Research
Working papers
with Francesco Franzoni, and Mariassunta Giannetti
Abstract: We suggest an equilibrium mechanism for the widely debated argument that “greedflation” has fostered widespread price hikes. We construct firm and industry-level measures of supply chain backlogs and delivery delays and provide evidence that supply chain shortages lead to a decrease in competition at the industry level. We show that “star” firms acquire market shares and increase their markups and profitability relative to the smaller firms in the industry. We also show that the large increase in supply chain backlogs during the COVID-19 pandemic can help explain about 19% of the US inflation in industries with more asymmetric firm size distribution, where supply chain shortages are more likely to benefit large firms at the expense of smaller firms. Economic magnitudes are comparable in the international sample.
Mutual Funds' Fire Sales and the Real Economy: Evidence from Hurricanes
Abstract: This paper examines how non-fundamental shocks to asset prices affect real economic activities using a natural experiment. I exploit hurricanes that hit the headquarters of mutual funds and cause exogenous outflows of $3.5 billion on average. These outflows force mutual funds to sell their holdings at fire-sale prices, leading to a temporary drop in abnormal returns for firms unrelated to the hurricane. I show that this non-fundamental price variation induces firms to reduce their investment by 1.3%. The effect on investment is permanent, not driven by financing constraints and explained by managerial market timing. These results indicate that when mutual funds outflows are unrelated to firms fundamentals, the resulting non-fundamental price variations affect firms’ real decisions.
(Conditionally accepted: Journal of Financial Markets)
with Marco Di Maggio, Francesco Franzoni, and Massimo Massa
Abstract: We study empirically whether informed traders’ reaction to the presence of short sellers affects price discovery. We find a sizeable reduction of positive information impounding before earnings announcements for stocks more exposed to exogenous variation in the threat of short selling. Consistent with strategic behavior by informed investors, we show that investors with positive views on a stock slow down their trades when short sellers are present in the same stock. Furthermore, they break up their buy trades across multiple brokers, suggesting that they wish to prevent their information from leaking. The findings suggest that short selling can deter information impounding when information is spread across several investors.