These seminars are sponsored by the Mitsui Life Financial Research Center.

If you would like to be added to the email distribution list, please contact Gabriella Ring at [email protected].

November 8

Tong Liu, MIT

Title: Excess Commitment in R&D

Abstract: We document a form of “excess” commitment to R&D projects and examine the consequences for innovation outcomes and consumer welfare, using detailed data on pharmaceutical firms’ clinical trial projects. Plausibly-exogenous delays in the completion of the preceding trial-phase, empirically uncorrelated with various project-quality measures, substantially reduce firms’ subsequent project termination propensity. This excess project commitment intensifies when the CEO has higher stock-price-compensation sensitivity and is personally responsible for the project’s initiation. Welfare implications are nuanced: delay-driven commitment induces investment crowd-out, while not predicting increased adverse effects in marginally-launched drugs and predicting continuation of drugs for diseases lacking alternative treatments.

Time: 10:30-11:50 a.m.        
Location: R1230

November 15

Camelia Kuhnen, UNC

Title:  Learning How to Borrow in a Fintech World

Abstract: Online loan marketplaces are an important innovation through which fintech is changing consumer lending. Here we investigate how consumers search, learn, and make borrowing choices in this new type of market, which is characterized by close to zero search costs. We use administrative data from a large online consumer lending platform, covering 730,000 loan applications and 750,000 resulting loan offers, and more than 200,000 unique individuals in Finland, with rich details regarding the demand and supply of loans, and supplement this with data from the national credit registry. We document novel search patterns – learning about the supply curve – in a dynamic adverse selection environment with minimal search costs.

Time: 10:30-11:50 a.m.        
Location: R1230

november 22

Cameron LaPoint, Yale

Title:  Housing is the Financial Cycle: Evidence from 100 Years of Local Building Permits

Abstract: Does the housing market lead the financial cycle? We address this question by creating a new hand-collected database spanning a century of monthly building permit quantities and valuations for all U.S. states and the 60 largest MSAs. We show that the option to build embedded in permits renders volatility in residential building permit growth (BPG) a strong predictor of aggregate and cross-sectional stock and corporate bond return volatility. This predictability remains even after conditioning on a battery of factors, including corporate and household leverage and firms’ exposure through their network of plants to other localized physical risks like natural disasters. Cities and states with more elastic housing supply consistently predict financial market downturns at 12-month horizons, resulting in new trading strategies to hedge against overbuilding risk. A noisy rational expectations framework in which local building permits serve as a quasi-public signal for dividends explains these empirical patterns.

Time: 10:30-11:50 a.m.        
Location: R1230

December 6

Apoorv Gupta, Dartmouth

Title: TBD

Abstract: TBD

Time: 10:30-11:50 a.m.        
Location: R1230