Essays in Empirical Financial Economics.

Summary This thesis consists of four separate chapters. In the first chapter, I use an exogenous restriction on the ability of road haulage firms to grant payment terms to their customers. I show that some firms lend to their customers at the expense of their investments, their profitability and by exposing themselves to the risk of default. In the second chapter, I show that investment funds with a long time horizon choose younger firms at a less advanced stage of development. Firms invested by funds with a longer time horizon increase their patent stock faster than those invested by funds with a shorter time horizon. The third chapter is the result of a collaboration with Ron Kaniel and David Sraer. We use detailed broker data and undertake a quantitative exploration of individual investor behavior during the 2008 financial crisis. We show that investors who look the most sophisticated in the pre-crisis period have a lower propensity to flee to risk-free assets, and a higher propensity to be liquidity providers and earn high returns during the crisis. In the fourth chapter, I explore the idea that households have limited knowledge of their portfolio's exposure to systematic risk factors, which leads them to make mistakes. This idea is applied to individual investors' decision to actively rather than passively invest in equity markets.