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January 09, 2019
American Finance Association Announces 2018 Recipients of The Brattle Group Prize

The Brattle Group Prizes for best papers in Corporate Finance for 2018, judged as exceptional by the associate editors of The Journal of Finance, were awarded at the 2019 American Finance Association's (AFA) Annual Meeting in Atlanta, GA, on January 4-6, 2019. The prizes, awarded annually, are funded through a grant from The Brattle Group and presented at the AFA’s annual meeting by a Brattle representative. The winners of the first prize receive $25,000 and distinguished papers each receive $10,000. All papers published in the prior year's issues of The Journal of Finance are eligible for the prizes. The Brattle Group congratulates the winners for their achievement.

First Prize Paper: Anthony A. DeFusco

"Homeowner Borrowing and Housing Collateral: New Evidence from Expiring Price Controls," The Journal of Finance, April 2018. 


I empirically analyze how changes in access to housing collateral affect homeowner borrowing behavior. To isolate the role of collateral constraints from that of wealth effects, I exploit the fully anticipated expiration of resale price controls on owner‐occupied housing in Montgomery County, Maryland. I estimate a marginal propensity to borrow out of housing collateral that ranges between $0.04 and $0.13 and is correlated with homeowners' initial leverage. Additional analysis of residential investment and ex‐post loan performance indicates that some of the extracted funds generated new expenditures. These results suggest a potentially important role for collateral constraints in driving household expenditures.

Distinguished Paper: Nicolae Gârleanu and Lasse Heje Pedersen

"Efficiently Inefficient Markets for Assets and Asset Management," The Journal of Finance, August 2018.


We consider a model where investors can invest directly or search for an asset manager, information about assets is costly, and managers charge an endogenous fee. The efficiency of asset prices is linked to the efficiency of the asset management market: if investors can find managers more easily, more money is allocated to active management, fees are lower, and asset prices are more efficient. Informed managers outperform after fees, uninformed managers underperform, while the average manager's performance depends on the number of “noise allocators.” Small investors should remain uninformed, but large and sophisticated investors benefit from searching for informed active managers since their search cost is low relative to capital. Hence, managers with larger and more sophisticated investors are expected to outperform.

Distinguished Paper: James Dow and Jungsuk Han

"The Paradox of Financial Fire Sales: The Role of Arbitrage Capital in Determining Liquidity," The Journal of Finance, February 2018.


How can fire sales for financial assets happen when the economy contains well‐capitalized but nonspecialist investors? Our explanation combines rational expectations equilibrium and “lemons” models. When specialist (informed) market participants are liquidity‐constrained, prices become less informative. This creates an adverse selection problem, decreasing the supply of high‐quality assets, and lowering valuations by nonspecialist (uninformed) investors, who become unwilling to supply capital to support the price. In normal times, arbitrage capital can “multiply” itself by making uninformed capital function as informed capital, but in a crisis, this stabilizing mechanism fails.

For a complete list of past winners, please visit The Journal of Finance Brattle Prize page

For more information on the American Finance Association, please visit their website