Gill Segal, University of North Carolina-Chapel Hill
Chao Ying, Chinese University of Hong Kong
Abstract: Using minute-level wearable-device data on 51,191 adults in the National Institutes of Health’s (NIH) All of Us Research Program, covering over 19 million person-nights, we show that sleep quality is a high-frequency biomarker of macroeconomic and financial uncertainty. Higher uncertainty predicts lower deep sleep and sleep efficiency for several nights, a “wake-and-see” effect that complements the classic “wait-and-see” channel. The effects are robust to environmental, physiological, and behavioral controls, are stronger for uncertainty than for first-moment market shocks, and are larger in higher-income areas. We also document a reverse channel from physiology to markets: nights of unusually poor sleep predict weaker opening-hour equity returns, lower next-day market liquidity, and higher realized volatility, with stronger effects in retail dominated stocks. Finally, poor sleep positively relates to the conditional market price of aggregate risk, consistent with lower aggregate risk-bearing capacity. Overall, population sleep provides a high-frequency physiological state variable linking uncertainty, human capital, and market functioning in real time.
Discussant: Ryan Israelsen, Michigan State University
Abstract: We study capital allocation and asset pricing consequences of geopolitical tensions using nearly 100 years of data. Leveraging widely adopted news-based geopolitical risk indices, we find that geopolitical threats (GPT) and acts (GPA) have markedly different implications. GPT closely tracks geopolitical risk perceptions and capital allocation decisions of investors and firms, is priced across different asset cross-sections, and predicts country-level equity premia. By contrast, GPA has weaker and less stable links to beliefs, capital allocation, and risk premia. These results are incremental to existing news-based measures of macro-financial uncertainty, including indices capturing war-related discourse and economic and trade policy risk.
Discussant: Jiatao Liu, Xi'an Jiaotong-Liverpool University
Abstract: We investigate whether firms’ workforce risk is priced in the options market. Using the U.S. opioid crisis as an exogenous shock to human capital, we show that firms with higher workforce uncertainty have higher option-implied downside risk. We exploit a natural experiment and establish causal effects using various difference-in-differences methods. The effects are stronger for firms that are labor-intensive, in low-labor-supply regions, with higher investor attention to labor issues, and without hedging activities. Overall, our findings identify workforce uncertainty as a novel determinant of downside risk, highlighting the important role of human capital in firm risk management and option pricing.
Discussant: Giang Nguyen, Pennsylvania State University
Abstract: Immigration stimulates economic growth, but also increases demand for local public resources. This paper examines the net impact of immigration on local governments' fiscal health. We estimate the effects of legal and unauthorized immigration using a Bartik shift-share design constructed from individual-level U.S. Census data dating back to 1880 and court order data measuring unauthorized immigrant inflows. We find that immigrant inflows improve local government access to finance, as evidenced by a decline in municipal bond yields and improvements in local governments' fiscal positions. These effects are stronger for counties with i) tighter labor markets consisting of higher labor force participation rates, lower unemployment rates, and more labor-intensive employment, and ii) more financial slack proxied by lower levels of poverty. We find both unauthorized immigrants and legal immigrants reduce borrowing costs with stronger effects for immigrants of higher education levels. The benefits of immigration are driven by increasing employment and stronger operating margins as revenue growth driven by increased sales tax and state intergovernmental transfers outpaces expense growth. Overall, our results provide novel evidence on the economic consequences of immigration, both legal and unauthorized.
