Lawrence Schmidt

Lawrence D. W. Schmidt is the Victor J. Menezes (1972) Career Development Professor of Finance. His research is at the intersection of finance and macroeconomics.

Schmidt's research combines theory and applied econometric approaches to offer a richer picture of risks faced by financial market participants—households, institutional investors, and financial intermediaries—and sheds new light on underlying economic mechanisms linking financial markets with the real economy. His research is particularly interested in understanding factors which are associated with the risk and return to investments in human capital (that is, the present discounted value of labor income), and how frictions that limit risk-sharing in the labor market affect asset prices and macroeconomic dynamics. In addition to studying the risk factors and behavior of households, his work also studied the behavior of institutional investors during financial crises. His research has appeared in the American Economic Review, the Journal of Applied Econometrics, and the Journal of Mathematical Economics, and his research has won multiple awards, including the 2015 AQR Top Finance Graduate Award.

Schmidt holds a BA from the University of California, Santa Barbara, and PhD and MA degrees in Economics from the University of California, San Diego. Prior to joining the faculty at MIT Sloan, Schmidt was an Assistant Professor in the Kenneth C. Griffin Department of Economics at the University of Chicago and a senior consultant at Navigant Consulting, Inc.

Current Research Focus: Schmidt’s research seeks to offer a richer picture of risks faced by financial market participants and to shed new light on economic mechanisms linking financial markets with the real economy. Two recent areas of interest are (1) understanding factors associated with the risk and return to investments in human capital, particularly how frictions that limit risk sharing in labor and capital markets affect asset prices and macroeconomic dynamics, and (2) understanding investment behavior of institutional investors in delegated asset management settings.

Publications

• "Climbing and Falling Off the Ladder: Asset Pricing Implications of Labor Market Event Risk."
  Schmidt, Lawrence D. W., MIT Sloan Working Paper 5500-16. Cambridge, MA: MIT Sloan School of Management, March 2016.

• "Runs on Money Market Mutual Funds."
  Schmidt, Lawrence D. W., Allan Timmermann, and Russ Wermers. American Economic Review Vol. 106, No. 9 (2016): 2625-2657. Author Disclosures.

• "Changing Income Risk across the US Skill Distribution: Evidence from a Generalized Kalman Filter."
  Braxton, J. Carter, Kyle Herkenhoff, Jonathan Rothbaum, and Lawrence D.W. Schmidt, MIT Sloan Working Paper 6547-21. Cambridge, MA: MIT Sloan School of Management, July 2021.

• "Working Remotely and the Supply-Side Impact of COVID-19."
  Papanikolaou, Dimitris and Lawrence D.W. Schmidt, MIT Sloan Working Paper 6115-20. Cambridge, MA: MIT Sloan School of Management, August 2021.

• "Investor Information Acquisition and Money Market Fund Risk Rebalancing during the 2011–2012 Eurozone Crisis."
  Gallagher, Emily A. Lawrence D W Schmidt, Allan Timmermann, Russ Wermers. The Review of Financial Studies Vol. 33, No. 4 (2020): 1445-1483.

• "Real Risk or Paper Risk: Mis-measured Factors, Granular Measurement Errors, and Empirical Asset Pricing Tests."
  Byun, Sung Je and Lawrence D.W. Schmidt, MIT Sloan Working Paper 5712-19. Cambridge, MA: MIT Sloan School of Management, February 2020.

• "Selling Fast and Buying Slow: Heuristics and Trading Performance of Institutional Investors."
  Akepanidtaworn, Klakow, Rick Di Mascio, Alex Imas, and Lawrence D.W. Schmidt, MIT Sloan Working Paper 5713-18. Cambridge, MA: MIT Sloan School of Management, July 2021.

• "Bad News and Robust Comparative Statics for the Elasticity of Intertemporal Substitution."
  Schmidt, Lawrence D.W. and Alexis Akira Toda, MIT Sloan Working Paper 5715-18. Cambridge, MA: MIT Sloan School of Management, October 2019.

• "An Empirical Test of Pricing Kernel Monotonicity."
  Beare, Brendan K., and Lawrence D. W. Schmidt. Journal of Applied Econometrics Vol. 31, No. 2 (2016): 338-356. Supplement.

• "On the Dimensionality of Bounds Generated by the Shapley–Folkman Theorem."
  Schmidt, Lawrence D.W. Journal of Mathematical Economics Vol. 48, No. 1 (2012): 59-63.