Upcoming Seminar Invites & Conferences
– Dartmouth College
– The 2024 Consumer Financial Protection Bureau Research Conference
– The 2024 Boulder Summer Conference on Consumer Financial Decision Making
– The 2025 American Finance Association (Poster) Conference
– The 2024 CFP Conference
– The 2024 Financial Management Association Annual Meeting
Working Papers
1- Does Trade Policy Affect Consumer Credit? The Role of Captive Finance with Kristine Hankins and David Sovich
Status: American Economic Review, Revise and Resubmit
Captive finance subsidiaries, vertically integrated lenders, create a potential channel for trade policy to affect consumer credit. Examining the Trump administration 2018 metal tariffs’ impact on auto manufacturers, we find consumers received worse auto loan terms from captive lenders after the tariff relative to unaffected non-captive lenders. The average interest rate on captive loans increased by 26 basis points while average loan amounts, loan maturities, and loan-to-value ratios decreased. The worse loan terms represent a tightening of credit along the intensive margin, not a shift in the composition of borrowers. Further, we document a disparate impact on low-income borrowers and in areas with less lending competition. Overall, our results suggest not only that captive finance divisions enable tariff cost pass-through to consumer finance but also that focusing solely on directly affected product prices may underestimate the impact of tariffs.
2- Competition and Shrouded Attributes in Auto Loan Markets
Auto dealers acting as intermediaries often charge a discretionary markup on auto loans. Using loan-level data and a novel identification strategy, I study the effect of competition among auto dealers on the joint pricing of cars and car loans. I find that increased competition causes dealers to decrease vehicle prices to attract consumers. They, however, offset a large portion of their loss through charging higher prices on loan markups as a non-salient margin. Consistent with the heuristic budgeting channel, I find that (1) consumers bunch at salient monthly payment amounts, and (2) increased competition does not change consumers’ monthly payments. In contrast with Grunewald et al. (2023)’s, my findings suggest that loan markups lead to more aggressive price competition in the U.S. auto market. Furthermore, I find that (1) infra-marginal consumers may not benefit from competitive pressures in this market, and (2) at the extensive margin, consumers underestimate the total price of their car purchase.
– Dartmouth College
–The 2024 Boulder Summer Conference
–The 2024 CFPB Research Conference
–The Best Paper Award, FMA 2023, Semi-Finalist
–Financial Management Association Annual Meeting
–Sydney Banking and Financial Stability Conference
3- Third Party Quality Certification in the Market for Financial Advice with William Gerken
Status: Management Science, Revise and Resubmit
We study third party quality certification in the market for financial advice. Using the Barron’s Top Financial Advisors rankings from 2009 to 2020, we find evidence that being named a top advisor increases both client assets and number of accounts. These effects increase sharply around thresholds for various levels of certification suggesting that clients value the certification itself and not solely the underlying quality of the advisor. Consistent with theoretical models of reputation in the financial advisory industry, we find that after obtaining this third-party certification, these advisors are less likely to engage in misconduct. We run tests that exploit within-individual variation, within-firm variation, and randomness around state-level cutoffs that suggest these effects are causal. The certification effects are larger for those with regulatory disclosures of past misconduct.
-Institute for the Study of Free Enterprise Research Grant ($7,500)
-American Finance Association Annual Meeting
– CFP Conference (Scheduled)
-Financial Intermediation Research Society (FIRS)
-Financial Management Association Annual Meeting
4- Testing Asset Pricing Models on Individual Stocks with Charles Clarke
This paper tests asset pricing models using individual stocks as test assets, rather than sorted portfolios. Sorted portfolios have the severe limitation that the researcher must know, in advance, reliable predictors of expected returns. We show how to generate appropriately sized tests and verify that our tests have considerable test power. In simulations when the CAPM describes the population, our tests (correctly) reject the Fama and French (2015) six-factor model 97.5% of the time, while our tests (incorrectly)reject the CAPM less than 5%. We apply our tests to seven leading factor models. We reject six of the seven leading models we test. The instrumented factor model of Kelly, Pruitt, and Su (2019) stands out as the most successful.
-American Finance Association Annual Meeting
5- The Marginal Propensity to Default on Auto Loans with David Sovich
How does the interest rate on a loan affect its likelihood of default after disbursement? What economic forces drive such a relationship? We examine these questions in the context of the indirect auto loan market. Using lender-specific discontinuities in auto loan interest rates as sources of quasi-exogenous variation, we find that a 100 basis point increase in interest rates is associated with a 41 basis point increase in the auto loan default rate. The increase in the default rate is concentrated among liquidity constrained borrowers. We find no evidence of higher default sensitivities among borrowers with lower default costs or higher strategic default motives. Our results suggest that the ability to pay — and not the incentive — is the predominant driver of the ex-post relation between default and the auto loan interest rate.
–The Best Paper Award, FMA 2021, Semi-Finalist
-Financial Management Association Annual Meeting
Work in Progress