Job Market Paper
Liquidity and Longevity, Bequest Adjustments Through the Life Settlement Market Access to wealth is vital for our rapidly aging population. This paper studies the financial decisions of individuals nearing their end of life and examines if access to such wealth can enable longevity. I use transaction-level data from the secondary market for life insurance policies, also known as the life settlement market. In this quasi-experimental evaluation of bequest adjustments, I show that the ability to access wealth through the life settlement market leads to a significant increase in longevity. This effect is stronger for people in fragile health, with severe disease diagnoses, and those with limited access to hospitals. The regional supply of primary healthcare, and the social-economic background of the policyholder does not seem to explain the longevity effect. Taken together, these results appear to be related to the high-cost of care for individuals and the importance of financial liquidity for people nearing their end of life.
Skin or Skim? Inside Investment and Hedge Fund Performance with Arpit Gupta Using a comprehensive and survivor-bias free dataset of U.S. hedge funds, we document the role that inside investment plays in managerial compensation and fund performance. We find that funds with greater investment by insiders outperform funds with less "skin in the game" on a factor-adjusted basis; exhibit greater return persistence; and feature lower fund flow-performance sensitivities. These results suggest that managers earn outsize rents by operating trading strategies further from their capacity constraints when managing their own money. Our findings have implications for optimal portfolio allocations of institutional investors and models of delegated asset management. Media and Coverage: Bloomberg View, Institutional Investor, ValueWalk, Reuters, and Harvard Law School Forum
The Impossibility of Communication Between Investors All investors face the same decision problem: invest for themselves or delegate their portfolio problem to an outside investor. Typically, asset managers will communicate their superior knowledge to these potential investors to attract capital. However, such communication by asset managers comes with the risk of revealing the particulars of their valuable information to potential investors, without the explicit commitment of delegation rights of capital. This risk in communication may lead to a breakdown in trade and sub-optimal information aggregation in financial markets. This paper explores this invest-delegate tradeoff through developing an entropy-based model of information choice, where investors can communicate their 'informativeness' rather than the particulars of their information when solving their portfolio decision problem. Linking information to trade, this paper endogenizes the decision to be a principal or an agent in a highly generalized setting to shed light on if, and how, communication can help investors resolve this tradeoff.
Works in Progress
Inside Ownership and Returns in Private Equity with Arpit Gupta and Sabrina Howell
Human Capital Considerations for Optimal Lifecycle Consumption with Byeong-Je An