NBER Working Papers and Publications
|December 2016||Fracking, Drilling, and Asset Pricing: Estimating the Economic Benefits of the Shale Revolution|
with Robert Ready, Nikolai Roussanov: w22914
We quantify the effect of a significant technological innovation, shale oil development, on asset prices. Using stock returns on major news announcement days allows us to link aggregate stock price fluctuations to shale technology innovations. We exploit cross-sectional variation in industry portfolio returns on days of major shale oil-related news announcements to construct a shale mimicking portfolio. This portfolio can explain a significant amount of variation in aggregate stock market returns, but only during the time period of shale oil development, which begins in 2012. Our estimates imply that $3.5 trillion of the increase in aggregate U.S. equity market capitalization since 2012 can be explained by this mimicking portfolio. Similar portfolios based on major monetary policy announce...
|December 2015||Voter Preferences and Political Change: Evidence from Shale Booms|
with Viktar Fedaseyeu, Philip E. Strahan: w21789
Local interests change sharply after the energy booms that began in 2003, when hydraulic fracturing spurred extraction of formerly uneconomic oil and gas reserves. Support for conservative interests rises and Republican political candidates gain votes after booms, leading to a near doubling in the probability of a change in incumbency. All of this change occurs at the expense of Democrats. Voting records of U.S. House members from boom districts become sharply more conservative across a wide range of issues, including issues unrelated to energy policy. At the level of the individual, marginal candidates skew their voting behavior somewhat toward more conservative causes, but generally not enough to maintain power. Thus, even when the stakes are high and politicians risk losing power, ...
|September 2013||Exporting Liquidity: Branch Banking and Financial Integration|
with Elena Loutskina, Philip E. Strahan: w19403
Using exogenous deposit windfalls from oil and natural gas shale discoveries, we demonstrate that bank branch networks help integrate U.S. lending markets. We find that banks exposed to shale booms increase their mortgage lending in non-boom counties by 0.93% per 1% increase in deposits. This effect is present only in markets where banks have branches and is strongest for mortgages that are hard to securitize. Our findings suggest that contracting frictions limit the ability of arm's length finance to integrate credit markets fully. Branch networks continue to play an important role in financial integration, despite the development of securitization markets.
Published: "Exporting Liquidity: Branch Banking and Financial Integration," Journal of Finance, Volume 71, Issue 3, June 2016, Pages: 1159–1184.