Marcus M. Opp, Ph.D.

Assistant Professor

Finance Group
UC Berkeley
Haas School of Business

mopp(št)haas.berkeley.edu

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Executive summary

I have been an assistant professor at the University of California, Berkeley since graduation from the Finance Ph.D. program at the University of Chicago in 2008. My research spans dynamic contracting, international finance, and, most recently, the regulation of the financial sector. The corresponding papers are published in top general interest journals (Econometrica) and leading field journals such as the Journal of Economic Theory, the Journal of Financial Economics and the Journal of International Economics. My strongest papers are “Impatience versus incentives,” “Markup cycles, dynamic misallocation, and amplification," and ''Rating agencies in the face of regulation.'' I have achieved Haas teaching excellence (Median score ≥ 6 / 7) in every section since 2010 across a variety of degree programs (undergraduate, M.B.A. and Ph.D.).

 

Research overview:

Research statement

1) Financial regulation, financial intermediaries (banks, rating agencies): (4), (8), (9), (10).

2) Contract and relationship dynamics: (3), (5), (6), (10).

3) International/ macro: trade theory, DSGE models: (1), (2), (5).

 

 

Publications and forthcoming papers:

 

(7) "Target Revaluation after Failed Takeover Attempts - Cash versus Stock," 2015, joint with Ulrike Malmendier and Farzad Saidi, forthcoming, Journal of Financial Economics.

Main insight: In sharp contrast to a stock offer, capital markets interpret a cash offer as a positive signal about the true value of target resources. We expose a significant look-ahead bias affecting the previous literature on this topic.

 

(6) “Impatience versus incentives,” 2015, joint with John Zhu, Econometrica, 83, 1601-1617. Presentation Slides from Econometric Society Meeting, Boston 2015.

Main insight: We study the dynamics of contracts in repeated principal-agent relationships with an impatient agent. Despite the absence of exogenous uncertainty, Pareto-optimal dynamic contracts generically oscillate between favoring the principal and favoring the agent.

 

(5) “Markup cycles, dynamic misallocation, and amplification," 2014, joint with Christine Parlour & Johan Walden, Journal of Economic Theory, 154, 126-161.
Main insight: We analyze the IO implications of consumption-based asset pricing. In contrast to a risk-neutral economy, oligopolistic competition produces procyclical aggregate markups if valuations are governed by preferences with a relative risk aversion coefficient greater than 1. With heterogeneous industries, aggregate fluctuations may originate purely from myopic strategic behavior at the industry-level.

 

(4) ''Rating agencies in the face of regulation,'' 2013, joint with Christian C. Opp & Milton Harris, Journal of Financial Economics, 108, 46-61.
Abridged version of paper for Fame magazine.
Main insight: The regulatory use of ratings feeds back into the ratings of profit-maximizing credit rating agencies. Rating inflation is expected to occur for complex securities.

 

(3) "Expropriation risk and technology,'' 2012, Journal of Financial Economics, 103, 113-129.
Main insight: Property rights (within a country) vary across industrial sectors according to their technology intensity, leading to a pecking order of expropriation. Firms can manage expropriation risk by forming conglomerates, i.e., bundling activities across sectors with different technology levels.

 

(2) "Tariff wars in a Ricardian model with a continuum of goods," 2010, Journal of International Economics, 80, 212-225.
Main insight: I characterize optimum import tariffs in the Dornbusch-Fischer Samuelson model. Both higher absolute as well as higher comparative advantage increase equilibrium tariff rates. A sufficiently large economy prefers the Nash equilibrium of tariffs over free trade.

(1) "Rybczynski's theorem in the Heckscher-Ohlin world - anything goes," 2009, joint with Hugo Sonnenschein & Christis Tombazos, Journal of International Economics, 79, 137-142.
Main insight: The predictions of the Rybczynski Theorem can be reversed in general equilibrium. This "reverse" outcome implies immiserizing factor growth.

Working papers:

(8) “Macroprudential bank capital regulation in a competitive financial system,” January 2015, joint with Milton Harris and Christian Opp (major update soon)

Abstract: We develop a tractable double-decker model of intermediation in which intermediaries have risk-taking opportunities and are subject to public debt financing subsidies. The banking sector's allocation of capital to firm projects of varying quality is determined by the amount of private rents that bankers can extract. Increased efficiency of direct financing by public markets lowers bankers' rents for good projects and exacerbates asset substitution incentives (reaching for yield). When intermediary capital is sufficient, an increase in regulatory equity-ratio requirements unambiguously improves total surplus. However, when intermediary capital is scarce, more stringent capital requirements may increase or decrease total surplus depending on the NPV of the banking sector's marginal funded project. Our model predicts that the effects of regulatory policies for the banking sector crucially depend on the cross-sectional distribution of firms and the development of public markets.

 

(9) “Regulatory reform and risk-taking: replacing ratings,” September 2014, joint with Bo Becker. (major update soon)

Abstract: We expose that a reform of capital regulation for insurance companies in 2009/2010 eliminated (to a first-order approximation) capital requirements for holdings of non-agency mortgage backed securities. Post reform, insurance companies allocate 54% of their purchases of new MBS issues toward non-investment grade assets (as opposed to 6% pre reform).

 

(10) “Regulating deferred incentive pay,” June 2014, joint with Florian Hoffmann and Roman Inderst. (major update soon)

Abstract: We analyze a broadly applicable principal-agent model to evaluate the effects of mandatory deferral and vesting requirements for bonus payments in the financial sector. In our setting, the agent's effort choice controls the arrival time distribution of a disaster event affecting the principal and society. Over time, the principal learns more precise information about the agent's effort choice. In the absence of regulation, the timing of bonus pay is determined by the trade-off between the marginal information benefit of delay and the marginal cost due to agent impatience. While further delay above and beyond the privately chosen payout time does indeed increase the level of available information to the principal, the effect on the induced equilibrium effort choice is non-trivial. We provide easily interpretable conditions on the arrival time distribution and the nature of the agency problem which determine whether regulation increases or decreases effort and ultimately affects the riskiness of the financial sector.

 

Work in progress:

"Industrial Asset Pricing," joint with Christine Parlour and Johan Walden.

"Credit ratings on structured products," joint with Natalia Kovrijnykh.

dissertation committee:

Douglas W. Diamond (Chair)

Milton Harris

Raghuram G. Rajan

Morten Sorensen

(773) 702-7283

(773) 702-2549

(773) 702-4437

(773) 834-1726

Douglas.Diamond@ChicagoBooth.edu

Milton.Harris@ChicagoBooth.edu

Raghuram.Rajan@ChicagoBooth.edu

ms3814@columbia.edu

 

 

WEB DESIGN by Natalia Kovrijnykh: Last modified August 3, 2015