Working Papers

• Lazy Dividends (July 2021), with James Weston.
• Firms whose dividends cluster amounts ending in "5" have lower risk-adjusted returns and lower operating performance than firms that exhibit no clustering. We interpret this clustering as a signal that the firm's managers exert lower effort than otherwise comparable firms.

• A Surrebuttal: There Are No Anti-Competitive Effects of Common Ownership in the Airline Industry (December 2022), with Kristopher Gerardi and Carola Schenone.
• We show that the alternative placebo developed in Azar, Schmalz & Tecu (2022) (AST2022) does not mute time-series variation in market shares as well as the one used in Dennis, Geradri & Schenone (2022) (DGS2022) and that the conclusions in DGS2022 still hold in light of the AST2022 critique.

Published Papers

• Common Ownership Does Not Have Anti-Competitive Effects in the Airline Industry with Kristopher Gerardi and Carola Schenone. Journal of Finance, Volume 77, Number 4, October 2022, pp. 2765-2798.
• The positive relationship between product market prices and common ownership of airlines is generated by variation in airline market shares rather than ownership. Furthermore, this positive relationship also disappears when plausible assumptions about bankruptcy & control rights are used.
• Awards: European Finance Association 2018 - Best Conference Paper
• Media:
  • Harvard Law School Forum on Corporate Governance, "Revisiting the Effect of Common Ownership on Pricing in the Airline Industry" (November 7, 2022)
  • Financial Times, "There is no need to curb common shareholding" (March 31, 2019)
  • Cato Institute, "Calm Down about Common Ownership" (Fall 2018)
  • Bloomberg, "Should index funds be illegal?" (November 21, 2017)
  • Economist, "Criticism of index-tracking funds is ill-directed" (November 14, 2017)
• Disclosure Statement: No authors on this paper have received financial support or compensation from any interested party.

• Does Trading Anonymously Enhance Liquidity?, with Patrik Sandås, Journal of Financial and Quantitative Analysis, Volume 55, Number 7, November 2020, pp. 2372-2396.
• Yes, it does. Compared with a control group, stocks that switch to trading anonymously show improved liquidity. One-year later, the stocks that were trading anonymously switch back to trading transparently and their liquidity deteriorates.

• The Role Of "Prominent Numbers" In Open Numerical Judgment: Strained Decision Makers Choose From A Limited Set Of Accessible Numbers, with Benjamin Converse, Organizational Behavior and Human Decision Processes, Volume 147, July 2018, pp. 94-107.
• We use both intraday stock trade data (TAQ) and experiments to show that decisions under uncertainty cluster on "Prominent Numbers" which are those beginning with 1, 2 and 5 (such as 100, 200 and 500). Prominent Number clustering increases when the decision maker is rushed, is under high cognitive load, or faces a wider range of choices.
• Media: UVA Magazine (Summer 2018)
• Supplemental Online Materials

• Microstructural Biases in Empirical Tests of Option Pricing Models, with Stewart Mayhew, Review of Derivatives Research, Volume 12, October 2009, pp. 169-191.
• Microstructural frictions can introduce bias in option pricing tests, even in liquid markets and especially for low-priced stocks.

• A Model for Valuing Multiple Employee Stock Options Issued by the Same Company, with Dick Rendleman, Journal of Derivatives, Volume 16, Fall 2008, pp. 44-69.
• Treating employee stock options as being independent from each other results in under-valuation.

• Stock Returns, Implied Volatility Innovations, and the Asymmetric Volatility Phenomenon, with Stewart Mayhew and Chris Stivers, Journal of Financial and Quantitative Analysis, Volume 41, June 2006, pp. 381-406.
• Asymmetric volatility, the fact volatility is higher following negative vs. positive returns, is primarily due to systematic market-wide factors rather than aggregated firm-level effects.

• Stock Splits And Liquidity: The Case Of The Nasdaq - 100 Index Tracking Stock, The Financial Review, Volume 38, August 2003, pp. 415-433.
• Using a 2-for-1 split of the Nasdaq-100 index tracking stock, I am able to isolate signalling vs. liquidity effects of a stock split. I find that splits increase liquidity, especially for small trade sizes.

• The Effect Of Stock Splits On Liquidity And Excess Returns: Evidence From Shareholder Ownership Composition, with Deon Strickland. Journal of Financial Research, Volume 26, Fall 2003, pp. 355-370.
• After a stock split, liquidity improves most and returns are the highest for for stocks that are mostly held by retail investors. This is consistent with retail investors finding the lower post-split price more attractive compared to the higher pre-split price.

• Who Blinks In Volatile Markets, Individuals Or Institutions?, with Deon Strickland. Journal of Finance, Volume 57, Number 5, 2002, pp. 1923-1950.
• When markets are volatile, it is institutions, not individuals, who are selling when prices move lower and buying when prices move higher.
• Media:
  • Wall Street Journal, "The Pros Have to Sell Stocks Now. You Don't" (February 26, 2020)
  • New York Times, "Leaders of the Pack Mentality" (September 17, 2000)

• Risk-Neutral Skewness: Evidence From Stock Options, with Stewart Mayhew. Journal of Financial and Quantitative Analysis, Volume 37, 2002, pp. 471-493.
• Firm-specific factors seem to be more important than systematic factors in explaining the variation in the risk-neutral skew for individual firms. Specifically, risk-neutral skewness for individual stocks tends to be more negative for those firms that have large market capitalization, lower trading volume, high betas, and lower leverage.

• Optimal No-Arbitrage Bounds On S&P500 Index Options And The Volatility Smile, Journal of Futures Markets, Volume 21, 2001, pp. 1151-1179.
• The volatility smile is consistent with the Black-Scholes Merton option pricing model once transaction costs are accounted for.

• A Depth-First Search Technique For The Valuation Of American Path-Dependent Derivatives, Journal of Applied Business Research, Volume 17, Number 3, pp. 1-11, Summer 2001.
• Using a depth-first algorithm, path-dependent options such as Asian and lookback options can be priced such that the amount of memory required grows linearly, not exponentially, with the number of binomial periods.

• An LP Approach To Synthetic Option Replication With Transactions Costs And Multiple Security Selection, with Richard J. Rendleman, Jr. Advances in Futures and Options Research, Volume 8, 1995, pp. 53-84.
• Optimal option replication in the presence of transaction costs, using both static and dynamic spanning, can be formulated as a linear programming problem.

• The Effects of Rebalancing on Size And Book-To-Market Ratio Portfolio Returns, with Stephen Perfect, Karl Snow, and Kenneth Wiles. Financial Analysts Journal, May-June 1995, pp. 47-57.
• We investigate the effect of transaction costs on a portfolio that is long value stocks and short growth stocks. As rebalancing frequency increases, tracking error deciles but trading costs erode returns. We find the optimal rebalancing period is two years.