May 3 2008
Nicholas Barberis and Robert J. Shiller, Organizers
"Realization Utility"
A number of authors have suggested that investors derive utility from realizing gains and losses on assets that they own. We present a model of this “realization utility,” analyze its predictions, and show that it can shed light on a number of puzzling facts. These include the disposition effect, the poor trading performance of individual investors, the higher volume of trade in rising markets, the effect of historical highs on the propensity to sell, the individual investor preference for volatile stocks, the low average return of volatile stocks, and the heavy trading associated with highly valued assets.
Discussant: Simon Gervais, Duke University
Ingolf Dittmann,
Erasmus University; Ernst Maug, University of Mannheim; Oliver
Spalt, University of Mannheim
"Sticks or Carrots? Optimal CEO Compensation When Managers Are Loss Averse"
Discussant: Alex Edmans, University of Pennsylvania
Enrichetta Ravina, New York University
"Love and Loans: The Effect of Beauty and Personal Characteristics in Credit
Markets"
Discussant: Tanya Rosenblat, Wesleyan University
Markus Brunnermeier, Princeton University and NBER; Stefan
Nagel, Stanford University and NBER; Lasse Pedersen, New York
University and NBER
"Carry Trades and Currency
Crashes"
This paper documents that carry traders are subject to crash risk: i.e.
exchange rate movements between high-interest-rate and low-interest-rate currencies are
negatively skewed. We argue that this negative skewness is due to sudden unwinding of
carry trades, which tend to occur in periods in which risk appetite and funding liquidity
decrease. Funding liquidity measures predict exchange rate movements, and controlling for
liquidity helps explain the uncovered interest-rate puzzle. Carry-trade losses reduce
future crash risk, but increase the price of crash risk. We also document excess
co-movement among currencies with similar interest rate. Our findings are consistent with
a model in which carry traders are subject to funding liquidity constraints.
Discussant: Nikolai Roussanov, University of Pennsylvania
Jialin Yu, Columbia University
"Commonality in Disagreement and Asset Pricing"
Discussant: Hongjun Yan, Yale University
Joseph Chen, University of Southern California; Samuel Hanson,
Harvard University; Harrison Hong, Princeton University; Jeremy
Stein, Harvard University and NBER
"Do Hedge Funds Profit from Mutual Fund Distress?"
Discussant: Owen Lamont, DKR Capital
Conference
sponsored by
Bracebridge Capital, Fuller & Thaler Asset Management and
LSV Asset Management
under the auspices of the National Bureau of Economic
Research