For more information about the Mitsui Finance Brown Bag Series, please contact Gabriella Ring at [email protected].
The audience for these brown bags is generally faculty and doctoral students.
march 11
Title: Biodiversity from Space: Satellite-Based Measures of Natural Capital Exposure
Abstract: This paper provides a portable framework for studying biodiversity risk across asset classes and in global markets. We develop a firm-level measure of natural capital exposure by combining publicly-available satellite imagery with species observations using machine-learning predictions and maps the resulting biodiversity estimates to the geocoded establishments of U.S. public firms. Firms with greater exposure to biodiversity loss earn higher equity returns and pay larger bond spreads, consistent with financial markets pricing risks associated with natural capital degradation. These pricing effects are distinct from climate and pollution risks and are linked to real firm activity, suggesting that biodiversity loss affects expected cash flows rather than investor sentiment. Overall, our scalable approach can be used to estimate the marginal damages of biodiversity loss to firms and to inform the pricing of natural capital in settings where direct reporting is limited.
Time: 11:45 a.m. - 12:45 p.m.
Location: Tauber Colloquium
march 18
Title: Intermediary Option Pricing
Abstract: I propose a novel inventory risk for option dealers (``gap risk''), which helps explain salient features of the option risk premium. I define ``gaps'' as equity price changes over nights or weekends, when reduced equity market liquidity impedes continuous delta-hedging, thus leading to unhedgeable inventory risk. Gaps function like large jumps, even if prices move continuously. Using comprehensive option trade data, I estimate intermediaries' option inventory and find substantial exposure to gap risk. This finding helps explain why the option risk premium is heavily concentrated over nights and weekends. Supporting a causal impact of intermediary gap risk on the option risk premium, I show that the emergence of overnight equity trading around 2006 led to significantly less option risk premium over week-nights relative to weekends, particularly in options that appear in intermediaries' inventory.
Time: 11:45 a.m. - 12:45 p.m.
Location: Corner Commons
April 1
Title: Retail Capital as a Stepping Stone in Venture Capital: Theory and Empirics
Abstract: What are the marginal effects of retail investor entry into private markets? The conventional debate focuses on direct effects: potential benefits (portfolio diversification, access to high-return assets) versus costs (excessive fees, inefficient capital allocation by retail investors). We identify a countervailing mechanism: retail investors fund experimentation with unproven general partners (GPs), enabling institutions to free-ride by poaching proven talent. We document that 34% of value created by institutional investments in private markets comes from GPs who started with retail capital. We formalize this stepping-stone mechanism by extending Berk and Green (2004) to venture capital with heterogeneous investors and uncertain manager skill. New GPs with moderate perceived ability initially raise retail capital to reveal their true skill; after observing performance, skilled GPs graduate to institutional capital while unsuccessful GPs exit. Retail investors pay for information production, but institutions capture benefits through superior manager selection and bargaining power. Our calibrated model shows that retail investor entry increases aggregate welfare when stepping-stone benefits exceed inefficient allocation costs. Policies restricting retail access may harm efficiency by restricting this talent discovery path.
Time: 11:45 a.m. - 12:45 p.m.
Location: Corner Commons
April 8
Title: Intangible Intensity
Abstract: We develop a text-based measure of intangible investment intensity derived from firms' 10-K filings, and offer a general methodology for semantic theme scoring (STS). Our approach further classifies disclosure text into knowledge, customer, and organization capital. Firms with high intangible intensity are smaller, younger, and invest heavily in R&D and human capital. The three subcomponents map cleanly to distinct economic firm types: knowledge-intensive firms are R&D-driven with high valuations and skilled labor; customer-intensive firms are mature, profitable, and commercially oriented; and organization-intensive firms are large, asset-heavy incumbents. Managerial expenditure descriptions thus provide informative signals about intangible investment, complementing financial statements in capturing corporate capital stocks.
Time: 11:45 a.m. - 12:45 p.m.
Location: Corner Commons