract":"<div><div>We document that 20% of Compustat firms exhibit above-median investment rates despite having below-median marginal product of capital (MPK), seemingly “misallocating” resources. These firms are typically younger and more likely to experience substantial upwards jumps in sales and MPK in subsequent years. They contribute significantly to innovation, and their investments predict future aggregate productivity, creating value beyond their current MPK. We propose and estimate a simple endogenous firm growth model that captures key cross-sectional features and enables counterfactual analysis. Ignoring the potential for future jumps in hypothetical investment policies reduces MPK and investment dispersion but also lowers aggregate productivity.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"176 ","pages":"Article 104208"},"PeriodicalIF":10.4,"publicationDate":"2026-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145500197","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}
We investigate whether teams exhibit increased or reduced overreaction in expectation formation relative to individuals. Using preregistered randomized experiments that directly elicit expectations about future returns, we find that teams display lower belief overreaction to recent investment performance. A quantitative decomposition shows that this team effect stems primarily from a “self-selection” mechanism, whereby the most biased team member chooses to influence the team decision less. An LLM-based analysis of team interactions reinforces this result. A complementary analysis of US equity mutual fund managers operating both individually and as part of a team yields consistent evidence of lower overreaction in teams.
{"title":"Do teams alleviate or exacerbate overreaction in beliefs?","authors":"Ricardo Barahona , Stefano Cassella , Kristy A.E. Jansen , Vincenzo Pezone","doi":"10.1016/j.jfineco.2025.104219","DOIUrl":"10.1016/j.jfineco.2025.104219","url":null,"abstract":"<div><div>We investigate whether teams exhibit increased or reduced overreaction in expectation formation relative to individuals. Using preregistered randomized experiments that directly elicit expectations about future returns, we find that teams display lower belief overreaction to recent investment performance. A quantitative decomposition shows that this team effect stems primarily from a “self-selection” mechanism, whereby the most biased team member chooses to influence the team decision less. An LLM-based analysis of team interactions reinforces this result. A complementary analysis of US equity mutual fund managers operating both individually and as part of a team yields consistent evidence of lower overreaction in teams.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"176 ","pages":"Article 104219"},"PeriodicalIF":10.4,"publicationDate":"2026-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145657236","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 : 2026-02-01Epub Date: 2025-11-14DOI: 10.1016/j.jfineco.2025.104206
Julio Gálvez , Gonzalo Paz-Pardo
Households face earnings risk which is non-normal and varies by age and over the income distribution. We show that allowing for rich features of earnings dynamics, in the context of a structurally estimated life-cycle portfolio choice model, helps to rationalize the limited stock market participation and the low risky asset holdings of households. Because people are subject to more background risk than previously considered, the estimated model implies a substantially lower coefficient of risk aversion and lower stock market participation costs. Older workers and higher earners are exposed to negatively skewed risk and choose lower stock exposures.
{"title":"Richer earnings dynamics, consumption and portfolio choice over the life cycle","authors":"Julio Gálvez , Gonzalo Paz-Pardo","doi":"10.1016/j.jfineco.2025.104206","DOIUrl":"10.1016/j.jfineco.2025.104206","url":null,"abstract":"<div><div>Households face earnings risk which is non-normal and varies by age and over the income distribution. We show that allowing for rich features of earnings dynamics, in the context of a structurally estimated life-cycle portfolio choice model, helps to rationalize the limited stock market participation and the low risky asset holdings of households. Because people are subject to more background risk than previously considered, the estimated model implies a substantially lower coefficient of risk aversion and lower stock market participation costs. Older workers and higher earners are exposed to negatively skewed risk and choose lower stock exposures.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"176 ","pages":"Article 104206"},"PeriodicalIF":10.4,"publicationDate":"2026-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145529105","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 : 2026-02-01Epub Date: 2025-12-18DOI: 10.1016/j.jfineco.2025.104221
Bing Han , Pengfei Sui , Wenhao Yang
Using mutual fund flows, we evaluate prospect theory with choice outcomes in the market. We provide strong support for prospect theory: under a standard set of parameters, funds whose past returns generate higher prospect theory value attract significantly larger future flows; we also find corroborative evidence using account-level data. Taking a revealed preference approach, we estimate the prospect theory parameters through a discrete choice model and find that our field-based estimates align well with previous experiment-based estimates. Moreover, we show that prospect theory offers a new framework for understanding flows, as it has explanatory power beyond existing drivers.
{"title":"Prospect theory in the field: Revealed preferences from mutual fund flows","authors":"Bing Han , Pengfei Sui , Wenhao Yang","doi":"10.1016/j.jfineco.2025.104221","DOIUrl":"10.1016/j.jfineco.2025.104221","url":null,"abstract":"<div><div>Using mutual fund flows, we evaluate prospect theory with choice outcomes in the market. We provide strong support for prospect theory: under a standard set of parameters, funds whose past returns generate higher prospect theory value attract significantly larger future flows; we also find corroborative evidence using account-level data. Taking a revealed preference approach, we estimate the prospect theory parameters through a discrete choice model and find that our field-based estimates align well with previous experiment-based estimates. Moreover, we show that prospect theory offers a new framework for understanding flows, as it has explanatory power beyond existing drivers.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"176 ","pages":"Article 104221"},"PeriodicalIF":10.4,"publicationDate":"2026-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145785983","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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