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• Working Paper | 2020

  The Pass-Through of Uncertainty Shocks to Households

  Marco Di Maggio, Amir Kermani, Rodney Ramcharan, Vincent Yao and Edison Yu

  Using new employer-employee matched data, this paper investigates the impact of uncertainty, as measured by idiosyncratic stock market volatility, on individual outcomes. We find that firms provide at best partial insurance to their workers. An increase in firm-level uncertainty is associated with a decline in total compensation, especially in variable pay. In turn, individuals reduce their durable goods consumption in response to these uncertainty shocks. These shocks also lead to greater financial fragility among lower-income earners. We also construct a new county-level uncertainty shock and find that local uncertainty shocks reduce county level durable consumption.

  Keywords: employment risk; consumption; Employment; Risk and Uncertainty; Insurance; Household; Spending;

  Citation:

  Di Maggio, Marco, Amir Kermani, Rodney Ramcharan, Vincent Yao, and Edison Yu. "The Pass-Through of Uncertainty Shocks to Households." NBER Working Paper Series, No. 27646, August 2020.  View Details

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• White Paper | 2020

  The Role of Hedge Funds in the 2020 Treasury Market Turmoil

  Marco Di Maggio

  This paper provides new evidence about the behavior of hedge funds during the disruptions that occurred in the Treasury market in March 2020. In contrast to some recent policy papers arguing that hedge funds were a major amplifier of those disruptions, we show that aggregate Treasury positions held by hedge funds were far too small to be the main disruptive factor. Moreover, we find that a range of parties, especially non-US official institutions, sold Treasuries as they sought to lock in US dollars in cash. The hedge funds implementing the Fixed Income Relative Value strategy behaved in a way that was consistent with market expectations as they faced challenging financing conditions when banks abruptly withdrew from funding their positions in the repo market. Overall, this evidence also highlights important vulnerabilities of the Treasury market. Since the last financial crisis, exploding federal deficits led to a significant increase in the stock of marketable Treasuries which outstripped the capacity of dealers to safely intermediate the market on their own balance sheets.

  Citation:

  Di Maggio, Marco. "The Role of Hedge Funds in the 2020 Treasury Market Turmoil." White Paper, August 2020. (Paper financially supported by the Managed Funds Association.)  View Details

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• Background Note | HBS Case Collection | February 2020 (Revised June 2020)

  China Commerce 2020

  William R. Kerr, Daniel O'Connor and Nathaniel Schwalb

  China's digital commerce platforms engage billions of consumers daily across a number of routine tasks from banking, retail purchases, travel, gaming, payments, and more. These platforms are the most sophisticated/informed and highest performing/capable in the world. While often business leaders refer to Amazon as a leader in digital exchange, this case highlights the vital areas where the Chinese platforms lead. Of special note is the merging of the retailers' on and offline capabilities into a unified consumer experience. Retailers like Walmart China have fundamentally altered their business model and federated with these Chinese platforms to build a better consumer experience, sell more, and manage costs and investment. While not all of these practices are globalizing, the non-China platforms are copying them fast to reach the new global standards. Leaders need to be informed and respond.

  Keywords: e-commerce; platforms; Strategy; Leadership; Retail Industry; Technology Industry; Consumer Products Industry; China;

  Citation:

  Kerr, William R., Daniel O'Connor, and Nathaniel Schwalb. "China Commerce 2020." Harvard Business School Background Note 820-014, February 2020. (Revised June 2020.)  View Details

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