Digests

Stress Tests, Entrepreneurship, and Innovation
Sebastian Doerr
Review of Finance, Volume 25, Issue 5, September 2021, Pages 1609–1637, https://doi.org/10.1093/rof/rfab007

The financial crisis of 2007/08 led to a severe recession and revealed that banks had taken on excessive risk in its run-up.… Read more...

Sovereign Credit Quality and Violations of the Law of One Price
Jacob Boudoukh, Jordan Brooks, Matthew Richardson, Zhikai Xu
Review of Finance, Volume 25, Issue 5, September 2021, Pages 1581–1607, https://doi.org/10.1093/rof/rfab001

Numerous violations of the law of one price for financial assets (i.e.,… Read more...

The Dollar Profits to Insider Trading
Peter Cziraki, Jasmin Gider
Review of Finance, Volume 25, Issue 5, September 2021, Pages 1547–1580, https://doi.org/10.1093/rof/rfab010

The notion that corporate insiders possess more information about their firm than outside investors plays an important role in models of financial markets.… Read more...

Hub-and-Spoke Regulation and Bank Leverage
Yadav Gopalan, Ankit Kalda, Asaf Manela
Review of Finance, Volume 25, Issue 5, September 2021, Pages 1499–1545, https://doi.org/10.1093/rof/rfab019

Regulators often delegate monitoring to local supervisors, which can improve information collection, but can also lead to agency problems and capture.… Read more...

Access to Finance and Job Growth: Firm-Level Evidence across Developing Countries
Meghana Ayyagari, Pedro Juarros, Maria Soledad Martinez Peria, Sandeep Singh
Review of Finance, Volume 25, Issue 5, September 2021, Pages 1473–1496, https://doi.org/10.1093/rof/rfab003

While an extensive literature exists on how finance can affect corporate investment and economic growth, comparatively little is known about the effect of finance on labor market outcomes.… Read more...

The Active World of Passive Investing
David Easley, David Michayluk, Maureen O’Hara and Talis J. Putninš
Review of Finance, Volume 25, Issue 5, September 2021, Pages 1433–1471, https://doi.org/10.1093/rof/rfab021

Worldwide, there are approximately 43,192 publicly listed stocks but around 3.3 million indexes, many of which are related to exchange-traded funds (ETFs).… Read more...

How Much Does Size Erode Mutual Fund Performance
Jonathan Reuter, Eric Zitzewitz
Review of Finance, Volume 25, Issue 5, September 2021, Pages 1395–1432, https://doi.org/10.1093/rof/rfab016

The low level of performance persistence among actively managed mutual funds has led many researchers to conclude that high past returns are more likely to reflect luck than skill.… Read more...

Experience Effects in Finance: Foundations, Applications, and Future Directions
Ulrike Malmendier
Review of Finance, Volume 25, Issue 5, September 2021, Pages 1339–1363, https://doi.org/10.1093/rof/rfab020

This article establishes four key findings of the growing literature on experience effects in finance: (1) the long-lasting imprint of past experiences on beliefs and risk taking, (2) recency effects, (3) the domain-specificity of experience effects, and (4) imperviousness to information that is not experience-based.… Read more...

New Mortgage Lenders and the Housing Market
Nikodem Szumilo
Review of Finance, Volume 25, Issue 4, July 2021, Pages 1299–1336, https://doi.org/10.1093/rof/rfaa031

This paper examines the effect of a new lender’s entry into a local mortgage market on the supply of new loans, housing prices and repossessions in areas around its branches.… Read more...

Time-Varying Crash Risk Embedded in Index Options: The Role of Stock Market Liquidity
Peter Christoffersen, Bruno Feunou, Yoontae Jeon, Chayawat Ornthanalai
Review of Finance, Volume 25, Issue 4, July 2021, Pages 1261–1298, https://doi.org/10.1093/rof/rfaa040

Market crashes refer to large, unexpected drops in asset prices.… Read more...