About

Kathleen Hagerty is the Provost of Northwestern University, having assumed the role on September 1, 2020. She previously served as Associate Provost for Faculty during the 2019-20 academic year and as Interim Dean of the Kellogg School of Management. Hagerty joined Kellogg more than 30 years ago and holds the First Chicago Professorship in Finance. She is recognized as an accomplished scholar and respected faculty leader, with extensive experience in attracting and retaining top faculty in a competitive academic environment. Her research focuses on the micro-structure of securities markets, disclosure regulation, insider trading regulation, and the effectiveness of self-regulatory organizations. Her scholarly work has been published in prominent journals such as The Quarterly Journal of Economics, Journal of Political Economy, and The Journal of Finance. She has received notable awards including a Bradley Foundation Research Fellowship and the D.P. Jacobs Prize for the most significant paper in the Journal of Financial Intermediation. Additionally, she has served on the editorial boards of the Review of Financial Studies and the Journal of Financial Markets. Hagerty has held numerous leadership positions within Kellogg, including two terms as Senior Associate Dean of Faculty and Research, two terms as Chair of the Finance Department, and two years as Faculty Director of Kellogg’s Ph.D. programs. Her academic background includes a PhD in Economics from Stanford University, an MBA in Finance from the University of California, Berkeley, and undergraduate degrees in Mathematics and Operations Research from UC Berkeley. Her teaching interests include derivatives and investments, and her research provides applied insights into financial markets and regulation.

Research topics

• Business
• Economics
• Microeconomics
• Finance
• Monetary economics

Selected publications

• Synchronicity, instant messaging, and performance among financial traders

  Proceedings of the National Academy of Sciences · 2011-03-14 · 82 citations

  articleOpen access

  Successful animal systems often manage risk through synchronous behavior that spontaneously arises without leadership. In critical human systems facing risk, such as financial markets or military operations, our understanding of the benefits associated with synchronicity is nascent but promising. Building on previous work illuminating commonalities between ecological and human systems, we compare the activity patterns of individual financial traders with the simultaneous activity of other traders--an individual and spontaneous characteristic we call synchronous trading. Additionally, we examine the association of synchronous trading with individual performance and communication patterns. Analyzing empirical data on day traders' second-to-second trading and instant messaging, we find that the higher the traders' synchronous trading is, the less likely they are to lose money at the end of the day. We also find that the daily instant messaging patterns of traders are closely associated with their level of synchronous trading. This result suggests that synchronicity and vanguard technology may help traders cope with risky decisions in complex systems and may furnish unique prospects for achieving collective and individual goals.

  PublisherOA PDFDOI

• Preventing Crime Waves1

  2010-01-01

  articleSenior author

  We study the design of enforcement mechanisms when enforcement resources are chosen ex ante and are inelastic ex post. Multiple equi libria arise naturally. We identify a new answer to the old question of why non-maximal penalties are used to punish moderate actions: penalties are much more attractive in the Pareto infe rior crime wave equilibrium. Specifically, although marginal penal ties have both costs and benefits, the net benefit is strictly positive in the crime wave equilibrium. In contrast, marginal penalties fre quently have a net cost in the noncrime wave equilibrium. We also show that increasing enforcement resources may worsen crime. (JEL D82, K42)

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• Preventing Crime Waves

  American Economic Journal Microeconomics · 2010-07-30 · 29 citations

  articleSenior author

  We study the design of enforcement mechanisms when enforcement resources are chosen ex ante and are inelastic ex post. Multiple equilibria arise naturally. We identify a new answer to the old question of why non-maximal penalties are used to punish moderate actions: “marginal” penalties are much more attractive in the Pareto inferior crime wave equilibrium. Specifically, although marginal penalties have both costs and benefits, the net benefit is strictly positive in the crime wave equilibrium. In contrast, marginal penalties frequently have a net cost in the noncrime wave equilibrium. We also show that increasing enforcement resources may worsen crime. (JEL D82, K42)

  PublisherDOI

• Reputations, Investigations and Self Regulation

  2007-09-01 · 3 citations

  articleSenior author

  Consider a principal who hires an agent, e.g., a broker is hired to fill stock orders. The outcome may be good or bad, e.g., the orders may be filled at favorable or unfavorable prices. A bad outcome may simply reflect bad luck or it may result from the agent defrauding the principal. How is the agent’s incentive to defraud the principal restrained? With a dynamic costly-stateverification model we examine two possibilities: (i) reputational penalties, meaning that principals can choose not to transact with an agent who has a bad history even if there is no evidence of fraud; and (ii) investigations, meaning that at a cost, an agent’s performance can be directly checked for fraud. Reputational penalties have no direct cost but they are imprecise in the sense that an agent can be penalized even if it was just bad luck. Investigations are costly but precise in the sense that an agent is penalized only if he is found to have committed fraud. We examine how principals would balance the two ways of controlling an agent’s incentives. Then we examine the incentives of agents to form a self-regulatory organization to conduct its own investigations of agent performance and to penalize agents who are caught cheating. We show that the threat of SRO investigations can enhance agents’ welfare but reduce the welfare of principals. In effect, SRO investigations can inefficiently – from the principal’s perspective – crowd out reputational penalties.

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• The post-earnings-announcement drift and liquidity: level, risk, and profitability of trading

  2005-01-01

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• Self-Regulation and Government Oversight

  The Review of Economic Studies · 2005-07-01 · 134 citations

  articleSenior author

  Self-regulation is a feature of a number of professions. For example, in the U.S. the government delegates aspects of financial market regulation to self-regulatory organizations (SROs) like the New York Stock Exchange and the National Association of Securities Dealers. We analyse one regulatory task of an SRO, enforcing antifraud rules so agents will not cheat customers. Specifically, we model contracting/enforcement as a two-tier problem. An SRO chooses its enforcement policy: the likelihood that an agent is investigated for fraud and a penalty schedule. Given an enforcement policy, agents compete by offering contracts that maximize customers' expected utility. We assume that the SRO's objective is to maximize the welfare of its members, the agents. We show that the SRO chooses a more lax enforcement policy—meaning less frequent investigations—than what customers would choose. A general conclusion is that control of the enforcement policy governing contracts confers substantial market power to a group of otherwise competitive agents. We also investigate government oversight of the self-regulatory process. The threat of government enforcement leads to more enforcement by the SRO, just enough to pre-empt any government enforcement.

  PublisherDOI

• Informational Versus Non-Informational Aspects of Liquidity Risk: The Pricing of Momentum Stocks

  2004-01-01 · 3 citations

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• Contracting and Enforcement with a Self-Regulatory Organization

  SSRN Electronic Journal · 2002-01-01 · 24 citations

  articleOpen accessSenior author
  PublisherDOI

• Mandatory Disclosure

  Palgrave Macmillan UK eBooks · 2002-01-01 · 7 citations

  book-chapterSenior author

  A wide range of transactions and interactions occurs between differentially informed parties. Customers are not always fully informed concerning the quality of the products and services they purchase. Corporate management has better information regarding the future profitability of their firm than do prospective investors. Traders in securities markets have access to different information regarding security values. Candidates for election, but not voters, know the identities of major political contributors. Parties to lawsuits do not share the same information regarding the merit of their cases. Job applicants are better informed about their skills and employers are better informed about working conditions. The list goes on. In some of these settings, governments have imposed mandatory disclosure rules requiring that certain parties disclose particular pieces of information.

  PublisherDOI

• Derivatives: A PowerPlus Picture Book

  Review of Financial Studies · 2000-01-01 · 1 citations

  article1st authorCorresponding

  Journal Article Derivatives: A PowerPlus Picture Book Get access Derivatives: A PowerPlus Picture Book. Mark Rubinstein. Kathleen Hagerty Kathleen Hagerty Northwestern University Search for other works by this author on: Oxford Academic Google Scholar The Review of Financial Studies, Volume 13, Issue 1, January 2000, Pages 253–256, https://doi.org/10.1093/rfs/13.1.253 Published: 15 June 2015

  PublisherDOI

Frequent coauthors

• Michael J. Fishman

  Northwestern University

  18 shared

• Peter M. DeMarzo

  7 shared

• Robert A. Korajczyk

  2 shared

• Philip L. Bond

  2 shared

• Kent Daniel

  National Bureau of Economic Research

  2 shared

• Gil Sadka

  2 shared

• Robert L. McDonald

  Kellogg's (Canada)

  2 shared

• Ronnie Sadka

  2 shared

Awards & honors

• Bradley Foundation Research Fellowship
• D.P. Jacobs Prize for the Most Significant Paper in the Jour…
• Sidney J. Levy Teaching Award (2004-2005)