This paper explores the theoretical and empirical implications of time-varying and unobservable beta. Investors infer factor loadings from the history of returns via the Kalman filter. Due to learning, the history of beta matters. Even though the conditional CAPM holds, standard OLS tests can...

This paper finds that the market betas of value and small stocks have decreased by about 75% in the second half of the twentieth century. The decline in beta can be related to a long-term improvement in economic conditions that made these companies less risky.

We explore the effects of mandatory third-party review of mortgage contracts on the terms, availability, and performance of mortgage credit. Our study is based on a legislative experiment in which the State of Illinois required “high-risk” mortgage applicants acquiring or refinancing...

The meltdown in residential real-estate prices that commenced in 2006 resulted in unprecedented mortgage delinquency rates. Until mid-2009, lenders and servicers pursued their own individual loss mitigation practices without being significantly influenced by government intervention. Using a...

We study the effects of securitization on renegotiation of distressed residential mortgages over the current financial crisis. Unlike prior studies, we employ unique data that directly observe lender renegotiation actions and cover more than 60% of the U.S. mortgage market. Exploiting...

The main rationale for policy intervention in debt renegotiation is to enhance such activity when foreclosures are perceived to be inefficiently high. We examine the ability of the government to influence debt renegotiation by empirically evaluating the effects of the 2009 Home Affordable...