Published Papers

We investigate peer effects associated with a user's churn and subsequent retention of other users in the network. We use data from an upscale gym with information on exogenous churns of users that allows us to identify peer effects. We estimate a structural model of users' plan choice and usage decisions that allows for bidirectionality in peer effects, direct/indirect peer effects, heterogeneity in the degree of centrality of users, and dynamics in peer effects. Our main results are as follows. (i) Unlike the churn of a low- or medium-centrality user, the churn of a high-centrality user has a strong negative cascade effect on the usage and subscriptions of other users in the network over time. (ii) To stop this negative cascade effect and increase the retention in the rest of the network, the firm's decision on which of the central churner's peers to target with promotions depends on the tradeoff between two forces: the individual level impact of the targeted promotion versus the positive spillover effect to the rest of the network that can increase over time because of carryover effects of usage and subsequent social multiplier effects (that stem from bidirectionality in peer effects). Thus, retention strategies focused on short-term outcomes should prioritize targeting users with low centrality, whereas strategies aimed at long-term outcomes should prioritize targeting users with high centrality.

We develop a dynamic model of naïve social learning from consumer reviews. In our model, consumers decide if and what to buy based on both the products' expected quality and their idiosyncratic taste for them. Products' qualities are initially unknown and are (mis)learned from reviews. At the heart of the model lies a dynamic feedback loop between reviews, beliefs, and choices: period t reviews influence t+1 consumers' beliefs and, thus, choices; these determine the average of t+1 reviews, which, in turn, influences t+2 beliefs, choices, and reviews. We show that, in the long run (t=), reviews are systematically biased, leading some consumers astray. In particular, in both monopoly and duopoly, reviews relatively advantage lower quality and more polarizing products because these products induce stronger taste-based consumer self-selection. Thus, in stark contrast with the winner-takes-all dynamics of classic observational learning models in which consumers learn from the choices of their predecessors, social learning from opinions generates excessive choice fragmentation. Our findings have implications for interpreting the variance and number of reviews, pricing in the presence of reviews, and the short- and long-term effectiveness of fake reviews.

We present evidence that loan allocations and loan terms are closely linked to the strength of social connections between bank and borrower regions. Lending increases with social connectedness, particularly in the presence of strong screening incentives. If connectedness is high, banks discriminate between borrowers more, the terms of originated loans are more borrower friendly, and loan performance is better. Furthermore, social connectedness is associated with higher bank profitability and with lending-related increases in borrower-region GDP growth and employment. Our results suggest that lending barriers decrease with social connectedness, which helps our understanding of geographic lending patterns and regional economic disparities.

We exploit meteorological conditions prevailing in Sweden at the time of the Chernobyl accident, which created stark regional differences in exposure to a large-scale environmental shock within the same population. Using comprehensive register-based data, we test whether this quasi-random variation in "Chernobyl experiences" predicts subsequent values-based investment behavior. Investors in the most affected regions are about 20% more likely to allocate to socially responsible assets compared to otherwise similar investors in the least affected regions. The effect is robust to extensive individual-level controls, including health status, and to alternative specifications addressing regional sorting. Our findings provide novel evidence that lived experiences of salient societal shocks can durably shift portfolio preferences, highlighting a moral-sentiment channel in household finance that persists well beyond standard risk-return considerations.

In a world driven by uncertainty, this essay explores how faith - not knowledge - is at the heart of modern investing. It reveals how the "unintelligent" investor - who admits he knows nothing and simply believes in long-term growth - outperforms the expert who tries to predict the market. Drawing on thinkers, as well as writers and artists who understood the power of technology, democracy and belief, the essay shows why the markets thrive not on reason, but on shared conviction. From index funds to Bitcoin, wealth today is not built through calculation, but through the quiet strength of faith.

This paper constructs dynamic networks of institutional funds based on investors' revealed preferences, captured through co-viewership on a leading asset management platform. Shocks to peer funds-identified solely through shared investor attention-predict subsequent returns and flows of focal funds, above and beyond the effects of overlapping stock holdings, style similarity, and textual similarity in fund prospectuses. Consistent with limited investor attention, these spillover effects are sluggish and amplified for connections that investors tend to overlook. Fund managers actively respond to negative spillovers by rebalancing portfolios away from attention-linked peers. In contrast, idiosyncratic peer shocks-such as key manager departures-generate positive inflows to attention-linked funds. The findings reveal an investor attention-based channel of shock propagation across institutional funds, with important implications for diversification across multiple fund managers and the stability of the sector.

During the COVID-19 crisis, bond mutual funds experienced significant outflows that disrupted debt markets. We show that "funds of funds"-mutual funds that invest in other mutual funds played a surprisingly large role in this episode. Despite experiencing minimal redemptions themselves, funds of funds rebalanced their portfolios mechanically in response to equity market losses, selling approximately $70-80 billion of bond funds and purchasing equity funds. This behavior accounted for 25-30 percent of all bond fund outflows in March 2020. Our findings highlight how portfolio rebalancing by institutional investors can transmit shocks across markets and amplify financial fragility.

Regulators around the world endeavor to reduce search costs and enhance financial education among retail investors. In line with this goal, Chinese regulators recently began allowing mutual funds to use social media livestreams to deliver video presentations and interact with viewers. We analyze over 27,000 livestreams to investigate whether they accomplish regulators' intended goal of improving investment decisions. Our findings indicate that livestreams drive significant inflows, even within minutes of their start times. However, contrary to their educational objective, livestreams exacerbate retail investors' tendencies to chase past returns and predict sharp declines in subsequent fund performance. Investors who buy in response to livestreams would earn higher returns by investing in index funds or even holding cash. Further analyses using deep learning algorithms find that livestreams drive greater inflows when speakers are more physically attractive, use more positive language, and sound more excited. We conclude that livestreams primarily function as persuasive advertising and that regulators should be wary of educational efforts led by sellers of consumer financial products. We also conclude that prior findings about the benefits of firms' social media use in equity markets do not extend to financial product markets in our setting.

This paper examines the impact of a digital platform's transmission of financialknowledge on users' stock market participation and investment performance.Leveraging a Chinese platform's randomly distributed prompts as an instrument,we demonstrate that access to financial information increases stock investment,enhances portfolio diversification, and improves risk-adjusted returns, even amongolder, less educated and less affluent users. Although initial responses to the promptsare modest, sustained exposure overcomes inertia and drives considerable engagement.Digitalization thus holds promises for democratizing finance by providingscalable, low-cost financial education that helps individuals make more informedinvestment decisions.

Using unique account-level data from a leading Chinese fintech platform, we investigate how financial influencers, the key information intermediaries in social finance, attract followers through a process of social transmission bias. We document a robust performance-following pattern wherein retail investors overextrapolate influencers' past returns rather than rational learning in the social network from their past performance. The transmission bias is amplified by two mechanisms: (1) influencers' active social engagement and (2) their index fund-heavy portfolios. Evidence further reveals influencers' self-enhancing reporting through selective performance disclosure. Crucially, the dynamics ultimately increase risk exposure and impair returns for follower investors.

Using the reconstitution of MSCI indices in 56 markets worldwide from 2006 to 2023, we discover arbitrage opportunities arising from index-tracking investors' rigidity to minimize tracking errors around the dates when index reconstitution changes become effective (i.e., effective dates). We document pronounced abnormal returns and trading volume on the last trading day before the effective date. Arbitrageurs can exploit this predictable pattern of stock price changes and earn sizable abnormal returns if they long the added and short the deleted stocks on the announcement date and close their positions at the end of the day before the effective date. Additional analysis reveals how index-tracking investors and arbitragers interact to shape stock prices and equity-lending activities around MSCI index reconstitutions.

We examine whether investors' commitment to socially responsible investment principles influence their investee firms' public disclosure of environmental, social, and governance (ESG) information. We find that following institutional investors' public commitment to the United Nations Principles for Responsible Investment (PRI), investees' ESG disclosure in U.S. Securities and Exchange Commission reports increases. We identify two mechanisms through which PRI investors influence investee firms' ESG disclosure: submitting shareholder proposals that request enhanced sustainability disclosure and engaging directly with investee firms to encourage greater ESG disclosure. Our conclusions are robust to considering: 1) Alternative measures of ESG disclosure; 2) The level of institutional ownership of the firm by PRI investors before they join the PRI initiative and by other investors; 3) The ESG performance of the investee firm, using alternative ESG score providers; 4) The simultaneous estimation of institutional investment decision, firm ESG performance, and firm ESG disclosure; and, 5) An event triggering institutional investor demand for environmental information - the BP Deepwater Horizon oil spill. We also find that the improvement in firms' ESG disclosure is attributable primarily to PRI institutional investors from Europe and is not driven only by large influential institutional investors. Overall, our analyses suggest that investors' public commitment to social responsibility plays a crucial role in enhancing investee firms' public disclosure of ESG information.