Finance

- December 2021
- Article
Trade Policy Uncertainty and Stock Returns

By: Marcelo Bianconi, Federico Esposito and Marco Sammon

A recent literature has documented large real effects of trade policy uncertainty (TPU) on trade, employment, and investment, but there is little evidence that investors are compensated for bearing such risk. To quantify the risk premium associated with TPU, we exploit quasi-experimental variation in exposure to TPU arising from Congressional votes to revoke China’s preferential tariff treatment between 1990 and 2001. A long-short portfolio designed to isolate exposure to TPU earns a risk-adjusted return of 3.6-6.2% per year. This effect is larger in sectors less protected from globalization, and more reliant on inputs from China. Industries more exposed to trade policy uncertainty also had a larger drop in stock prices when the uncertainty began, and more volatile returns around key policy dates. Our results are not explained by the effects of policy uncertainty on expected cash-flows, investors’ forecast errors, and import competition from China.
- December 2021
- Article
Trade Policy Uncertainty and Stock Returns

By: Marcelo Bianconi, Federico Esposito and Marco Sammon

A recent literature has documented large real effects of trade policy uncertainty (TPU) on trade, employment, and investment, but there is little evidence that investors are compensated for bearing such risk. To quantify the risk premium associated with TPU, we exploit quasi-experimental variation in exposure to TPU arising from Congressional...
- November 2021
- Case
PE Secondaries: Blackstone Strategic Partners

By: Victoria Ivashina, Luis M. Viceira, John D. Dionne and Alys Ferragamo
- November 2021
- Case
PE Secondaries: Blackstone Strategic Partners

By: Victoria Ivashina, Luis M. Viceira, John D. Dionne and Alys Ferragamo
- 2021
- Working Paper
Friends and Family Money: P2P Transfers and Financially Fragile Consumers

By: Tetyana Balyuk and Emily Williams

We assess the impact that real time money transfer technology has on consumer outcomes, particularly during periods of financial fragility. We do this by developing a new data set that documents use of Zelle - the most widely used P2P money transfer technology in the U.S. today - constructed from transaction level data from a large data aggregator for millions of U.S. consumers. We combine these data with a hand-collected data set on Zelle partnerships for 1,113 financial institutions. Finally, we introduce a novel instrument by identifying the location of consumers' close social circle using transactions data. We make use of the fact that money transfer technology is a network good and hence your own use is a function of the use by others, and particularly that of your close friends and family. We then use variation in Zelle bank partnerships at the location of consumers' residence and consumers' close social circle to instrument for Zelle use. We compare users residing in the same city with similar incomes, but with different exposure to Zelle, and observe consumer outcomes during periods of financial fragility. We find that Zelle use results in fewer overdrafts and higher consumption by financially fragile consumers. Consumers substitute away from traditional methods of transferring cash towards Zelle, an effect that is more pronounced for smaller transfer sizes and low-income consumers who are more price-sensitive.
- 2021
- Working Paper
Friends and Family Money: P2P Transfers and Financially Fragile Consumers

By: Tetyana Balyuk and Emily Williams

We assess the impact that real time money transfer technology has on consumer outcomes, particularly during periods of financial fragility. We do this by developing a new data set that documents use of Zelle - the most widely used P2P money transfer technology in the U.S. today - constructed from transaction level data from a large data aggregator...

About the Unit

Our strategy is to assemble and nurture a faculty whose interests and skills complement each other, and who work well together:

a) to produce a broad range of finance-related research that is published in top-tier scientific and practitioner journals, and that addresses issues of present and future importance to managers (including regulators and policy makers);

b) to develop highly-relevant and intellectually rigorous MBA and executive education courses; and

c) to mentor future academics through the Business Economics doctoral program.

Our applied focus and access to business organizations are major advantages which are reinforced by our students and our case-based approach. We have a faculty with broad expertise, and we have resources, field contacts, and institutional support, all of which we can leverage to do richer work and be more productive than we could at other institutions.

Recent Publications

Trade Policy Uncertainty and Stock Returns

By: Marcelo Bianconi, Federico Esposito and Marco Sammon

December 2021 |
Article |
Journal of International Money and Finance

A recent literature has documented large real effects of trade policy uncertainty (TPU) on trade, employment, and investment, but there is little evidence that investors are compensated for bearing such risk. To quantify the risk premium associated with TPU, we exploit quasi-experimental variation in exposure to TPU arising from Congressional votes to revoke China’s preferential tariff treatment between 1990 and 2001. A long-short portfolio designed to isolate exposure to TPU earns a risk-adjusted return of 3.6-6.2% per year. This effect is larger in sectors less protected from globalization, and more reliant on inputs from China. Industries more exposed to trade policy uncertainty also had a larger drop in stock prices when the uncertainty began, and more volatile returns around key policy dates. Our results are not explained by the effects of policy uncertainty on expected cash-flows, investors’ forecast errors, and import competition from China.

Keywords: Trade Policy; Uncertainty; Stock Returns; Risk Premium; Tariff Rates; Portfolio Analysis; Trade; Policy; Risk and Uncertainty; Stocks; Investment Return

Citation

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PE Secondaries: Blackstone Strategic Partners

By: Victoria Ivashina, Luis M. Viceira, John D. Dionne and Alys Ferragamo

November 2021 |
Case |
Faculty Research

Citation

Educators

Tottenham Hotspur plc

By: Lauren Cohen, Joshua D. Coval and Christopher Malloy

November 2021 |
Supplement |
Faculty Research

Citation

Purchase

Friends and Family Money: P2P Transfers and Financially Fragile Consumers

By: Tetyana Balyuk and Emily Williams

2021 |
Working Paper |
Faculty Research

We assess the impact that real time money transfer technology has on consumer outcomes, particularly during periods of financial fragility. We do this by developing a new data set that documents use of Zelle - the most widely used P2P money transfer technology in the U.S. today - constructed from transaction level data from a large data aggregator for millions of U.S. consumers. We combine these data with a hand-collected data set on Zelle partnerships for 1,113 financial institutions. Finally, we introduce a novel instrument by identifying the location of consumers' close social circle using transactions data. We make use of the fact that money transfer technology is a network good and hence your own use is a function of the use by others, and particularly that of your close friends and family. We then use variation in Zelle bank partnerships at the location of consumers' residence and consumers' close social circle to instrument for Zelle use. We compare users residing in the same city with similar incomes, but with different exposure to Zelle, and observe consumer outcomes during periods of financial fragility. We find that Zelle use results in fewer overdrafts and higher consumption by financially fragile consumers. Consumers substitute away from traditional methods of transferring cash towards Zelle, an effect that is more pronounced for smaller transfer sizes and low-income consumers who are more price-sensitive.

Citation

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Segmented Arbitrage

By: Emil Siriwardane, Adi Sunderam and Jonathan Wallen

2021 |
Working Paper |
Faculty Research

We use arbitrage activity in equity, fixed income, and foreign exchange markets to characterize the frictions and constraints facing intermediaries. The average pairwise correlation between the twenty-nine arbitrage spreads that we study is 22%. These low correlations are inconsistent with models in which an integrated intermediary sector faces a single constraint and sets all prices. We show that at least two types of segmentation drive arbitrage dynamics. First, funding is segmented—certain trades rely on specific funding sources so arbitrage spreads are sensitive to localized funding shocks. Second, balance sheets are segmented—intermediaries specialize in certain arbitrages so arbitrage spreads are sensitive to idiosyncratic balance sheet shocks. Our results suggest specialization on both the asset and liability sides of intermediary balance sheets is important for understanding their role in capital markets.

Keywords: Financial Intermediation; Arbitrage; Finance; Segmentation

Citation

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