This paper examines how financial networks influence asset prices and trading performance. Consistent with theoretical studies on the role of communication networks in information dissemination, we posit that financial institutions with more extensive financial networks can more efficiently...

Evidence indicates that people fear change and the unknown. We offer a model of familiarity bias in which individuals focus on adverse scenarios in evaluating defections from the status quo. The model explains the endowment effect, portfolio underdiversification, home and local biases....

We show theoretically that variable production costs lower systematic risk of firms' cash flows if capital and variable inputs are complementary in firms’ production and input prices are sufficiently pro-cyclical. In our dynamic model, this operating hedge effect is weaker for more profitable...

We propose the use of investment income taxes to incentivize investors to reallocate capital to the eco-friendly green sector away from the non-eco-friendly brown sector to reduce the climate change disaster which obliterates a fraction of capital in the economy. Compared with a Carbon tax on...

This paper examines the impact on asset prices from a reduction in the long-term capital gains tax rate using an equilibrium approach that considers both demand and supply responses. We demonstrate that the equilibrium impact of capital gains taxes reflects both the capitalization effect (i.e.,...

We investigate optimal intertemporal asset allocation and location decisions for investors making taxable and tax-deferred investments. We show a strong preference for holding taxable bonds in the tax-deferred account and equity in the taxable account, reflecting the higher tax burden on taxable...