Christian Opp

Jules van Binsbergen and Christian Opp (Working), Real Anomalies.

Vincent Glode and Christian Opp (2016), Asymmetric Information and Intermediation Chains , American Economic Review.

Abstract: We propose a parsimonious model of bilateral trade under asymmetric information to shed light on the prevalence of intermediation chains that stand between buyers and sellers in many decentralized markets. Our model features a classic problem in economics where an agent uses his market power to inefficiently screen a privately informed counterparty.  Paradoxically, involving moderately informed intermediaries also endowed with market power can improve trade efficiency. Long intermediation chains in which each trader's information set is similar to those of his direct counterparties limit traders' incentives to post prices that reduce trade volume and jeopardize gains to trade.

Christian Opp, Marcus Matthias Opp, Milton Harris (2012), Rating Agencies in the Face of Regulation, Journal of Financial Economics.

Christian Opp (Working), Learning, Active Investors, and the Returns of Financially Distressed Firms.

Christian Opp (Working), Cycles of Innovation and Financial Propagation.

Abstract: Episodes of boombust cycles tend to occur in sectors with recent arrivals of new technologies and are often related to excessive funding by the financial sector. In this paper, I develop a dynamic general equilibrium model consistent with a role for the financial sector in propagation during such episodes. I extend a standard Schumpeterian growth model by incorporating (a) a monopolistically competitive financial sector and (b) timevarying technological conditions in real sectors. I identify two propagation channels. The first operates through financial firms’ acquisition of sectorspecific knowledge (skill channel); financial firms chase "hot sectors" and thereby amplify fluctuations. The second channel originates in an interaction between competition in the financial sector and patent races in product markets (competition channel). Financial firms’ temporary competitive advantages in access to new ventures imply market segmentation: financial firms maximize the surplus generated by the client firms they can currently attract, anticipating competing financial firms’ future screening and funding decisions. Relative to the Pareto optimum, the competition channel generates over investment in sectors with temporarily improved technological conditions; excessively high growth in these sectors comes at the cost of lower growth in the economy as a whole. The model links financial propagation to time variation in the cross section of asset prices. Exposures to aggregate risk dampen amplification effects.

Christian Opp (Working), Intertemporal Information Acquisition and Asset Market Dynamics.

Abstract: I analyze the links between intertemporal information acquisition and the dynamics of asset markets. In my model, investors are Bayesian learners that optimally choose how much to consume, how much to invest, and how much information to acquire. The model predicts that investors acquire more information in times when future capital productivity is expected to be high, the cost of capital is low, new technologies are expected to have a persistent impact on productivity, and the scalability of investments is expected to be high. My results shed light on the economic mechanisms behind various dynamic aspects of information production by the financial sector, such as the sources of variation in returns on information acquisition for investment banks or private equity funds.

Past Courses

FNCE203 ADVANCED CORP FINANCE

The objective of this course is to study the major decisionmaking areas of managerial finance and some selected topics in financial theory. The course reviews the theory and empirical evidence related to the investment and financing policies of the firm and attempts to develop decisionmaking ability in these areas. This course serves as an extension of FNCE 100 (FNCE 611). Some are as of financial management not covered in FNCE 100 are covered in FNCE 203. These may include leasing, mergers and acquisitions, corporate reorganizations, financial planning and working capital management, and some other selected topics. Other areas that are covered in FNCE 100 are covered more in depth and more rigorously in FNCE 203. These include investment decision making under uncertainty, cost of capital, capital structure, pricing of selected financial instruments and corporate liabilities, and dividend policy. During the Spring semester, Professor Opp does not allow students to take this course pass/fail.

FNCE726 ADVANCED CORP FINANCE

The objective of this course is to study the major decisionmaking areas of managerial finance and some selected topics in financial theory. The course reviews the theory and empirical evidence related to the investment and financing policies of the firm and attempts to develop decisionmaking ability in these areas. This course serves as an extension of FNCE 611. Some areas of financial management not covered in FNCE 611 are covered in FNCE 726. These may include leasing, mergers and acquisitions, corporate reorganizations, financial planning, and working capital management, and some other selected topics. Other areas that are covered in FNCE 611 are covered more in depth and more rigorously in FNCE 726. These include investment decision making under uncertainty, cost of capital, capital structure, pricing of selected financial instruments and corporate liabilities, and dividend policy.