Working Papers

"A problem of zeros: The misbehavior of simple bid-ask spread estimators" (with Scott H. Irwin)

  • Under Revision

  • New draft coming soon!

Abstract: We show that widely used bid-ask spread estimators based on high, low, and closing prices are inadequate proxies when markets are very liquid. For a given volatility level and maintaining all model assumptions, we demonstrate how smaller true spreads induce these measures to yield negative estimates more often and positive estimates with larger upward bias. Using a simple framework, we establish how the frequency of negative spreads identifies the bias empirically. Effective spreads in many modern markets result in poor performance of the high-low and close-high-low estimators, which cannot be ameliorated with any adjustment proposed in the literature.

"International student migration and local housing markets" (with Tatiana Mocanu)

Abstract: We study the impact of the 2005-2015 international student boom on local housing markets. By constructing a sample of American college towns characterizing rarely studied local markets, we show that international students exogenously sustained demand for rentals and residential investment even during the housing bust. Using an instrument based on the historical distribution of foreign students across college towns, we find that international students increased rents by 1% and home prices by 1.6% relative to the housing boom peak. An analysis exploiting within-city dynamics reveals that neighborhoods near campus absorbed international inflows by replacing single-family homes with apartment rentals.

"Electronic trading and traders"

How did trading automation impact the finance industry? I leverage the high degree of financial regulation in the US to construct a linked employer-employee panel of traders, analysts, and brokerage firms and analyze the consequences of electronic trading on employment, skills, and performance. There are two parts to my analysis. First, I show how brokerage firms and professionals have evolved over time and space by assembling a dataset of all registered US broker-dealers. These data combine millions of publicly available individual records from FINRA, NFA, SEC and other sources which I homogenize and link to education variables and a variety of local characteristics. The resulting longitudinal data provide a unique characterization of over 1.2 million broker-dealers since 1970, with detailed information on workers’ employment history, litigation, years of experience, professional licenses and firms’ financial and operating condition and leverage. In the second part of the paper, exploiting regulatory changes that fostered speed-driven competition and local variation in IT use, I show how electronic markets affected the skill level and licensing of workers in less tech-intensive occupations within finance, and the entry and financial outcomes of trading firms.


Work in Progress

"Speculating on housing quality" (with Tatiana Mocanu)

We depart from a purely extrapolative motive for housing investing and approach short-term real estate holding as an exchange option.

"The 𝜅 of liquidity costs"

"Real estate investing and the rental market in college towns" (with Tatiana Mocanu)

"Eight facts about the last twenty years of market microstructure" (with Geraldo Costa Jr.)