Laura Veldkamp | Research

Working Papers

  1. The Tail that Wags the Economy: Belief-Driven Business Cycles and Persistent Stagnation with Julian Kozlowski and Venky Venkateswaran
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    The great recession has been more persistent than others because observing an unlikely event led us to re-assess the probability of tail events. This change in beliefs endures long after the event itself has passed.

  2. Taking Orders and Taking Notes: Dealer Information Sharing in Financial Markets, with Nina Boyarchenko and David Lucca
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    When financial intermediaries use information from order flow to advise their clients, the mean and variance of asset prices rise. Allowing investors a choice to buy directly or through the intermediary creates a new financial accelerator because only bad news is shared with others.

  3. Long Run Growth of Financial Technology with Maryam Farboodi
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    How does technological progress shape financial markets? Is efficiency-boosting or does it instead create volatility and illiquidity? We use the lens of growth theory to explore how more efficient information production shifts the mix of what information is produced and changes how financial markets function.

  4. Big Data in Finance and the Growth of Large Firms
    with Juliane Begenau and Maryam Farboodi
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    The use of big data in fi nancial markets has lowered the cost of capital for large
    firms, relative to small ones, enabling large firms to grow larger.

  5. Understanding Uncertainty Shocks and the Role of the Black Swan with Anna Orlik
    Download Paper | Slides | Non-technical Summary | FAQs | Uncertainty Index (xls file)
    Where do uncertainty shocks come from? When a Bayesian forecaster updates his non-linear forecast model each period, his estimated probability of tail events fluctuates. Results measure this effect and show that learning about tail risk can explain large swings in uncertainty.

  6. Information Globalization, Risk Sharing, and International Trade
    with Isaac Baley and Michael Waugh
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    | Slides
    When countries have more information about each other, they trade less and share less risk, but achieve higher utility.

  7. What Are Uncertainty Shocks?
    with Anna Orlik and Nic Kozeniauskas
    Download Paper | Practitioner's summary in Systemic Risk and Systemic Value
    Measures of micro, macro and higher-order uncertainty are statistically and conceptually distinct. Changes in macro volatility can explain the origin of these fluctuations and their covariance.

  8. Germs, Social Networks and Growth, with Alessandra Fogli
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    When societies form their social institutions, they do so, in part, to protect themselves from the spread of disease. But such social structures may inhibit the diffusion of new technologies and restrain economic development.

  9. Where Has All the Big Data Gone? with Maryam Farboodi and Adrien Matray
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    We document that price informativeness is increasing for S&P 500 firms, but declining for most others. Why? Is it efficient to concentrate data resources on the economy's most important firms? Or is the financial sector burning resources, without social benefit?

Published and Forthcoming Work

  1. The Tail that Keeps the Riskless Rate Low
    with Julian Kozlowski and Venky Venkateswaran
    2018 NBER Macroeconomics Annual, forthcoming
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    The 2008 financial crisis was an unlikely event led us to re-assess the probability of tail events. The knowledge that such an event can happen raises the value of riskless assets for many years.

  2. A Rational Theory of Mutual Funds' Attention Allocation
    with Marcin Kacperczyk and Stijn Van Nieuwerburgh
    Econometrica, March 2016, v.84(2), p.571-626
    Download Paper | Technical Appendix | MS Quant Conference slides
    Mutual funds should monitor payoff-relevant information and use that information to form profitable portfolios. We solve a model to determine what information funds should monitor and test the model's predictions with fund portfolio data.

  3. Should We Regulate Financial Information? with Pablo Kurlat
    Journal of Economic Theory, July 2015, v.158, p.697-720.
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    We explore the costs and benefits of regulations that require asset issuers to disclose information about future asset payoffs.

  4. Time-Varying Fund Manager Skill,
    with Marcin Kacperczyk and Stijn Van Nieuwerburgh
    Journal of Finance, August 2014, 69(4), p.1455-1484.
    Download Paper | MS Quant Conference slides
    Using data on fund managers' holdings and returns, we find evidence that managers' stock-picking and market-timing skills change over the business cycle.

  5. Leadership, Coordination and Mission-Driven Management,
    with Patrick Bolton and Markus Brunnermeier
    Review of Economic Studies, April 2013, v.80(2), p.512-537.
    Download Paper | Abstract (html) | Technical Appendix | Slides
    Leaders face a time-inconsistency problem: They want to commit so that their followers will be coordinated and act as a team. But ex-post, they want to adapt to a changing environment. In such a setting, overconfident leaders can achieve better outcomes.
    Awarded the 2008 JP Morgan Prize for the best paper at the Utah Winter Finance Conference

  6. Information Choice in Macroeconomics and Finance
    Princeton University Press, 2011
    Book website | Buy on Amazon | Slides from Econometric Society lecture, 2009

  7. Nature or Nurture? Learning and the Geography of Female Labor Force Participation, with Alessandra Fogli
    Econometrica, July 2011, v.79(4), p.1103-1138.
    Download Paper | Abstract (html) | Supplementary Appendix | BibTeX Citation | Slides
    The increase in female labor force participation and its geographic pattern was driven partly by the diffusion of information about the effects of maternal employment on childhood development.
    A non-technical summary in The Region magazine

  8. Information Acquisition and Under-Diversification,
    with Stijn Van Nieuwerburgh
    Review of Economic Studies, April 2010, v. 77(2), p.779-805.
    Download Paper | Abstract (html) | Technical Appendix | BibTeX Citation
    Before investors solve a standard n-asset portfolio problem, they choose what payoff-relevant information to acquire. We explore various preferences and learning technologies and show the investment patterns that result from each.

  9. Income Dispersion and Counter-Cyclical Markups, with Chris Edmond
    Journal of Monetary Economics, September 2009, v. 56(6), p.791-804.
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    Counter-cyclical income dispersion can account quantitatively for the counter-cyclicality of markups in a simple, neoclassical business cycle model. This explanation is consistent with many cross-sectional and long-run facts.

  10. Ratings Shopping and Asset Complexity: A Theory of Ratings Inflation, with Vasiliki Skreta
    Journal of Monetary Economics, July 2009, v.56(5), p.678-695.
    Download Paper | Abstract (html) | BibTeX Citation | Slides
    The more complex assets issued in the mid-2000's were harder to rate accurately. Noisier ratings gave asset issuers an incentive to shop around for the best rating. This could explain the emergence of ratings bias.
    Awarded Glucksman Institute Research Prize - 3rd place

  11. Information Immobility and the Home Bias Puzzle,
    with Stijn Van Nieuwerburgh
    Journal of Finance, June 2009, v. 64(3), p.1187-1215
    Download Paper | Abstract (html) | Technical Appendix | BibTeX Citation
    Investors profit most from information that is very different from what other investors know. Therefore, if a home investor starts out knowing more than foreigners do about the future payoffs of home assets, their optimal research strategy is to learn more about home assets, and buy more home assets on average.
    Awarded Glucksman Institute Research Prize - 1st place
    Awarded best paper prize in investments by Financial Management Association

  12. Knowing What Others Know: Coordination Motives in Information Acquisition, with Christian Hellwig
    Review of Economic Studies, 2009, v.76, pp.223-251
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    When agents choose information to acquire before playing a strategic game, information choices inherit the strategic motives in actions. Specifically, in price-setting models with information choice, complementarity in price-setting makes information acquisition a complement. This helps delay price adjustment but can generate multiple equilibria.

  13. Learning About Reform: Time-Varying Support for Structural Adjustment
    International Review of Economics and Finance, March 2009, v.19(2), p.192-206.
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    A reform that causes sectoral reallocation produces temporary unemployment. As workers are gradually re-employed, they learn about the costs and benefits of reform, and political support for the reform changes.

  14. Aggregate Shocks or Aggregate Information? Costly Information and Business Cycle Comovement, with Justin Wolfers
    Journal of Monetary Economics, v. 54(S), Sept 2007, pp.37-55
    Download Paper | Abstract (html) | Technical Appendix | BibTeX Citation | Slides
    Because of the high fixed costs of information gathering and the low cost of replication, many firms buy cheap aggregate information instead of expensive sector -specific information. As a result, production decisions overweight aggregate shocks and covary more than multi-sector models predict.

  15. Information Markets and the Comovement of Asset Prices
    Review of Economic Studies, July 2006, v.73, p.823-845.
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    When market participants buy information about the future value of an asset from an information market, asset prices and returns covary more than standard pricing models predict.

  16. Media Frenzies in Markets for Financial Information
    American Economic Review, June 2006, v.96(3), p.577-601.
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    In frenzies, market participants appear to coordinate - they buy the same assets at the same time. Coordination motives in information acquisition generate investment patterns that mimic coordinated investment.

  17. Learning Asymmetries in Real Business Cycles,
    with Stijn Van Nieuwerburgh
    Journal of Monetary Economics, May 2006, v.53(4), p.753-772.
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    More economic activity generates higher-precision information about productivity, which makes business cycle downturns sharper than recoveries. The calibrated model explains the extent of business cycle asymmetry.

  18. Slow Boom, Sudden Crash
    Journal of Economic Theory October 2005, v.124(2), p.230-257.
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    The productivity of an investment can only be observed if the investment is undertaken. In high investment periods, more signals speed up learning and hasten crashes, relative to booms.

Non-Refereed Publications

  1. Comment: Funding Quantitative Easing to Target Inflation
    Proceedings of Economic Policy Symposium, Jackson Hole, Federal Reserve Bank of Kansas City,  2016.
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    If monetary policy transmission is stymied by fear of a tail event, what policy tools are available?

  2. Inside Information and the Own Company Stock Puzzle,
    with Stijn Van Nieuwerburgh
    Journal of the European Economic Association, P&P, May 2006, v.4(2-3), p.623-633.
    Download Paper (with Appendix) | Abstract (html) | BibTeX Citation
    The "Information Immobility" paper raises a question: Aren't foreign assets a valuable hedge against labor income risk? In this extension, labor income is a source of risk, but also a source of comparative information advantage in trading home assets.

  3. Comment on: "Uncertainty, Policy Ineffectiveness, and Long Stagnation of the Macroeconomy"
    Japan and the World Economy, August 2006, v.18(3), p.273-277.
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  4. Economists' Perspectives on Leadership,
    with Patrick Bolton and Markus Brunnermeier
    in Handbook of Leadership Theory and Practice, ed. Nohria and Khurana, Harvard Business School Press, 2010.
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  5. Did Asset Complexity Trigger Ratings Bias?, with Vasiliki Skreta
    forthcoming in Understanding Our Financial Crisis, John Wiley & Sons, 2010.
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  6. Information Choice Technologies, with Christian Hellwig and Sebastian Kohls
    American Economic Review P&P, May 2012, v.102(3), p.35-40.
    Download Paper | Supplementary Appendix


Professor of Economics
NYU Stern School of Business

The Aggregate Information Economy:
A research overview (2017)

My SSRN page