Ongoing Research

Ongoing research agendas include the following featured projects in progress:

Assistant Professor Mehmet Canayaz studies various aspects of artificial intelligence (AI), international trade, and the political economy. "AI Agency" analyzes autonomous digital employees and the new form of agency conflicts within firms and "Crafting an AI Compass" with Zhe Wang provides a first look at how standardization of AI influences business outcomes. "When Protectionism Kills Talent" with Isil Erel, Umit Gurun, and Yufeng Wu examines repercussions of protectionist policies implemented in the United States and the composition of workforce and career choices within the semiconductor industry. Findings highlight the challenges in achieving the goals of initiatives like the 2022 CHIPS and Science Act and emphasize the need to address talent shortages to sustain semiconductor industry growth. "Start-Ups Judging Judges" with Matt Gustafson documents that shifts toward more liberal (i.e. less pro-business) courts predict reductions in local small business activity. Interested readers can find these and other works in progress here.

Associate Professor Fenghua Song focuses on theoretical issues in banking and corporate finance, particularly the role of bank capital and its interaction with (i) promoting a green economy and financial inclusion, (ii) money and liquidity creation, and (iii) the influence of bank culture on talent allocation. His working paper "Bailout Addiction: Does Bailout Anticipation Induce Adverse Selection?" coauthored with Anjan Thakor, demonstrates that the anticipation of government bailouts can exacerbate ex ante adverse selection in financial markets. This results in avoidable market freezes and unnecessary government intervention: a phenomenon we term a "bailout trap." The theoretical analysis yields novel policy implications for financial regulation.

Associate Professor Anh Le focuses on fixed income markets, with emphasis on the dynamics of bond risk premiums and their relationship to macroeconomic conditions. In recent work, Anh and his coauthor Scott Joslin develop a new class of no-arbitrage term structure models that incorporate stochastic volatility while relaxing the structural rigidities that constrain traditional affine models. This new framework -- referred to as Almost Affine Models -- offers a more realistic representation of how interest rates behave. Whereas conventional models often face trade-offs between accurately pricing bonds and capturing the evolution of yields over time, their approach allows interest rate volatility to respond more flexibly to economic forces without compromising analytical tractability. The result is a model that generates improved forecasts and deeper insights into the drivers of bond risk premiums. They find that market sentiment and changes in risk appetite -- not just yield volatility -- play a central role in explaining term premium fluctuations. These findings carry important implications for both policy analysis and investment strategies.

Read Anh's paper, "Breaking the Tension: Almost Affine Term StructureModels with Stochastic Volatility"

Associate Professor David Haushalter is working on cross-disciplinary research with accounting scholars including the working paper "Why are Reported Fair Values Sticky?" coauthored with Paul Fischer, Brian Miller, and Kevin Pisciotta. The authors use the increasing trend of mutual funds investing in private company (non-publicly traded) equities to study how fair value reporting for individual Level 3 assets is implemented in practice. Although the Investment Company Act of 1940 requires these investments to be individually reported at fair value on a quarterly basis, funds’ valuations of private company holdings are often sticky and untimely. The authors find evidence suggesting that this stickiness reflects funds efforts to minimize costly accusations of aggressive valuations of their private company holdings. In particular, funds generally defer revaluations of these holdings until there is a compelling and objective case to do so and funds are more likely to reduce valuations when market returns are negative than increase valuations when market returns are positive. To the extent that funds exploit the stickiness of valuations to improve performance, they do so through the timing of the revaluations of these holdings rather than by revaluing these holdings to abnormally high levels. The paper’s findings suggest a potential trade-off in fair value reporting for individual Level 3 between promoting unbiased valuations and promoting timely revaluations.