ESG Investing: How to Optimize Impact?
Augustin LANDIER, Stefano LOVO
SSRN Electronic Journal | 2020
This paper develops a general equilibrium model of a productive economy with negative externalities. Investors are not willing to accept lower returns than their best investment alternatives and entrepreneurs maximize profits. If capital markets are subject to a search friction, an ESG fund can raise assets and improve social welfare despite the selfishness of all agents. The presence of the ESG fund forces companies to partially internalize externalities. We derive the fund's optimal policy in terms of industry allocation and pollution limits imposed to portfolio companies. The fund prioritizes investments in companies where (i) the inefficiency induced by the externality is particularly acute and (ii) the capital search friction is strong. We also show that the ESG fund can take advantage of the supply-chain network: It can amplify its impact by imposing restrictions on the suppliers of the firms where it invests.
Zero-sum revision games.
Fabien GENSBITTEL, Stefano LOVO, Jerome RENAULT, Tristan TOMALA
Games and Economic Behavior | 2018
No summary available.
Belief-free price formation.
Johannes HORNER, Stefano LOVO, Tristan TOMALA
Journal of Financial Economics | 2018
We analyze security price formation in a dynamic setting in which long-lived dealers repeatedly compete for trading with potentially informed retail traders. For a class of market microstructure models, we characterize equilibria in which dealers’ dynamic pricing strategies are optimal no matter the private information each dealer may possess. In a generalized version of the Glosten and Milgrom model, these equilibria deliver price dynamics reminiscent of well-known stylized facts: price/trading-flow correlation, volatility clustering, price bubble and inventory/inter-dealer trading correlation.
A Model of Trading in the Art Market.
Stefano LOVO, Christophe SPAENJERS
American Economic Review | 2018
No summary available.
Divisional buyouts by private equity and the market for divested assets.
Ulrich HEGE, Stefano LOVO, Myron b. SLOVIN, Marie e. SUSHKA
Journal of Corporate Finance | 2018
No summary available.
Herding in Equity Crowdfunding.
Stefano LOVO, Thomas STEBRO, Manuel FERNNNDEZ SIERRA, Nir VULKAN
2017
Do equity crowdfunding investors herd? We build a model where informed and uninformed investors arrive sequentially and choose whether and how much to invest. We test the model using data of investments on a leading European equity crowdfunding platform. We show theoretically and find empirically that the size and likelihood of a pledge is affected positively by the size of the most recent pledges, and negatively by the time elapsed since the most recent pledge. The empirical analysis is inconsistent with naive herding, independent investments, or exogenously correlated investments.
No-trade in second-price auctions with entry costs and secret reserve prices.
Stefano LOVO, Christophe SPAENJERS
Economics Letters | 2017
No summary available.
No-Trade in Second-Price Auctions with Entry Costs and Secret Reserve Prices.
Stefano LOVO, Christophe SPAENJERS
SSRN Electronic Journal | 2017
No summary available.
Herding in Equity Crowdfunding.
Thomas STEBRO, Manuel FERNNNDEZ SIERRA, Stefano LOVO, Nir VULKAN
SSRN Electronic Journal | 2017
No summary available.
Markov Perfect Equilibria in Stochastic Revision Games.
Stefano LOVO, Tristan TOMALA
2015
We introduce the model of Stochastic Revision Games where a finite set of players control a state variable and receive payoffs as a function of the state at a terminal deadline. There is a Poisson clock which dictates when players are called to choose of revise their actions. This paper studies the existence of Markov perfect equilibria in those games. We give an existence proof assuming some form of correlation.
Markov Perfect Equilibria in Stochastic Revision Games.
Stefano LOVO, Tristan TOMALA
SSRN Electronic Journal | 2015
We introduce the model of Stochastic Revision Games where a finite set of players control a state variable and receive payoffs as a function of the state at a terminal deadline. There is a Poisson clock which dictates when players are called to choose of revise their actions. This paper studies the existence of Markov perfect equilibria in those games. We give an existence proof assuming some form of correlation.
Risk Attitude, Beliefs Updating, and the Information Content of Trades: An Experiment.
Jean paul DECAMPS, Stefano LOVO, Christophe BISIERE
Management Science | 2015
We conduct a series of experiments that simulate trading in financial markets. We find that the information content of the order flow varies with the strength of subjects' prior beliefs about fundamentals. The presence of intrinsic uncertainty about the asset's fundamentals reduces informational efficiency. This originates from subjects' risk attitudes and biases in the way some subjects update their beliefs. The behavior of approximately 63% of the subjects is consistent with the expected utility maximization. These subjects are either risk averse (52%) or risk loving (11%). About 22% of the subjects display non-Bayesian updating of beliefs: underconfidence emerges for weak prior beliefs, and confirmation bias occurs for strong prior beliefs. Non-Bayesian belief updating reduces market efficiency when subjects' prior beliefs are weak and increases it when the prior beliefs are strong.
A Model of Trading in Unique Durable Assets.
Stefano LOVO, Christophe SPAENJERS
2014
We present an infinite-horizon model of endogenous trading in the art auction market. Agents make purchase and sale decisions based on the relative magnitude of their private use value in each period. Our model generates endogenous cross-sectional and time-series patterns in investment outcomes. Average returns and buy-in probabilities are negatively correlated with the time between purchase and resale (attempt). Idiosyncratic risk does not converge to zero as the holding period shrinks. Prices and auction volume increase during expansions. Our model finds empirical support in auction data and has implications for selection biases in observed prices and transaction-based price indexes.
Asynchronicity and coordination in common and opposing interest games.
Riccardo CALCAGNO, Yuichiro KAMADA, Stefano LOVO, Takuo SUGAYA
Theoretical Economics | 2014
We study games endowed with a pre-play phase in which players prepare the actions that will be implemented at a predetermined deadline. In the preparation phase, each player stochastically receives opportunities to revise her actions, and the finally-revised action is taken at the deadline. In 2-player \textquotedblleft common interest" games, where there exists a best action profile for all players, this best action profile is the only equilibrium outcome of the dynamic game. In \textquotedblleft opposing interest" games, which are $2\times 2$ games with Pareto-unranked strict Nash equilibria, the equilibrium outcome of the dynamic game is generically unique and corresponds to one of the stage-game strict Nash equilibria. Which equilibrium prevails depends on the payoff structure and on the relative frequency of the arrivals of revision opportunities for each of the players.
A Model of Trading in Unique Durable Assets.
Stefano LOVO, Christophe SPAENJERS
SSRN Electronic Journal | 2014
No summary available.
Credit rating industry: A helicopter tour of stylized facts and recent theories.
Doh shin JEON, Stefano LOVO
International Journal of Industrial Organization | 2013
The recent subprime crisis and the ongoing Euro zone crisis have generated an enormous interest in the credit rating industry not only among economists but also among average citizens. As a consequence, we have seen an explosion of the economic literature on the industry. The objective of this survey is to introduce readers to the key stylized facts of the credit rating industry and to the recent theoretical economic literature on this industry.
