Title: What explains the stock market’s response to QE policy?

Abstract: This paper analyses the effects of Quantitative easing (QE) on the US stock market by decomposing the S&P500 index into two components, its risk-neutral fundamental value, and the equity premium. The causal effects of QE are identified by using an instrumental variable (IV) that is based on high-frequency price revisions of the medium-long end of the yield curve, triggered by Federal Open Market Committee (FOMC) policy announcements. Stylized facts indicate that these price revisions are correlated with information and risk premia shocks, potentially biasing the dynamic effects of QE policy. The IV is constructed by controlling for such non-monetary shocks using a novel two step approach. Findings from a Structural Vector Autoregression (SVAR) model suggest that a QE policy shock increases the stock index, due to a rise in the risk-neutral fundamental component and a fall in the equity premium component. Both components display persistence, with the equity premium response declining gradually over a period of two years. This confirms QE’s ability to compress risk premium in stock markets.

Title to be advised.

Title: Making the invisible hand visible: Managers and the allocation of workers to jobs

Abstract: Why do managers matter for firm performance? This paper provides evidence of the critical role of managers in matching workers to jobs within the firm using the universe of personnel records from a large multinational firm. The data covers 200,000 white-collar workers and 30,000 managers over 10 years in 100 countries. I identify good managers as the top 30% by their speed of promotion and leverage exogenous variation induced by the rotation of managers across teams. I find that good managers cause workers to reallocate within the firm through lateral and vertical transfers. This leads to large and persistent gains in workers' career progression and productivity. Seven years after the manager transition, workers earn 30% more and perform better on objective performance measures. In terms of aggregate firm productivity, doubling the share of good managers would increase output per worker by 61% at the establishment level. My results imply that the visible hands of managers match workers' specific skills to specialized jobs, leading to an improvement in the productivity of existing workers that outlasts the managers' time at the firm.

Paper is here: https://sticerd.lse.ac.uk/dps/eopp/eopp72.pdf