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Working Paper
How Markets Process Macro News: The Importance of Investor Attention
I provide evidence that investors' attention allocation plays a critical role in how financial markets incorporate macroeconomic news. Using intraday data, I document a sharp increase in the market reaction to Consumer Price Index (CPI) releases during the 2021-2023 inflation surge. Bond yields, market-implied inflation expectations, and other asset prices exhibit significantly stronger responses to CPI surprises, while reactions to other macroeconomic announcements remain largely unchanged. The joint reactions of these asset prices point to an attention-based explanation–an interpretation ...
Briefing
Assessing the Risks of Mortgage REITs
Regulators have expressed concern about the growth of a category of real estate investment trusts (REITs) that today invest primarily in mortgage-backed securities (MBS). These companies, known as mortgage REITs, or mREITs, have increased both in number and in asset size since the financial crisis, benefiting from federal guarantees and other support for MBS and from favorable regulatory treatment that allows high levels of leverage. While mREIT investors face significant risks, the level of risk that mREITs present to the financial system as a whole is unclear.
Briefing
How Risky Are Young Borrowers?
Young borrowers are conventionally considered the most prone to making financial mistakes. This has spurred efforts to limit their access to credit, particularly via credit cards. Recent research suggests, however, that young borrowers are actually among the least likely to experience a serious credit card default. One reason why people obtain credit cards early in life may be to build a strong credit history.