This paper estimates the effect of early lead exposure on academic achievement and adult earnings. We analyze longitudinal information from individuals attending primary and secondary schools in the city of Arica (in northern Chile). Between 1984 and 1989, Arica received more than 20,000 tons of...

It is conventional wisdom that it is possible to reduce exposure to indoor air pollution, improve health outcomes, and decrease greenhouse gas emissions in the rural areas of developing countries through the adoption of improved cooking stoves. This belief is largely supported by observational...

The equity premium, namely the expected return on the aggregate stock market less the government bill rate, is of central importance to the portfolio allocation of individuals, to the investment decisions of firms, and to model calibration and testing. This quantity is usually estimated from the...

While gold objects have existed for thousands of years, gold's role in diversified portfolios is not well understood. We critically examine popular stories such as 'gold is an inflation hedge'. We show that gold may be an effective hedge if the investment horizon is measured in centuries. Over...

This paper studies the limitations of monetary policy transmission within a credit channel frame- work. We show that, under certain circumstances, the credit channel transmission mechanism fails in that liquidity injections by the central bank into the banking sector are hoarded and not lent...

Financial systems are inherently fragile because of the very function which makes them valuable: liquidity transformation. Regulatory reforms can strengthen the financial system and decrease the risk of liquidity crises, but they cannot eliminate it completely. This leaves monetary policy with a...

Government guarantees of private debt deplete equity. The depletion is greatest during periods when the probability of a guarantee payoff is highest. In a setting otherwise subject to Modigliani-Miller neutrality, firms issue guaranteed debt up to the limit the government permits. Declines in...

Building on neoclassical reasoning, we propose a new multi-factor model that consists of the market factor and factor mimicking portfolios based on investment and productivity. The neo- classical three-factor model outperforms traditional factor models in explaining the average returns across...

Hedge fund managers are compensated via management fees on the assets under management (AUM) and incentive fees indexed to the high-water mark (HWM). We study the effects of managerial skills (alpha) and compensation on dynamic leverage choices and the valuation of fees and investors' payoffs....

Hedge funds often impose lockups and notice periods to limit the ability of investors to withdraw capital. We model the investor's decision to withdraw capital as a real option and treat lockups and notice periods as exercise restrictions. Our methodology incorporates time-varying probabilities...