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NBER Working Papers and Publications
|November 2017||Incentive Constrained Risk Sharing, Segmentation, and Asset Pricing|
with Bruno Biais, Pierre-Olivier Weill: w23986
Incentive problems make assets imperfectly pledgeable. Introducing these problems in an otherwise canonical general equilibrium model yields a rich set of implications. Asset markets are endogenously segmented. There is a basis going always in the same direction, as the price of any risky asset is lower than that of the replicating portfolio of Arrow securities. Equilibrium expected returns are concave in consumption betas, in line with empirical findings. As the dispersion of consumption betas of the risky assets increases, incentive constraints are relaxed and the basis reduced. When hit by adverse shocks, relatively risk tolerant agents sell the safest assets they hold.
|August 2016||Does Unemployment Insurance Change the Selection into Entrepreneurship?|
with Antoinette Schoar, David Sraer, David Thesmar
in Measuring Entrepreneurial Businesses: Current Knowledge and Challenges, John Haltiwanger, Erik Hurst, Javier Miranda, and Antoinette Schoar, editors
The French Reform of 2003, documented in Hombert et al. (2014), led to 25% increase in supply of newly created firms. The question we investigate in this article is whether it led to a significant reduction in the potential for long-term success of new ventures. We proceed in two steps. First, using the 1994 cohort, we show that some entrepreneurial and project characteristics, that we can measure using a large-scale survey, significantly predict the probability that newly founded firms succeed in the long-run. We show that firms started by entrepreneurs that plans on growing, have already had entrepreneurial experience, or are motivated by new ideas, are significantly more likely to employ at least 50 persons after 12 years. We then use this relationship to see if the success potent...
|November 2014||Can Unemployment Insurance Spur Entrepreneurial Activity?|
with Antoinette Schoar, David Sraer, David Thesmar: w20717
We study a large-scale French reform that provided generous downside insurance for unemployed individuals starting a business. We study whether this reform affects the composition of people who are drawn into entrepreneurship. New firms started in response to the reform are, on average, smaller, but have similar growth expectations and education levels compared to start-ups before the reform. They are also as likely to survive or to hire. In aggregate, the effect of the reform on employment is largely offset by large crowd-out effects. However, because new firms are more productive, the reform has the impact of raising aggregate productivity. These results suggest that the dispersion of entrepreneurial abilities is small in the data, so that the facilitation of entry leads to sizable Schum...
|December 2010||Trading and Liquidity with Limited Cognition|
with Bruno Biais, Pierre-Olivier Weill: w16628
We study the reaction of financial markets to aggregate liquidity shocks when traders face cognition limits. While each financial institution recovers from the shock at a random time, the trader representing the institution observes this recovery with a delay reflecting the time it takes to collect and process information about positions, counterparties and risk exposure. Cognition limits lengthen the market price recovery. They also imply that traders who find that their institution has not yet recovered from the shock place market sell orders, and then progressively buy back at relatively low prices, while simultaneously placing limit orders to sell later when the price will have recovered. This generates round trip trades, which raise trading volume. We compare the case where algorithms...
Published: "Equilibrium Pricing and Volume under Preference Uncertainty" with Bruno Biais and Johan Hombert. Review of Economic Studies, Volume 81, Issue 4, Pp. 1401-1437.