Research
Working Papers
Institutional investors in the market for single-family housing: Where did they come from, where did they go? (SSRN)
- Finalist, Best Student Paper Award, UEA Toronto 2023
The real cost of benchmarking (with Christian Kontz)
Abstract
Since 2012 the U.S. market for single-family homes has experienced a large and unprecedented rise in rental purchases by institutional investors or ''Wall Street Landlords''. I provide new causally identified evidence on the cause of this phenomenon and its long-term effects on impacted neighborhoods. I document a large and unprecedented rise in expected excess returns to single-family rentals that explains the entry decisions of Wall Street Landlords across time and geographies, as well as their historical absence from this market. Declining long-term interest rates and tightened household borrowing constraints in the aftermath of the housing bust causally explain the rise in expected excess returns and capture over 58% of the variation in expected excess returns. The entry of Wall Street Landlords into a neighborhood has a causal positive effect on local house prices and rents that leads to a decline in housing affordability and home-ownership rates. This effect is increasing in the share of Wall Street Landlord-owned housing stock (''treatment intensity''). A stylized model with funding constrained households and an unconstrained investor generates predictions consistent with the empirical evidence.
Abstract
This paper documents a novel channel through which benchmarking of asset managers affects firm behavior. We causally show that increases in a stock's benchmarking intensity lead to a higher CAPM-β. Stocks whose benchmarking intensity increases by more than 5p.p. have 17% higher CAPM βs after 9 months. These changes in CAPM-β are not driven by changes in firm fundamentals. Using an instrumental variable design, we show that firms which experience higher CAPM-β because of higher benchmarking intensity have 5% less capital and hold 15% more cash after 5 years. The results suggest that benchmarking has important effects on firm behavior and real quantities, driven by changes in the perceived cost of capital.
Work in progress
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Resilient traders make safe assets