Permanent Capital Losses after Banking Crises

The authors would like to thank Markus Brunnermeier, Andrew Karolyi, Arvind Krishnamurthy, Ross Levine, Stephan Luck, Yueran Ma, Alberto Martin, Andrew Metrick, Alan Moreira, Tyler Muir, Karsten Müller, Aleksandra Rzeznik, Paul Schmelzing, Emil Verner, Wei Xiong, and seminar participants at the Bank for International Settlements, Bank of England, BI Norwegian Business School, Cheung Kong Graduate School of Business, Cornell University, Federal Reserve Bank of Boston, Federal Reserve Bank of Chicago, Federal Reserve Bank of New York, Goethe University, Kedge Business School, Princeton University, Skema Business School, Universitat Pompeu Fabra, University of Toronto, Washington University in St. Louis, the American Finance Association conference, ASU Sonoran Winter Finance Conference, Barcelona GSE Summer Forum, CEPR/Study Center Gerzensee European Summer Symposium in Financial Markets, European Finance Association conference, MoFiR Workshop on Banking, NBER Summer Institute (Risks of Financial Institutions), and Yale Program on Financial Stability conference for their comments and feedback. We thank Sophia Alden, Niklas Grimm, Andrea Pop Catalisan, and Chiara Vergeat for excellent research assistance. Matthew Baron acknowledges funding from the Cornell Center for Social Sciences, the Institute for New Economic Thinking, and an OFR-NSF grant administered through the NBER. A previous version of the paper circulated under the title “Investing in Crises”. The views expressed herein are those of the authors and do not necessarily reflect the views of the European Central Bank, Eurosystem, or National Bureau of Economic Research.