Automated Market Makers (AMMs) are both liquidity sources and investment vehicles for market participants. This paper analyzes the risks and returns of liquidity provision (LP) investments in AMMs. In a continuous-time model, we show that LP returns decompose into a...

I introduce and test for preference for simplicity in choice under risk. I characterize the theory axiomatically, and derive its properties and unique predictions relative to canonical models. By designing and running theoretically-motivated experiments, I document that people value simplicity...

In a continuous-time model, a risk-neutral decision-maker chooses the volatility of a state variable and is terminated when the variable falls below a threshold. I provide economically interpretable conditions under which the decision-maker becomes risk averse endogenously and minimizes volatility...

I characterize the dynamics of incentives in an optimal contract with investment delegation, moral hazard, and uncertainty about the agent’s productivity. The principal increases the agent’s incentives after good performance in order to delegate more capital to an agent with...

We study whether regulators should reveal stress test results that contain imperfect information about banks' financial health. Although disclosure restores market confidence in banks, it misclassifies some healthy banks as risky. This encourages banks to choose portfolios deemed safe by...

We develop a model of bailout stigma in which accepting a bailout signals a firm's balance-sheet weakness and reduces its funding prospects. To avoid stigma, high-quality firms withdraw from subsequent financing after receiving bailouts or refuse bailouts altogether to send...