Laurent Calvet, EDHEC Business School

As part of the ser­ies of the "Fin­ance Re­search Sem­inar", VGSF wel­comes Laurent Cal­vet from ED­HEC Busi­ness School to present his re­search pa­per.
Per­sonal Webpage

Pa­per

A Sup­ply and De­mand Ap­proach to Cap­ital Mar­kets

We develop an em­pir­ic­ally tract­able sup­ply and de­mand model of fin­an­cial mar­kets, which ex­plains the cost and quant­ity of cap­ital used by in­di­vidual firms. In­vestor pref­er­ences, bi­ases, and risk assess­ments drive cap­ital sup­ply, while a firm’s prof­it­ab­il­ity and other char­ac­ter­ist­ics drive de­mand. Firm sizes and cap­ital costs are en­do­gen­ously de­termined in gen­eral equi­lib­rium. Us­ing the­or­et­ic­ally-­mo­tiv­ated in­stru­ments, we es­tim­ate the sup­ply and de­mand sched­ules of over 1,200 U.S. firms. Our sys­tem pro­duces ac­cur­ate fore­casts of firm sizes and cap­ital costs. We use the es­tim­ated sys­tem to quan­tify the equi­lib­rium sens­it­iv­it­ies of size and cap­ital cost to firm and in­vestor char­ac­ter­ist­ics.