Found 49 article(s) for author 'Jeremy Stein'

Presidential Address: Sophisticated Investors and Market Efficiency

Presidential Address: Sophisticated Investors and Market Efficiency. Jeremy Stein, August 2009, Paper. “Stock-market trading is increasingly dominated by sophisticated professionals, as opposed to individual investors. Will this trend ultimately lead to greater market efficiency? I consider two complicating factors. The first is crowding–the fact that, for a wide range of “unanchored” strategies, an arbitrageur cannot know how many of his peers are simultaneously entering the same trade. The second is leverage–when an arbitrageur chooses a privately optimal leverage ratio, he may create a fire-sale externality…” Link

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This Bailout Doesn’t Pay Dividends

This Bailout Doesn’t Pay Dividends. Jeremy Stein, David Scharfstein, October 21, 2008, Article. “On Oct. 13, the chief executives of nine large American banks were called to a meeting at the Treasury Department. At the meeting, Secretary Henry Paulson offered them $125 billion from the federal government in exchange for shares of preferred stock. The chief executives accepted his terms. In some accounts of the meeting, Secretary Paulson is described as playing the role of the Godfather, making the banks an offer they could not refuse. But in one important respect, he was more Santa Claus than…” (May require user account or purchase) Link

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The $700 Billion Question

The $700 Billion Question. Jeremy Stein, September 23, 2008, Op-Ed. “Henry Paulson, the Treasury secretary, has opened the government checkbook and is poised to spend $700 billion to end the financial crisis. What comes next depends on the precise mission and operating powers he and Congress assign the new Treasury agency that will oversee the bailout. We see four broad possibilities. First, the agency could act as a deep-pocketed private investor that sees a bargain-buying opportunity – Warren Buffet on steroids. This strategy makes sense if one believes that the crises has caused the prices…” (May require user account or purchase) Link

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Academic Freedom, Private-Sector Focus, and the Process of Innovation

Academic Freedom, Private-Sector Focus, and the Process of Innovation. Jeremy Stein, Philippe Aghion, September 16, 2008, Paper. “We develop a model that clarifies the respective advantages and disadvantages of academic and private-sector research. Rather than relying on lack of appropriability or spillovers to generate a rationale for academic research, we emphasize control-rights considerations, and argue that the fundamental tradeoff between academia and the private sector is one of creative control versus focus. By serving as a precommitment mechanism that allows scientists to freely pursue their own interests…” Link

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A Gap-Filling Theory of Corporate Debt Maturity Choice

A Gap-Filling Theory of Corporate Debt Maturity Choice. Jeremy Stein, Robin Greenwood, Samuel Hanson, June 2008, Paper. “We argue that time-series variation in the maturity of aggregate corporate debt issues arises because firms behave as macro liquidity providers, absorbing the large supply shocks associated with changes in the maturity structure of government debt. We document that when the government funds itself with relatively more short-term debt, firms fill the resulting gap by issuing more long-term debt, and vice-versa. This type of liquidity provision is undertaken more aggressively: i) in periods when the ratio…” Link

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Do Hedge Funds Profit From Mutual-Fund Distress?

Do Hedge Funds Profit From Mutual-Fund Distress? Jeremy Stein, Samuel Hanson, February 2008, Paper. “This paper explores the question of whether hedge funds engage in front-running strategies that exploit the predictable trades of others. One potential opportunity for front-running arises when distressed mutual funds — those suffering large outflows of assets under management — are forced to sell stocks they own. We document two pieces of evidence that are consistent with hedge funds taking advantage of this opportunity. First, in the time series, the average returns of long/short equity hedge funds are significantly higher in those…” Link

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The Only Game in Town: Stock-Price Consequences of Local Bias

The Only Game in Town: Stock-Price Consequences of Local Bias. Jeremy Stein, November 2007, Paper. “Theory suggests that, in the presence of local bias, the price of a stock should be decreasing in the ratio of the aggregate book value of firms in its region to the aggregate risk tolerance of investors in its region. Using data on U.S. states and Census regions, we find clear-cut support for this proposition. Most of the variation in the ratio of interest comes from differences across regions in aggregate book value per capita. Regions with low population density—e.g., the Deep South—are home to relatively few firms per capita…” Link

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Simple Forecasts and Paradigm Shifts

Simple Forecasts and Paradigm Shifts. Jeremy Stein, June 2007, Paper. “We study the asset pricing implications of learning in an environment in which the true model of the world is a multivariate one, but agents update only over the class of simple univariate models. Thus, if a particular simple model does a poor job of forecasting over a period of time, it is discarded in favor of an alternative simple model. The theory yields a number of distinctive predictions for stock returns, generating forecastable variation in the magnitude of the value-glamour return differential, in volatility, and in the skewness of returns. We validate several…” Link

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Disagreement and the Stock Market

Disagreement and the Stock Market. Jeremy Stein, Spring 2007, Paper. “A large catalog of variables with no apparent connection to risk has been shown to forecast stock returns, both in the time series and the cross-section. For instance, we see medium-term momentum and post-earnings drift in returns — the tendency for stocks that have had unusually high past returns or good earnings news to continue to deliver relatively strong returns over the subsequent six to twelve months (and vice-versa for stocks with low past returns or bad earnings news); we also see longer-run fundamental reversion — the tendency for “glamour” stocks…” Link

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