We examine the governance implications of passive fund growth. In our model, investors allocate capital between passive funds, active funds, and private savings, and funds' fees and ownership stakes determine their incentives to engage in governance. If passive funds grow...

Blockchain technology holds the promise of transforming our financial system but a key question lingers regarding whether this technology can ensure secure settlement. We develop an equilibrium model to study that question with regard to the most prominent blockchain type,...

We examine how portfolio regulations affect risk sharing between financial institutions with market power. Unconstrained access to complete markets permits flexible exploitation of market power and induces inefficient risk sharing. Appropriate portfolio restrictions counteract this, improving liquidity and risk sharing...

A key function of financial intermediaries is to borrow in financial markets and lend to firms. I show that this creates informational linkages between repo and corporate bond markets. My key result is improving transparency in either market may lower...

Survey-based excess stock return forecasts are procyclical, less volatile, and more persistent than countercyclical statistical forecasts. These patterns challenge rational representative-agent models. We show that they arise naturally in fully rational heterogeneous-belief models with speculative trade. Prices reflect the market...

Standard demand elasticity estimation treats investors’ demand slopes as stable objects that can be traced out by exogenous residual supply shifts. We show this identification strategy fails in dynamic settings: supply shocks cause demand curves to tilt and shift through...