Working Papers
Heterogeneous Intermediary Asset Pricing (Job Market Paper)
Abstract: I study the asset pricing implications of heterogeneity in the financial intermediary sector. To examine the impact of massive balance sheet adjustments within the intermediary sector during the Great Recession, I propose a dynamic model with heterogeneous intermediaries and financial frictions. The model implies that a significant fraction of risk premia variation can be attributed to the composition of the intermediary sector. Asset reallocations, comparable in magnitude to the one observed during the recent financial crisis, lead to a substantial increase in the risk premia and volatility. An empirical measure of the composition of the financial sector strongly forecasts future excess returns with significant additional predictive power beyond many established forecasting variables in the literature. Moreover, shocks to wealth distribution among intermediaries have strong explanatory power for the cross-section of assets and are priced with a positive price of risk.
Student Loans, Marginal Costs, and Markups: Estimates From the PLUS Program (with William Mann)
Review of Financial Studies, Revise and Resubmit
Coverage at Forbes.com
Abstract: We estimate small marginal costs and large markups at private colleges in the United States, and discuss implications for the design of financial aid. For identification, we exploit a tightening of credit standards in the PLUS loan program, which decreased enrollment, revenues, and expenditures at private colleges with low-income students. We estimate that markups represented more than half of charges for students disqualified by the change. Markups were higher at for-profit schools, and in states with fewer public schools and lower education spending. Our results complement prior evidence on the Bennett Hypothesis, and contrast prior estimates of small markups.
Work in Progress
Cross-Market Arbitrage in Coupled OTC Networks
