Martin Schneider
Stanford
University
Department
of Economics
579
Jane Stanford Way
Stanford,
CA 94305-6072
(650)
721 6320
Recent Papers
Uncertainty and change: survey evidence of firms' subjective beliefs (with Bachmann, Carstensen and Lautenbacher) November 2020
Learning about housing cost: survey evidence from the German house price boom (with Kindermann, LeBlanc and Piazzesi) September 2020
Uncertainty is more than risk: survey evidence on Knightian and Bayesian firms (with Bachmann, Carstensen and Lautenbacher) June 2020
Credit lines, bank deposits or CBDC? Competition and efficiency in modern payment systems (with Piazzesi) March 2020
Inflation and the price of real
assets (with Leombroni, Piazzesi and Rogers) January 2020,
Moving to fluidity: regional growth and labor market
churn (with Hoffmann and Piazzesi) June 2020
Money and Banking in a New
Keynesian Model (with Piazzesi and Rogers) October 2019
Payments, Credit and
Asset Prices (with Piazzesi) November 2018
Banks’ Risk Exposures (with Begenau and Piazzesi) under revision for Econometrica
Trend and Cycle in Bond
Premia (with Piazzesi and Salomao)
Research
by topic
Ambiguity in macro & finance
Credit & money
Interest rate & credit risk
Housing
Learning in markets
Ambiguity
in macro & finance
Recursive
multiple priors, with Larry
Epstein
Journal of Economic Theory, 113(1), 32-50 (2003)
Axiomatizes dynamically consistent model of intertemporal decision making under
ambiguity. Shows how to update sets of priors.
Learning
under ambiguity, with Larry Epstein
Review of Economic Studies, 74((4), 1275-1303 (2007)
Tractable model of learning under ambiguity from iid signals. Shows that
ambiguity may but need not vanish in long run. Quantitative application
to portfolio choice with learning about mean returns illustrates
slow convergence & 1st order effects of parameter uncertainty.
Ambiguity,
information quality and asset pricing, with Larry Epstein
Journal of Finance, 63(1), 197-228 (2008)
Learning from signals with ambiguous precision induces asymmetric response to
news: good news discounted, bad news taken seriously. Asset pricing model
delivers negative skewness and premia for low (idiosyncractic) information
quality. Quantitative application to pricing after 9/11.
Ambiguity and
asset markets, with Larry Epstein
Annual Reviews of Financial Economics 2, 315-34 (2010)
Surveys models of ambiguity aversion and their applications in finance
Ambiguous
Business Cycles, with Cosmin
Ilut,
American Economic Review 104: 2368-2399 (2014)
Proposes a class of business cycle models with uncertainty shocks
that can be analyzed by standard linear methods. In estimated
medium scale New Keynesian model, ambiguity shocks play
important role by generating comovement of major aggregates
Uncertainty
shocks, asset supply and pricing over the business cycle with Francesco Bianchi & Cosmin Ilut,
Review of Economic Studies 85 (2), pp. 810–854, (2018)
Business
cycle model with corporate sector payout and capital structure choice. Firms
react to time variation in (measured) risk premia. Risk premia are driven
by ambiguity. Stochastic volatility affects perceived ambiguity
and thereby has 1st order effects.
Slow to hire, quick to
fire: employment dynamics with asymmetric responses to news, with Cosmin Ilut & Matthias Kehrig,
Journal of Political Economy, 126(5), pages 2011-2071, (2018)
Cross sectional dispersion of employment growth ("micro
volatility") and conditional volatility of aggregate employment growth
("macro volatility") are countercyclical because firms respond more
strongly to bad news than to good news. Micro data on manufacturing
establishments further show negative skewness in time series and cross section,
and asymmetric response to TFP shocks, both consistent with the mechanism.
Credit & money
Balance
Sheet Effects, Bailout Guarantees, and Financial Crises, with Aaron Tornell
Review of Economic Studies 2004, 71(3), 883-913
If borrowers cannot commit to repay, systemic bailout guarantees not only
encourage (coordinated) risk taking but also alleviate underinvestment.
Explains why emerging market lending booms see strong nontradable sector growth
financed by foreign currency debt and eventually become vulnerable to
self-fulfilling "twin crises" (widespread defaults & real
devaluation).
Aggregate
implications of wealth redistribution: the case of inflation, with Matthias Doepke
Journal of the European Economic Association, 4(2-3), 493-502 (2006)
OLG model where zero sum redistribution shock has persistent aggregate effects.
Motivated by inflation episode, shock takes from old retired agents with high
propensity to consume out of wealth and gives to young workers with low
propensity to consume. Asymmetric responses decrease aggregate labor supply and
increase aggregate savings, and are propagated slowly through changes in wealth
distribution.
Inflation
and the Redistribution of Nominal Wealth, with Matthias Doepke
Journal of Political Economy, 114(6), 1069-97 (2006)
Measures the size and duration of nominal positions for broad sectors of the US
economy as well as households by age and wealth. Shows that an inflation
episode entails sizeable redistribution from rich, old households and
foreigners towards young middle class households and the government sector. A
more gradual episode strengthens the effect as it protects short term nominal
assets of the middle class.
Inflation
as a redistribution shocks: effects on aggregates and welfare, with Matthias Doepke
Quantifies the aggregate and welfare effects of an inflation episode in the US
economy. Inflation would benefit a broad coalition of households provided that
gains from the revaluation of government debt are used to increase retirement
benefits of the less well-off.
Money
as a unit of account, with Matthias Doepke
Econometrica 85 (5), pp. 1537-1574 (2017)
Derives conditions for dominant unit of account in optimal system
of contracts. Assumes cost of writing contingent contracts and gains of trade
along credit chains formed by random matching. Common unit of account helps
avoid costly mismatch of income and expenditure along chains and allows
formation of longer chains.
Payments,
credit and asset prices, with Monika
Piazzesi; Simple monetary economy in which payments occur in two layers:
endusers (households and institutional investors) use inside money to pay for
goods and securities, whereas banks provide inside money and use outside money
(reserves) to handle payment instructions. Works out the determination of asset
prices & inflation to show how shocks to security payoffs affect inflation
and monetary policy affects asset prices. Monetary policy can no longer be
summarized by the nominal interest rate alone, as it affects both the return on
money and the mix of securities available to banks to back inside money.
The Short Rate Disconnect
in a Monetary Economy with Monika Piazzesi and Moritz Lenel
Forthcoming Journal of Monetary Economics
Housing
Housing,
consumption and asset pricing, with Monika Piazzesi and Selale Tuzel
Journal of Financial Economics 83, 531-569 (2007)
Representative agent model with two trees (housing, equity) and
nonseparable utility over fruit (housing services, other consumption).
Composition risk of consumption basket is priced and changes over time.
Share of housing in total consumption predicts excess returns on equity.
Inflation illusion, credit and asset prices,
with Monika Piazzesi
in
Asset Pricing and Monetary Policy, J.Y. Campbell (ed.), Chicago IL,
Chicago University Press, pp. 147-181 (2007)
Whenever borrowers and lenders disagree about real interest rates,
there are gains from trade, so credit and collateral values increase. Money
illusion leads to more disagreement when nominal rates are unusually
high or low, predicting housing booms in 1970s as well as 2000s.
Momentum
traders in the housing market: survey evidence and a search model
with Monika Piazzesi
American Economic Review P&P 99(2) 493-502 (2009)
Cluster analysis of Michigan survey expectations shows increase of small
(20% max) cluster with extrapolative expectations in
2006-7. In search model of housing market calibrated to low
turnover and large transaction costs, small inflow of exuberant traders is
enough to move prices
The Housing
Market(s) of San Diego, with Tim
Landvoigt and Monika
Piazzesi,
American
Economic Review 105(4): 1371-1407
Quantitative study of assignment model for San Diego County housing market boom
2000-5. Capital gains much higher for low quality housing. Cheap
credit is key; composition of housing supply also matters.
Housing
assignment with restrictions: theory and evidence from Stanford campus
(with Tim Landvoigt and Martin Schneider)
American Economic Review P&P 2014, pp. 67-72.
Pricing of indivisible houses when a subset of eligible investors has exclusive
access to houses in a restricted area. House prices reflect the relative shapes
of the distributions of quality (restricted vs other) and buyer characteristics
(eligible vs other)
Inflation and the
Price of Real Assets, with Monika
Piazzesi
Overlapping generations model with unsinsurable nominal risk and household
choice of equity, housing & bonds. Changes in demographics and
inflation expectations can explain large share of movements in
household net worth and negative comovement of equity & house price in
postwar US
Housing
and Macroeconomics, with Monika Piazzesi
Our
chapter for the new Handbook of Macroeconomics edited
by John Taylor and Harald Uhlig, July 2016
Segmented Housing
Search (with Monika Piazzesi and Johannes
Stroebel, forthcoming in the AER)
Divides SF Bay Area into housing market segments, starting from new data set on
buyers' internet searches. Documents substantial heterogeneity in market
activity and searcher clienteles across segments. Search model with mutliple
segments infers role of moving shocks and buyer preferences.
Learning in markets
Strategic
Experimentation and Disruptive Technological Change
Review
of Economic Dynamics
2008, 11(2) 386-412.
Dynamic investment game with learning between incumbent and startup who
operates new technology of unknown potential. Changes in market power often
preceded by subpar early performance of new technology: incumbent then does not
switch technologies and later gambles for resurrection by sticking with old
technology.
International
Equity Flows and Returns: A Quantitative Equilibrium Approach, with Rui Albuquerque and Greg Bauer
Review
of Economic Studies
2007, 74/1: 1-30.
Quantitative model of equity trading with heterogeneous investors and private
information applied to G7 equity markets. Accounts for volume, gross and
net trades between US investors and locals as well as the correlation of US
investors' trades and returns. Within country investor heterogenity is much
more important than cross country heterogeneity.
Global Private
Information in International Equity Markets, with Rui Albuquerque and Greg Bauer
Journal
of Financial Economics 2009, 94 (1),
18-46.
Documents "global return chasing": US investors' net equity purchases
comove with returns on many countries simultaneously. Model of trading on
"global" private information jointly accounts for global return
chasing, equity home bias and the mixed performance of foreign investors in
local markets.
Learning
from prices implies makes investors with higher initial exposure to a risk
factor more optimistic about that risk factor. Increase in exposure by an
unknown fraction of market participants does not lead to sharing of exposure,
but instead to less trade, lower prices and higher risk premia.