Working Papers:
Pulling the the Plug: Retail Traders and Social Media
Abstract:
This paper uses days on which social media platform connectivity is exogenously interrupted to study social media’s impact on retail trading. It provides evidence consistent with social media platforms spreading fanatical optimism rather than rational beliefs. On “outage” days, social media-discussed stocks experience an increase in retail trading volume concentrated in selling during the first 2 hours of the outage. Social media-discussed stocks experience a price decline that reverses over the next day following the outage. These results can be explained by a theoretical model of fanatical optimism and are robust to a battery of alternative explanations. The paper’s findings highlight the important role of social media on retail traders’ belief formation and its stock market consequences.
House of Stolen Cards: Credit Outcomes after Lost/Stolen Credit Cards
with Divij Kohli
(SSRN)
Abstract:
Credit card frauds are one of the most prevalent forms of identity theft. These frauds pose a unique problem to the banks. Under the Fair Credit Billing Act (1974), banks are generally liable for fraudulent transactions, not the consumer. Banks want consumers to spend to generate transaction fees, but also want to minimize their liability to fraud. Research on these frauds has been limited due to data constraints. Exploiting a quirk of credit card reporting, we are able to observe these fraudulent cards in credit bureau data. We then document that banks did restrict credit to individuals exposed to fraud; stopping the increasing trend in their credit. We then examine the impact of a government initiative to widely roll out chip cards in the US market. Following increased payment security in the form of the chip-enabled cards, banks no longer restrict fraud exposed individuals’ credit. Prior fraud exposed cohorts also experience a jump in their credit limits when chip cards are rolled out. These results are consistent with payment security lessening fraud risk to banks and document the importance of payment security in consumer credit markets.
Works in Progress:
The Value of Truth in Social Media: Retail Traders and Reddit Ban Bets
with Corbin Fox
The Other Half: Monetary Policy Transmission for Households without Mortgages
with Yucheng Zhou and Divij Kohli