Final Report Summary - IFFINMAR (Informational Frictions in Financial Markets)
Progress and results:
Progress on my initial plan has been good during the grant period. In the first grant period, I managed to finalize my project on Attention Allocation over the Business Cycle. The paper is now published at Econometrica, the leading journal in economics. In the second grant period, I advanced the publication process of my second paper on Investor Sophistication and Capital Income Inequality. The paper is now in a late stage review process at the Journal of Monetary Economics, which is a leading journal for macroeconomists and one of the top journals in broad economics field. In addition to my planned projects, during the entire grant period I have managed to start a number of new projects. Those were not initially planned for but were significant follow-ups to the ones I discuss above. In particular, I have written a theory paper on Market Impact and Price Informativeness and Foreign and an empirical paper on Foreign Investors and Market Efficiency. Both papers are now almost finished and ready for the initial submission to top academic journals.
Potential impact:
Overall, I think both works are high impact pieces. The published Econometrica work has been a state-of-the-art framework for many successful academic discoveries and has also started a rich academic discussion on the role of information in asset management. The unpublished work has a significant role in the current debate on the sources and causes of income inequality. To date, we understand the data more and more, but what is missing is the presence of micro-founded theoretical frameworks that could allow for policy implications. I hope the project will serve this role. I believe that both these projects have significantly enhanced my visibility in the profession.