Andrew Metrick
Research Associate
Yale University
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U.S. and European banking institutions were hit by a wave of distress in March 2023. Policymakers on both sides of the Atlantic reacted with an array of interventions, some targeting individual institutions, others designed to shore up the banking sector as a whole. This paper contextualizes events...
We present a new database of banking-crisis interventions from the Roman Empire to the present, covering 1,946 interventions in 20 categories across 143 countries. We demonstrate that crisis-intervention patterns are significantly related to income and fiscal variables and to measures of the...
The Financial Crisis began and accelerated in short-term money markets. One such market is the multi-trillion dollar sale-and-repurchase (repo) market, where prices show strong reactions during the crisis. The academic literature and policy community remain unsettled about the role of repo runs,...
Why did the failure of Lehman Brothers make the financial crisis dramatically worse? The financial crisis was a process of a build-up of risk during the crisis prior to the Lehman failure. Market participants tried to preserve an option or exit by shortening maturities - the "flight from maturity"....
This paper surveys the role of the Federal Reserve within the financial regulatory system, with particular attention to the interaction of the Fed's role as both a supervisor and a lender-of-last-resort (LOLR). The institutional design of the Federal Reserve System was aimed at preventing banking...
We survey the literature on securitization and lay out a research program for its open questions. Securitization is the process by which loans, previously held to maturity on the balance sheets of financial intermediaries, are sold in capital markets. Securitization has grown from a small amount in...
The sale and repurchase (repo) market played a central role in the recent financial crisis. From the second quarter of 2007 to the first quarter of 2009, net repo financing provided to U.S. banks and broker-dealers fell by about $1.3 trillion - more than half of its pre-crisis total. Significant...
We document that the percentage of all U.S. assets that are "safe" has remained stable at about 33 percent since 1952. This stable ratio is a rare example of calm in a rapidly changing financial world. Over the same time period, the ratio of U.S. assets to GDP has increased by a factor of 2.5, and...
All economists should be conversant with "what happened?" during the financial crisis of 2007-2009. We select and summarize 16 documents, including academic papers and reports from regulatory and international agencies. This reading list covers the key facts and mechanisms in the build-up of risk,...
This paper analyzes the economics of the private equity fund compensation. We build a novel model to estimate the expected revenue to fund managers as a function of their investor contracts. In particular, we evaluate the present value of the fair-value test (FVT) carried interest scheme, which is...
October 18, 2011 - Article
The recent corporate scandals at several large, publicly traded firms such as Enron and WorldCom were particularly devastating for many employees of these firms, who had invested their retirement assets heavily in company stock. Such behavior is a clear violation of diversification principles - one...
October 18, 2011 - Article
More than half of all U.S. workers are covered by a pension plan through their employer, yet approximately one in five eligible workers do not participate in the plan, according to the Employee Benefit Research Institute. Furthermore, even some of those who participate may not be saving adequately...
We review the theory and evidence on venture capital (VC) and other private equity: why professional private equity exists, what private equity managers do with their portfolio companies, what returns they earn, who earns more and why, what determines the design of contracts signed between (i)...
June 17, 2010 - Chapter
March 1, 2010 - Chapter
December 1, 2009 - Article
The loss of liquidity at the firms that were the biggest players in the securitized banking system...led to the financial crisis. The financial panic of 2007-8 stemmed from a run on the repurchase or "repo"market -- the primary source of funds for the securitized banking system -- rather than a run...
When "confidence" is lost, "liquidity dries up." We investigate the meaning of "confidence" and "liquidity" in the context of the current financial crisis. The financial crisis is a manifestation of an age-old problem with private money creation, banking panics. We explain this and provide some...
The Panic of 2007-2008 was a run on the sale and repurchase market (the "repo" market), which is a very large, short-term market that provides financing for a wide range of securitization activities and financial institutions. Repo transactions are collateralized, frequently with securitized bonds....
August 8, 2005 - Chapter
Defaults can have a dramatic influence on consumer decisions. We identify an overlooked but practical alternative to defaults: requiring individuals to make an explicit choice for themselves. We study such "active decisions" in the context of 401(k) saving. We find that compelling new hires to make...
We show how to construct a ranking of U.S. undergraduate programs based on students' revealed preferences. We construct examples of national and regional rankings, using hand-collected data on 3,240 high- achieving students. Our statistical model extends models used for ranking players in...
Large blocks of stock play an important role in many studies of corporate governance and finance. Despite this important role, there is no standardized data set for these blocks, and the best available data source, Compact Disclosure, has many mistakes and biases. In this paper, we document these...
July 1, 2004 - Article
Some firms adopt dual-class structures when their original owners are reluctant to cede control... these firms are less likely to tap the capital markets, typically invest less, grow more slowly, and have lower valuations. Aligning the interests of owners and managers has been a problem ever since...
June 9, 2004 - Chapter
Economic theory predicts that an unexpected wealth windfall should increase consumption shortly after the windfall is received. We test this prediction using administrative records on over 40,000 401(k) accounts. Contrary to theory, we estimate a negative short-run marginal propensity to consume out...
Dual-class common stock allows for the separation of voting rights and cash flow rights across the different classes of equity. We construct a large sample of dual-class firms in the United States and analyze the relationships of insider's cash flow rights and voting rights with firm value,...
We study the relationship between past returns on a company's stock and the level of investment in that stock by the participants in that company's 401(k) plan. Using data on 94,191 plan participants, we analyze several different decision points: the initial fraction of savings allocated to company...
Default options have an enormous impact on household choices.' Defaults matter because opting out of a default is costly and these costs change over time, generating an option value of waiting. In addition, people have a tendency to procrastinate. We develop a theory of optimal defaults based on...
June 1, 2002 - Article
Author(s) - Andrew Metrick
A mutual-fund manager earns annualized returns of 20 percent per year for a five-year period. Over the same period, the stock market as a whole earns 10 percent per year. Was this manager smart, or just lucky? Some companies engage in a lot of merger activity. Other companies do not. A researcher...
April 1, 2002 - Article
Employers and policymakers need to recognize that there is no such thing as a neutral menu of options for a 401(k) plan but rather that how the decisions are framed will affect the choices that employees make. Enron's collapse has put company-sponsored 401(k) retirement plans under the spotlight. As...
January 1, 2002 - Chapter
We assess the effect on savings behavior of several different 401(k) plan features, including automatic enrollment, automatic cash distributions, employer matching provisions, eligibility requirements, investment options, and financial education. We also present new survey evidence on individual...
In the last several years, many employers have decided to automatically enroll their new employees in the company 401(k) plan. Using several years of administrative data from three large firms, we analyze the impact of automatic enrollment on 401(k) participation rates, savings behavior, and asset...
We assess the impact on savings behavior of several different 401(k) plan features, including automatic enrollment, automatic cash distributions, employer matching provisions, eligibility requirements, investment options, and financial education. We also present new survey evidence on individual...
December 1, 2001 - Article
A portfolio strategy based on purchasing shares in companies with the strongest investor protections and selling short those firms with the greatest management power earned an abnormal return of 8.5 percent a year. Corporate raiders. Hostile takeovers. Poison pills. Golden parachutes. Deal mania in...
Corporate-governance provisions related to takeover defenses and shareholder rights vary substantially across firms. In this paper, we use the incidence of 24 different provisions to build a 'Governance Index' for about 1,500 firms per year, and then we study the relationship between this index and...
February 1, 2001 - Article
Although the introduction of Web trading seems to increase total trading, it does not appear to increase short-term trading or last-hour trading, suggesting that the Web may not be an important catalyst for speculative trading. The growing availability of online trading technologies is believed to...
We analyze the impact of a Web-based trading channel on the trading activity in two corporate 401(k) plans. Using detailed data on about 100,000 participants, we compare trading growth in these firms to growth for a sample of firms without a Web channel. After 18 months of access, the inferred Web...
This paper proposes a Bayesian method of performance evaluation for investment managers. We begin with a flexible set of prior beliefs that can be elicited without any reference to probability distributions or their parameters. We then combine these prior beliefs with a general multi-factor model...
February 1, 1999 - Article
Large institutional investors have come to own an ever-larger percentage of the country's equities, and large institutional investors prefer to buy large-cap stocks. In the early 1980s, economists discovered that --over the long run-- small-cap stocks outperform large-cap stocks. Since then, however...
This paper estimates the profits to insiders when they trade their company's stock. We construct a rolling purchase portfolio' that holds all shares purchased by insiders over the previous year and an analogous sale portfolio' that holds all shares sold by insiders over the previous year. We then...
We analyze institutional investors' preferences for stocks and the implications that these preferences have for stock-market prices and returns. We find that -- a category including all managers with greater than $100 million under discretionary control -- have nearly doubled their share of the...
Author(s) - Andrew Metrick
This paper analyzes the equity-portfolio recommendations made by investment newsletters. The dataset spans 17 years, is free of survivor and back-fill biases, and includes the complete recommendations for 153 different newsletters. Overall, there is no significant evidence of superior stock-picking...
High-quality producers in a vertically differentiated market can reap superior profits by charging higher prices, selling greater quantities, or both. If qualities are known by consumers and production costs are constant, then having a higher quality secures the producer both higher price and higher...
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