Presidential Address
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2010 Presidential Address |
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Asset Price Dynamics with Slow-Moving Capital
Darrell Duffie
The address is available in a streaming video that may be viewed by clicking here.
Abstract
I address the apparent slow movement of investment capital to trading opportunities, and the implications for asset price dynamics. The arrival of new capital can be delayed by fractions of a second in some markets, for example an electronic limit-order-book market, or months in other markets, such as that for catastrophe risk insurance. The pattern of price responses to supply or demand shocks, however, typically involves a sharp reaction to the shock and a subsequent and more extended reversal. The amplitude of the immediate price impact and the pattern of the subsequent recovery can reflect many sorts of institutional impediments to immediate trade, such as search costs for trading counterparties or time to raise capital by intermediaries. I discuss special impediments to capital formation during the recent financial crisis that caused asset price distortions, which subsided afterward. After presenting examples of price reactions to supply shocks in more “normal” market settings, I offer a simple illustrative model of price dynamics associated with slow moving capital that is based on the notion that many investors do not monitor markets and adjust their positions continually.
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2009 Presidential Address
Sophisticated Investors and Market Efficiency
Jeremy C. Stein
The address is available in a streaming video that may be viewed by clicking here.
Abstract
Stock-market trading is increasingly dominated by sophisticated professionals, as opposed to individual investors. Will this trend ultimately lead to greater market efficiency? I consider two complicating factors. The first is crowding-the fact that, for a wide range of "unanchored" strategies, an arbitrageur cannot know how many of his peers are simultaneously entering the same trade. The second is leverage-when an arbitrageur chooses a privately-optimal leverage ratio, he may create a fire-sale externality that raises the likelihood of a severe crash. In some cases, capital regulation may be helpful in dealing with the latter problem.
2008 Presidential Address
The Cost of Active Investing
Kenneth R. French
The address is available in the following streaming video formats:
Abstract
I compare the fees, expenses, and trading costs society pays to invest in the U.S. stock market with an estimate of what would be paid if everyone invested passively. Averaging over 1980 to 2006, I find investors spend 0.67% of the aggregate value of the market each year searching for superior returns. This implies that society’s capitalized cost of price discovery is at least 10% of the current market cap. Moreover, under reasonable assumptions, the typical investor would increase his average annual return by 67 basis points over the 1980 to 2006 period if he switched to a passive market portfolio.
Link to working paper at SSRN: http://ssrn.com/abstract=1105775.P |
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2007 Presidential Address
Issuers, Underwriter Syndicates, and Aftermarket Transparency
Richard C. Green
The address is available in the following streaming video formats:
You can download a copy of the whole 2007 Presidential Address in Adobe Acrobat pdf format
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2006 Presidential Address
Household Finance
John Y. Campbell
The address is available in the following streaming video formats:
2005 Presidential Address
The Limits of Financial Globalization
René M. Stulz
The address is available in the following streaming video formats:
2004 Presidential Address
Committing to Commit: Short-term Debt When Enforcement is Costly
Douglas W. Diamond
The address is available in the following streaming video formats:
You can download a copy of the whole 2004 Presidential Address in Adobe Acrobat pdf format (314KB)
2003 Presidential Address
Liquidity and Price Discovery
Maureen O'Hara
This address is available in the following streaming video formats:
View the 2003 Presidential Address in pdf format.
2002 Presidential Address
Rational Asset Prices
George M. Constantinides
View the 2002 Presidential Address in pdf format.
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