Publications & Accepted Papers

1. Financial Disruptions and the Organization of Innovation: Evidence from the Great Depression, (with Tania Babina and Filippo Mezzanotti). Accepted at Review of Financial Studies [PDF]
We examine innovation following the Great Depression using data on a century’s worth of U.S. patents and a difference-in-differences design that exploits regional variation in the crisis severity. Harder-hit areas experienced large and persistent declines in independent patenting, mostly reflecting the disruption in access to finance during the crisis. This decline was larger for young and inexperienced inventors and lower-quality patents. In contrast, innovation by large firms increased, especially among young and inexperienced inventors. Overall, the Great Depression contributed to the decline in technological entrepreneurship and accelerated the shift of innovation into larger firms.
2. Partisan Residential Sorting on Climate Change Risk, (with Stephen Billings, Matt Gustafson, and Ryan Lewis). Forthcoming at Journal of Financial Economics [PDF]
Is climate change partisanship reflected in residential decisions? Comparing individual properties in the same zip code with similar elevation and proximity to the coast, houses exposed to sea level rise (SLR) are increasingly more likely to be owned by Republicans and less likely to be owned by Democrats. We find a partisan residency gap for even moderately SLR exposed properties of more than 5 percentage points, which has more than doubled over the past six years. Findings are unchanged controlling flexibly for other individual demographics and a variety of granular property characteristics, including the value of the home. Residential sorting manifests among owners regardless of occupancy, but not among renters, and is driven by long-run SLR exposure but not current flood risk. Anticipatory sorting on climate change suggests that households that are most likely to vote against climate friendly policies and least likely to adapt may ultimately bear the burden of climate change.
3. Housing Lock: Dutch Evidence on the Impact of Negative Home Equity on Household Mobility, (with Daan Struyven). Forthcoming at American Economic Journal: Economic Policy [PDF]
Abstract This paper employs Dutch administrative population data to test the “housing lock hypothesis”: the conjecture that homeowners with negative home equity, low levels of financial assets and restricted opportunities to borrow reduce their mobility. We exploit variation in home equity solely driven by the timing of home purchase within a municipality and the harshness of Dutch recourse laws, which allow us to isolate the housing lock channel. Instrumented negative home equity is associated with a 74-79% decline in mobility, and the effects are substantially larger for households with low financial asset holdings or moves over longer distances.
4. Negative Home Equity and Household Labor Supply, Journal of Finance 76:2963-2995 (Dec 2021) [PDF]
Winner of the 2015 Colorado Finance Summit Best PhD Paper Award, 2016 Stanford Institute of Theoretical Economics, 2016 AQR Top Finance Graduate Award, 2016 WFA Cubist Systematic Strategies Ph.D. Candidate Award for Outstanding Research
I find that negative home equity causes a 2%-6% reduction in household labor supply. I utilize U.S. household-level data and plausibly exogenous variation in the location-timing of home purchases with a single lender. Supporting causality, households are observationally equivalent at origination and equally sensitive to local housing shocks that don’t cause negative equity. Results also hold comparing purchases within the same year-MSA, that differ by only a few months. Though multiple channels are likely at work, evidence of non-linear effects is broadly consistent with costs associated with housing lock and financial distress.
5. Counterparty Risk and the Establishment of the NYSE Clearinghouse, (with Eric Hughson and Marc Weidenmier). Journal of Political Economy 127.2 (2019): 689-729 [PDF]
The recent financial crisis suggests that counterparty risk in markets without multilateral net settlement through a centralized clearing party (CCP) may pose a threat to financial stability. We study the effect of clearing on counterparty risk by examining a unique historical experiment, the establishment of a clearinghouse on the New York Stock Exchange (NYSE) in 1892. During this period, the largest NYSE stocks were also listed on the Consolidated Stock Exchange (CSE), which already had a clearinghouse netting trades. Using identical securities on the CSE as a control, we find that the introduction of netting on the NYSE reduced the average counterparty risk premium by 24bps and volatility by 26-42bps. Prior to clearing, shocks to overnight lending rates reduced the value of stocks on the NYSE, relative to identical stocks on the CSE, but this was no longer true after the establishment of clearing. We also show that at least ½ of the average reduction in counterparty risk is driven by a reduction in contagion risk through spillovers in the trader network. Our results indicate that clearing can cause a significant improvement in market stability and value through a reduction in network contagion and the counterparty risk premium.
6. Disaster on the Horizon: The Price Effect of Sea Level Rise, (with Matthew Gustafson and Ryan Lewis). Journal of Financial Economics 134.2 (Nov 2019): 253-300 (Lead Article) [PDF]
2019 AQR Insight Distinguished Paper Award, 2018 Northern Finance Association Meetings Best Paper in Risk Management, 2018 International Centre for Pensions Management Research Award, Kahle Family Research Award
Homes exposed to sea level rise (SLR) sell for approximately 7% less than observably equivalent unexposed properties equidistant from the beach. This discount has grown over time and is driven by sophisticated buyers and communities worried about global warming. Consistent with causal identification of long horizon SLR costs, we find no relation between SLR exposure and rental rates and a 4% discount among properties not projected to be flooded for almost a century. Our findings contribute to the literature on the pricing of long-run risky cash flows and provide insights for optimal climate change policy.
7. Identifying the Effect of a Lender of Last Resort on Financial Markets: Lessons from the Founding of the Fed, (with Eric Hughson and Marc Weidenmier). Journal of Financial Economics 98.1 (2010):40-53 [PDF]
We use the founding of the Federal Reserve to identify the effects of a lender of last resort. We examine stock return and interest rate volatility during September and October, when markets were vulnerable because of financial stringency from the harvest. Stock volatility fell by 40% and interest rate volatility by more than 70% following the monetary regime change. The drop is insignificant if major panic years are omitted from the analysis, however. Because business cycle downturns occurred in the same year as financial crises, our results suggest that the existence of the Federal Reserve reduced liquidity risk.

Working Papers

1. The Mortgage Piggy Bank: Building Wealth through Amortization,(with Peter Koudijs). Revise and Resubmit at the Quarterly Journal of Economics [PDF]
Mortgage amortization schedules are among the largest savings plans in the world (ex. U.S. households contribute hundreds of billions of dollars annually to these “mortgage piggy banks”). However, little is known about their effects on wealth accumulation. Ex-ante, the effect is unclear. It depends on the fungibility of home equity and other savings, and households’ willingness to adjust consumption or leisure. Empirically, effects are difficult to identify since amortization and other savings choices are typically co-determined. We overcome this challenge by utilizing a 2013 Dutch reform that increased amortization requirements for new mortgages. Using detailed administrative data, we compare savings decisions for home-buyers right before or after the reform. We use plausibly exogenous variation in the timing of home purchase coming from life-events (ex. birth of a child) to address selection concerns. We find that marginal wealth-building from amortization (MWA) is substantial. Remarkably, households leave non-mortgage savings untouched and cut consumption and leisure instead, implying a near 1-for-1 rise in net-worth. Results hold five years out when the additional amortization-induced home equity is larger than the stock of liquid savings, suggesting substantial amounts of amortization-driven wealth-building over a typical business cycle. Effects are ubiquitous and hold for unconstrained households, who could easily offset the additional amortization by reducing non-mortgage savings, and movers, suggesting a broad applicability of our results. Overall, our results highlight the critical importance of mortgage amortization for household wealth-building and macroprudential policies.
2. The Perceived Value of Pension Funding: Evidence from Border House Prices , [PDF], (with Darren Aiello, Mahyar Kargar, Ryan Lewis, and Michael Schwert).
2021 SFS Cavalcade, 2021 Red Rock Finance Conference, 2022 AFA
We study the effect of state pension windfalls on property prices near state borders, where theory suggests real estate should reflect marginal residents’ perceived value of additional public funds that relax the economic burden of substantial pension shortfalls. We find that one dollar of plausibly exogenous variation in pension asset returns increases border house prices by approximately two dollars. This implies that residents anticipate considerable value-enhancing public spending or reduced distortionary taxation driven by these windfalls. Our analysis of government expenditures suggests windfall-induced differences in the current provision of public goods plays a central role in our findings.
3. The Costs of Curbing Speculation: Evidence from the Establishment of “Investment Grade”, [PDF]
2016 SFS Cavalcade under title “More Than Just Speculation: The Costs of Restrictions on Speculative Investing”, 2017 EHA, 2018 AFA, 2019 NBER DAE SI
In 1936, regulators unexpectedly banned banks from purchasing “speculative” bonds. This announcement caused a sudden persistent rise in speculative bond yields, even comparing securities within the same firm. In contrast to prior evidence during credit booms, I document a substantial decline in equity values for firms reliant on speculative debt financing. Regulations to curb bank speculation are provoked by economic distress, but my findings suggest recoveries may be costly periods for such restrictions. Costs are also exacerbated by reliance on rating agencies. Firms reduce debt to “game” ratings, causing slower investment and asset growth in subsequent years.


1. Securities Ratings and Information Provision, (with Carola Frydman and Eric Hilt).