Industry Expertise (1)
Areas of Expertise (3)
Information Acquisition in Financial Markets
Presidential Fellowship, University of Chicago, 2009-2014
Best student award
Best student award (graduate studies), Goethe University, 2009
University of Chicago: Ph.D., Economics 2015
University of Chicago: M.A., Economics 2010
Goethe University Frankfurt: Diplom, Business Economics 2009
Alex Edmans, Sudarshan Jayaraman, Jan Schneemeier
This paper shows that real decisions depend not only on the total amount of information in prices, but the source of this information—a manager learns from prices when they contain information not possessed by him. We use the staggered enforcement of insider trading laws across 27 countries as a shock to the source of information that leaves total information unchanged: enforcement reduces (increases) managers’ (outsiders’) contribution to the stock price. Consistent with the predictions of our theoretical model, enforcement increases investment-q sensitivity, even when controlling for total price informativeness. The effect is larger in industries where learning is likely to be stronger, and in emerging countries where outsider information acquisition rises most post-enforcement. Enforcement does not increase the sensitivity of investment to cash flow, a non-price measure of investment opportunities. These findings suggest that extant measures of price efficiency should be rethought when evaluating real efficiency. More broadly, our paper provides causal evidence that managers learn from prices, by using a shock to price informativeness.
In this paper, firm managers use their disclosure policy to direct speculators' scarce attention towards their firm. More attention implies greater outside information and strengthens the feedback effect from stock prices to firm investment. The model highlights a novel trade-off associated with disclosure. While more precise public information crowds-out the value of private information, it can also signal high firm quality to the financial market. If the spread between the (unknown) quality of firms is sufficiently high, there is a separating equilibrium with partial disclosure by the high-quality firm and no disclosure by the low-quality firm. Otherwise, there is a (more efficient) pooling equilibrium without disclosure. Surprisingly, an increase in the managers' short-run incentives and disclosure caps lead to more efficient investment decisions.
I theoretically investigate how the informational content of stock prices is affected by the structure of firms' capital investment decisions. The efficiency of stock prices is determined by the weight firms attach to private information and by the extent to which investment is predictable. Both factors attract informed trading and lead to more revealing prices. The model predicts that i) individual stock prices should be more informative than aggregate prices, ii) firms with better managers should have more informative prices, iii) a higher degree of stock-based compensation reduces price efficiency and iv) more heterogenous markets are less price efficient.
Jan Schneemeier, David Schreindorfer
We study the role of time-varying stock return volatility in a consumption and portfolio choice problem for a life-cycle investor facing short-selling and borrowing constraints. Faced with a benchmark investment strategy that conditions on age and wealth only, we find that an investor is willing to pay a fee of up to 1%-1.5% of total life time consumption in order to optimally condition on volatility. Tilts in the optimal asset allocation in response to volatility shocks are considerably more pronounced than tilts in response to wealth shocks, and almost as important as life-cycle effects. Lastly, we find that the correlation between volatility and permanent labor income shocks may explain the low equity share of young households in the data.