Concentration in Mortgage Markets: GSE Exposure and Risk-Taking in Uncertain Times

Working paper · 2025-03-01

When home prices threaten to decline, large mortgage investors can benefit from fostering new lending that boosts demand.We ask whether this benefit contributed to the growth in acquisitions of risky mortgages by the government-sponsored enterprises (GSEs) in the first half of 2007.We find that it helps explain the variation of this growth across regions as well as regional house price and credit changes.The growth predicted by this benefit is on top of the acquisition growth caused by the exit of private-label securitizers.Our results are consistent with the GSEs actively targeting their acquisitions to counter home-price declines.

Concentration in Mortgage Markets: Government Sponsored Enterprise Exposure and Risk-Taking in Uncertain Times

Management Science · 2025-04-07

When home prices threaten to decline, large mortgage investors can benefit from fostering new lending that boosts demand. We ask whether this benefit contributed to the growth in acquisitions of risky mortgages by the Government Sponsored Enterprises (GSEs) in the first half of 2007. We find that it helps explain the variation of this growth across regions, as well as regional house price and credit changes. The growth predicted by this benefit is on top of the acquisition growth caused by the exit of private-label securitizers. We conclude that the GSEs actively targeted their acquisitions to counter home-price declines. This paper was accepted by Camelia Kuhnen, finance. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2024.05912 .

Control Rights or Wrongs? Active versus Index Governance

SSRN Electronic Journal · 2025-01-01

Costs of Executing Complex Options Trades

SSRN Electronic Journal · 2023-01-01 · 3 citations

A Simple Role for Complex Options

SSRN Electronic Journal · 2023 · 5 citations

• Computer Science
• Computer Science
• Epistemology

Passive-Aggressive Trading: The Supply and Demand of Liquidity by Mutual Funds

Review of Finance · 2022 · 9 citations

• Computer Science
• Business
• Monetary economics

Abstract Active mutual funds supply liquidity when demanding it becomes uneconomical. They tilt toward cheaper buy trades after inflows deplete their trading ideas, when trading ideas in general run low, and when they have more stocks to supply liquidity to, and their cheaper trades perform worse. Their largest trades are more likely to supply liquidity, explaining why they were not broken up. Funds perform better when they pay more for their buys and perform worse when they pay more for their sells, consistent with the implied value of the trades and the correlation between what a fund trades and what it holds.

Contracts with (Social) benefits: The implementation of impact investing

Journal of Financial Economics · 2021 · 119 citations

• Business
• Finance
• Economics

Failure Is an Option: Impediments to Short Selling and Options Prices

Carolina Digital Repository (University of North Carolina at Chapel Hill) · 2021-09-08

Regulations allow market makers to short sell without borrowing stock, and the transactions of a major options market maker show that in most hard-to-borrow situations, it chooses not to borrow and instead fails to deliver stock to its buyers. Some of the value of failing passes through to option prices: when failing is cheaper than borrowing, the relation between borrowing costs and option prices is significantly weaker. The remaining value is profit to the market maker, and its ability to profit despite the usual competition between market makers appears to result from a cost advantage of larger market makers at failing.

Robo‐advisors and the Growth of Index‐Fund Governance

2021-02-04

The votes that come with equities barely figure in retail investment decisions, especially the decisions aided by robo‐advisors. This low profile is consistent with the tiny effect a retail investor's votes would have, if she took them seriously. But despite this disinterest in voting implications, or possibly because of it, recent trends in retail investment decisions are reshaping the corporate‐governance landscape by creating new and different blocks of voting power. In this paper I review the relevant trends and consider the implications for public corporations. Full Text Available Here: https://doi.org/10.1002/cfp2.1105

Concentration in Mortgage Markets: GSE Exposure and Risk-Taking in Uncertain Times

Working paper · 2020-01-01 · 7 citations

When home prices threaten to decline, large mortgage investors can benefit from fostering new lending that boosts demand. We ask whether this benefit contributed to the growth in acquisitions of risky mortgages by the Government Sponsored Enterprises (GSEs) in the first half of 2007. We find that it helps explain the variation of this growth across regions. The growth predicted by this benefit is on top of the acquisition growth caused by the exit of private-label securitizers. We conclude that the GSEs actively targeted their acquisitions to counter home-price declines.