Research

1. “Investment and Voting Under Local Externalities” with Dmitry Chebotarev [available on SSRN]

We build a model in which local externalities generate heterogeneous preferences among investors and shape stockholdings, corporate voting, and welfare. We study this mechanism in the context of pollution. Risk-averse investors suffer from pollution produced by local firms, which choose between more productive brown and less productive green technologies through ownership-weighted voting. Diversification attracts brown-voting external investors, distorting local investors’ portfolios and votes, generating inefficient technology choice and risk sharing. A passive fund that maximizes assets under management can alleviate this coordination failure and, in most cases, implement the first best, although its concern for portfolio value can induce excessive brown voting. Pass-through voting weakens the fund’s coordinating role and can reduce welfare. Our findings show how green preferences can arise endogenously from investors’ economic interests.

2. “How do hedge funds affect stock market quality? Evidence from hedge fund terminations”

I examine how hedge funds affect stock liquidity and price informativeness using hedge fund terminations as a quasi-natural experiment. I find that price impact declines after closures. Moreover, consistent with a reduction of adverse selection, incorporation of both market- and firm-specific information into stock prices suffers after defunct hedge funds disappear.

3. “Pricing information: Experimental evidence” with Dmitry Chebotarev

We conducted a laboratory experiment in which participants can buy information before making predictions of future stock prices. We find that participants overprice signals. Additionally, signals help participants eliminate of several biases. Yet, more biased participants do not value signals more.