Working papers

Cross-State Strategic Voting — Reject & Resubmit, American Economic Journal: Economic Policy

(with Gordon Dahl, Joey Engelberg and Runjing Lu )   SSRN link    NBER WP (older version)   
We estimate that 3.1% of US voters, or 6.1 million individuals, were registered to vote in two states in 2020, opening up the possibility for them to choose where to vote. Double registrants are concentrated in the wealthiest zipcodes and respond to both incentives and costs, disproportionately choosing to vote in swing states (higher incentive) and states which automatically send out mail-in ballots (lower cost). We call this behavior Cross-State Strategic Voting. While others have documented strategic incentives on who to vote for, this paper is the first to consider strategic incentives on where to vote.

Dissecting Racial Politicization: Long-Run Evidence from the Food Stamp Program

(with Carlos Avenancio-Leon and Troup Howard)   SSRN link      
Many public policies – such as those on immigration, welfare, and policing – consistently attract partisan political attention, often with a racial dimension. How a public policy becomes politicized along racial lines is the focus of this paper. We develop a framework in which political parties gain electoral advantage by framing policy in political terms. This shows that an ex-ante group-neutral policy can generate political polarization across different voter groups (e.g., by race), that polarization is larger for cohorts learning about the policy at its onset, and that polarization persists over time. We apply this framework to study the politicization of the Food Stamp program. Using voter roll data for the entire U.S., we show empirically that the introduction of the program increased political polarization across racial groups, that this racial polarization was larger for voters that experienced the FS rollout at its onset, and that this polarization persists today, about a half-century later. More specifically, we show that individuals of voting age at the time of the program’s rollout (1961–1975) diverge along racial lines in their likelihood of voting and registering as Republicans or Democrats, with this divergence decreasing among younger cohorts. Our design ensures that these findings are not driven by geographic or age-specific racial trends. We also explore contemporaneous effects and additional contributing factors. First, we show that access to the safety net also had short-run effects on voters’ beliefs and turnout, as well as on the ideological composition of Congress. Second, we explore the interaction between Food Stamps and contemporaneous events such as the Voting Rights Act and recessions.

Celebrity Persuasion: This is not Financial Advice

(with Matteo Benetton, Marina Niessner and Jan Toczynski)   
Investors increasingly look to social media for cryptocurrency news and investment guidance. In this paper we combine survey responses and transaction-level data to study how investors respond to real-world celebrity endorsements of cryptocurrencies on Twitter. We find that investors appear to treat these celebrity tweets as financial advice: controlling for crypto-related news, tweet days are associated with a 13.5% higher probability that an individual invests in cryptocurrencies, with stronger effects for men, wealthier, and older investors. Furthermore, market trading volume in the target coin increases by 7% in the hour of the celebrity tweet. We also show that the share of large Dogecoin trades (over $1,000) increases in the hours leading up to the celebrity tweet and stays elevated for several days. Investors would have been better off buying Bitcoin or Ethereum than the coin mentioned in the celebrity tweet.

Credit Guarantees and New Bank Relationships

(with Patricio Toro)   
Government credit guarantees for bank loans direct vast volumes of credit and are the main policy tool used to improve firms' access to credit. This paper examines Chile’s credit guarantee scheme, which is similar to that of many OECD countries. Using a regression discontinuity design around the eligibility cutoff we find that guarantees more than double firms' borrowing without detectable increases in default rates. We also show that banks use guarantees to build new borrower relationships, an important and poorly understood process. The scheme also has an amplification effect: firms increase borrowing from other banks following a guarantee. Finally, we show that firms use the credit increase to significantly scale up their sales and employment. The fact that guarantees are not a common pool resource in this policy design is critical to understanding these results.


Work in Progress

Aggregate Signals from Social Media

(with Tony Cookson, Runjing Lu, and Marina Niessner)

The Immigrant Credit Experience

(with Tony Cookson and Benedict Guttman-Kenney)


Publications

8. Political Sentiment and Innovation: Evidence from Patenters
Review of Financial Studies (forthcoming)

(with Joey Engelberg, Runjing Lu and Rick Townsend )   SSRN link   
We document political sentiment effects on U.S. inventors. Democratic inventors are more likely to patent (relative to Republicans) after the 2008 election of Obama but less likely after the 2016 election of Trump. These effects are at least twice as strong among politically active Democrats and are present even within firms and within firm × technology. We also show that partisans tend to cluster in technologies (e.g., Democrats in Biotechnology and Republicans in Weapons), so that sentiment effects aggregate up to more patents in the technologies dominated by the winning party.

7. Partisan Entrepreneurship
Journal of Finance (forthcoming)

(with Joseph Engelberg, Jorge Guzman and Runjing Lu )   SSRN link   SocArXiv link   
Republicans start more firms than Democrats. In a sample of 40 million party-identified Americans between 2005 and 2017, we find that 5.5% of Republicans and 3.7% of Democrats become entrepreneurs. This partisan entrepreneurship gap is time-varying: Republicans increase their relative entrepreneurship during Republican administrations and decrease it during Democratic administrations, amounting to a partisan reallocation of 170,000 new firms over our 13-year sample. We find sharp changes in partisan entrepreneurship around the elections of President Obama and President Trump, and the strongest effects among the most politically active partisans: those that donate and vote.

*. Social Media and Finance (review article)
Oxford Research Encyclopedia of Economics and Finance (forthcoming)

(with Tony Cookson, and Marina Niessner )   SSRN link   
Social media has become an integral part of the financial information environment, changing the way financial information is produced, consumed and distributed. This article surveys the financial social media literature, distinguishing between research using social media as a lens to shed light on more general financial behavior and research exploring the effects of social media on financial markets. We also review the social media data landscape.

6. The Social Signal
Journal of Financial Economics (2024)

(with Tony Cookson, Runjing Lu and Marina Niessner )   SSRN link   Data (PC1s, 2012-2021)   
We examine social media attention and sentiment from three major platforms: Twitter, StockTwits, and Seeking Alpha. We find that, even after controlling for firm disclosures and news, attention is highly correlated across platforms, but sentiment is not: its first principal component explains little more variation than purely idiosyncratic sentiment. Using market events, we attribute differences across platforms to differences in users (e.g., professionals versus novices) and differences in platform design (e.g., character limits in posts). We also find that sentiment and attention contain different return-relevant information. Sentiment predicts positive next-day returns, but attention predicts negative next-day returns. These results highlight the importance of considering both social media sentiment and attention, and of distinguishing between different investor social media platforms.

5. Unconventional Monetary Policy Transmission and Bank Lending Relationships
Management Science (2024)

(with Anne Duquerroy and Christophe Cahn )   SSRN link    SocArXiv link   
Firms with only one bank relationship make up the majority of firms in many economies. This paper explores whether policy-driven lending is differentially transmitted to single-bank firms in comparison with the multibank firms that are the focus of the literature. Using unique variation in the ECB’s very long-term refinancing operations (VLTROs), which affected lending to firms discontinuously across credit ratings but within banks, we find selective transmission of VLTRO liquidity to single-bank firms. Banks apply higher lending standards to single-bank firms, with banking relationships determining both new lending and lending maturity. By contrast, banks appear to transmit policy lending near-uniformly across multibank firms.

4. Echo Chambers
Review of Financial Studies (2023)

(with Tony Cookson and Joey Engelberg )   SSRN link    SocArXiv link   Slides    Data   
We find evidence of selective exposure to confirmatory information among 300,000 users on the investor social network StockTwits. Self-described bulls are 5 times more likely to follow a user with a bullish view of the same stock than self-described bears. This tendency is strong even among professional investors and is more pronounced on earnings announcement days. Placing oneself in an information “echo chamber” generates significant differences in the newsfeeds of bulls and bears: over a 50-day period, a bull will see 70 more bullish messages and 15 fewer bearish messages than a bear over the same period. Selective exposure creates “information silos” in which the diversity of received signals is high across users’ newsfeeds but is low within users’ newsfeeds. Finally, we show that this siloing of information is positively related to trading volume.

3. Partisan Fertility and Presidential Elections
American Economic Review: Insights (2022)

(with Gordon Dahl and Runjing Lu )   SSRN link    SocArXiv link    NBER WP    Co-author video    Slides   
Changes in political leadership drive large changes in economic optimism. We exploit the surprise 2016 election of Trump to identify the effects of a shift in political power on one of the most consequential household decisions: whether to have a child. Republican-leaning counties experience a sharp and persistent increase in fertility relative to Democratic counties: a 0.7 to 1.4% increase in annual births, depending on the intensity of partisanship. Hispanics, a group targeted by Trump, see fertility fall relative to non-Hispanics, especially compared to rural or evangelical whites. Further, following Trump pre-election campaign visits, relative Hispanic fertility declines.

2. Does Partisanship Shape Investor Beliefs? Evidence from the COVID-19 Pandemic
Review of Asset Pricing Studies (2020)

(with Tony Cookson and Joey Engelberg )    SSRN link    SocArXiv link      sentiment time series   
We use party-identifying language – like “Liberal Media” and “MAGA”– to identify Republican users on the investor social platform StockTwits. Using a difference-in-difference design, we find that the beliefs of partisan Republicans about equities remain relatively unfazed during the COVID-19 pandemic, while other users become considerably more pessimistic. In cross-sectional tests, we find Republicans become relatively more optimistic about stocks that suffered the most from COVID-19, but more pessimistic about Chinese stocks. Finally, stocks with the greatest partisan disagreement on StockTwits have significantly more trading in the broader market, explaining 28% of the increase in stock turnover during the pandemic.

1. How do CEOs see their roles? Management Philosophies and Styles in Family and non-Family Firms
Journal of Financial Economics (2016)

(with Antoinette Schoar)   SSRN link    Non-technical summary   Appendix 1    Survey Appendix    Appendix 2   
Using a survey of 800 Chief Executive Officers (CEOs) in 22 emerging economies, we show that CEOs' management styles and philosophies vary with the ownership and governance structure of their firms. Founders and CEOs of firms with greater family involvement display a greater stakeholder focus and feel more accountable to employees and banks than to shareholders. They also have a more hierarchical management approach, and see their role as maintaining the status quo rather than bringing about change. In contrast, CEOs of non-family firms emphasize shareholder-value-maximization. Finally, firm-level variation in ownership is as important in explaining management philosophies as cross-country or industry-level differences.

  

Case Studies

Unrest in Chile - HBS Case Study (2020, rev. 2023)

  
In 2020, Chileans would head to the ballot box to decide their country’s future. Many international observers credited Chile’s decades of neoliberal governance with turning the country into Latin America’s “Tiger,” a prosperous, diversified economy on its way to becoming the continent’s first developed country. But in October of 2019, a mass protest movement ground the country to a halt and shocked its political class, showing the world a different Chile—one defined by inequality, social distrust, and a young generation of political activists. As Chile prepared to vote in the fall of 2020 on whether to adopt a new constitution, could it sculpt a more equitable society while remaining “the exception” on a continent known for its political instability? Or would Chile’s prosperity go the same way as its neoliberal experiment?

Walmart Chile After the Unrest: Doubling Down or Pulling Out? - HBS Case Study (2021, rev. 2022)

  

Permanent working papers

The Governance Impact of Indexing: Evidence from Regression Discontinuity

(never submitted due to inertia)