NBER Working Papers by Richard Stanton

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

Working Papers

July 2010CMBS Subordination, Ratings Inflation, and the Crisis of 2007-2009
with Nancy Wallace: w16206
This paper analyzes the performance of the commercial mortgage-backed security (CMBS) market before and during the recent financial crisis. Using a comprehensive sample of CMBS deals from 1996 to 2008, we show that (unlike the residential mortgage market) the loans underlying CMBS did not significantly change their characteristics during this period, commercial lenders did not change the way they priced a given loan, defaults remained in line with their levels during the entire 1970s and 1980s and, overall, the CMBS and CMBX markets performed as normal during the financial crisis (at least by the standards of other recent market downturns). We show that the recent collapse of the CMBS market was caused primarily by the rating agencies allowing subordination levels to fall to levels that pr...

Published: CMBS Subordination, Ratings Inflation, and the Crisis of 2007-2009, Richard Stanton, Nancy Wallace. in Market Institutions and Financial Market Risk, Carey, Kashyap, Rajan, and Stulz. 2012

April 2007Human Capital, Bankruptcy and Capital Structure
with Jonathan B. Berk, Josef Zechner: w13014
We derive a firm's optimal capital structure and managerial compensation contract when employees are averse to bearing their own human capital risk, while equity holders can diversify this risk away. In the presence of corporate taxes, our model delivers optimal debt levels consistent with those observed in practice. It also makes a number of predictions for the cross-sectional distribution of firm leverage. Consistent with existing empirical evidence, it implies persistent idiosyncratic differences in leverage across firms. An important new empirical prediction of the model is that, ceteris paribus, firms with more leverage should pay higher wages.

Published: Berk, Jonathan B., Richard Stanton,and Josef Zechner. "Human Capital, Bankruptcy and Capital Structure." Journal of Finance 65, 3 (June 2010): 891-926. citation courtesy of

April 2004A Rational Model of the Closed-End Fund Discount
with Jonathan Berk: w10412
The discount on closed-end funds is widely accepted as proof of investor irrationality. We show,however, that a parsimonious rational model can generate a discount that exhibits many of the characteristics observed in practice. The only required features of the model are that managers have (imperfectly observable) ability to generate excess returns; they sign long-term contracts guaranteeing them a fee each year equal to a fixed fraction of assets under management; and they can leave to earn more money elsewhere if they turn out to be good. With these assumptions, time-varying discounts are not an anomaly in a rational world with competitive investors -- they are required.
July 1999A Multifactor, Nonlinear, Continuous-Time Model of Interest Rate Volatility
with Jacob Boudoukh, Matthew Richardson, Robert F. Whitelaw: w7213
This paper presents a general, nonlinear version of existing multifactor models, such as Longstaff and Schwartz (1992). The novel aspect of our approach is that rather than choosing the model parameterization out of thin air,' our processes are generated from the data using approximation methods for multifactor continuous-time Markov processes. In applying this technique to the short- and long-end of the term structure for a general two-factor diffusion process for interest rates, a major finding is that the volatility of interest rates is increasing in the level of interest rates only for sharply upward sloping term structures. In fact, the slope of the term structure plays a larger role in determining the magnitude of the diffusion coefficient. As an application, we analyze the model's ...

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us