Finance

- November 2023
- Article
A Quantity-Driven Theory of Term Premia and Exchange Rates

By: Robin Greenwood, Samuel G. Hanson, Jeremy C. Stein and Adi Sunderam

We develop a model in which specialized bond investors must absorb shocks to the supply and demand for long-term bonds in two currencies. Since long-term bonds and foreign exchange are both exposed to unexpected movements in short-term interest rates, a shift in the supply of long-term bonds in one currency influences the foreign exchange rate between the two currencies, as well as bond term premia in both currencies. Our model matches several important empirical patterns, including the co-movement between exchange rates and term premia, as well as the finding that central banks' quantitative easing policies impact exchange rates. An extension of our model links spot exchange rates to the persistent deviations from covered interest rate parity that have emerged since 2008.
- November 2023
- Article
A Quantity-Driven Theory of Term Premia and Exchange Rates

By: Robin Greenwood, Samuel G. Hanson, Jeremy C. Stein and Adi Sunderam

We develop a model in which specialized bond investors must absorb shocks to the supply and demand for long-term bonds in two currencies. Since long-term bonds and foreign exchange are both exposed to unexpected movements in short-term interest rates, a shift in the supply of long-term bonds in one currency influences the foreign exchange rate...
- September 2023
- Case
Breaking Barriers: How Brex is Shaping the Future of Financial Services for Startups

By: Marco Di Maggio, James Barnett and Susie L. Ma
- September 2023
- Case
Breaking Barriers: How Brex is Shaping the Future of Financial Services for Startups

By: Marco Di Maggio, James Barnett and Susie L. Ma
- September 2023
- Case
Cost of Capital at DraftKings

By: Malcolm Baker, Sebastian Hillenbrand and James Barnett
- September 2023
- Case
Cost of Capital at DraftKings

By: Malcolm Baker, Sebastian Hillenbrand and James Barnett

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

A Quantity-Driven Theory of Term Premia and Exchange Rates

By: Robin Greenwood, Samuel G. Hanson, Jeremy C. Stein and Adi Sunderam

November 2023 |
Article |
Quarterly Journal of Economics

We develop a model in which specialized bond investors must absorb shocks to the supply and demand for long-term bonds in two currencies. Since long-term bonds and foreign exchange are both exposed to unexpected movements in short-term interest rates, a shift in the supply of long-term bonds in one currency influences the foreign exchange rate between the two currencies, as well as bond term premia in both currencies. Our model matches several important empirical patterns, including the co-movement between exchange rates and term premia, as well as the finding that central banks' quantitative easing policies impact exchange rates. An extension of our model links spot exchange rates to the persistent deviations from covered interest rate parity that have emerged since 2008.

Keywords: Term Premium; Exchange Rate; Currency Exchange Rate; Bonds

Stock Market Stimulus

By: Robin Greenwood, Toomas Laarits and Jeffrey Wurgler

October 2023 |
Article |
Review of Financial Studies

We study the stock market effects of the arrival of the three rounds of “stimulus checks” to U.S. taxpayers and the single round of direct payments to Hong Kong citizens. The first two rounds of U.S. checks appear to have increased retail buying and share prices of retail-dominated portfolios. The Hong Kong payments increased overall turnover and share prices on the Hong Kong Stock Exchange. We cannot rule out that these price effects were permanent. The findings raise novel questions about the role of fiscal stimulus in the stock market.