Job Market Paper

Advertising Exposure and Portfolio Choice: Estimates Based on Sports Sponsorships (November 2017)

Product market advertising by raising the awareness of a company's brand is thought to also increase the demand for a company's stock as well as its products. I construct a dataset of publicly traded sports sponsors in the US and develop an instrument for investor exposure to advertising via these sponsorships. I show that investors living in a city where local sports teams are sponsored by a given company, local or non-local, are more likely to purchase stocks in that company. The portfolio effects from sports sponsorship are large and suggest that advertising is more important than even local bias.

Working Papers

Location Choice, Portfolio Choice (January 2018) with Harrison Hong, Columbia University and Jiangmin Xu, Peking University

XiYue Best Paper Award, CICF 2017

Households hold undiversified stock portfolios of firms headquartered near their city of residence. Leading explanations such as the familiarity heuristic assign a causal role for proximity. However, households optimally locate in a city based on unobservables such as optimism about a city’s prospects, which can be correlated with latent localstock demand. Using location choice models, we develop an instrumented-Heckman (1977)-style correction for widely-used regressions to show that local bias is also driven by this selection. We then propose a decomposition of local bias into household priors about stocks, using location-choice model residuals, and familiarity, whereby confidence about stock-payoff signals rise with proximity.

Estimates of the Costs and Benefits of Information in Stock Markets (January 2018) with Harrison Hong, Columbia University and Jiangmin Xu, Peking University

Draft available upon request

Previously circulated under the title "Buy Side, Sell Side"

A significant fraction of information in stock markets is produced by sell-side analysts working at banks, whose research is bought by institutional investors. We estimate the costs and benefits of this information by modeling the effect of analyst coverage on fund manager portfolios.  We quantify two distinct channels: coverage drawing managerial attention to stocks versus improving the precision of managerial signals.  We can then calculate the marginal benefit of information as the elasticity of aggregate institutional demand with respect to one additional analyst. Assuming convex cost functions for coverage, we can then measure the marginal cost of producing information for each stock.