Asaf Manela

📢 Call for Papers: 22nd Annual Olin Finance Conference at WashU, Nov 12–13, 2026, St. Louis. All areas of finance welcome: asset pricing, corporate, behavioral, intermediation & more. Empirical + theoretical. Deadline: July 31. Submit ⬇️ event.olin.washu.edu/washu-f… #Finance #CallForPapers

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Using capital requirements to fix the climate is like using using interest rates to fight obesity. It might curb consumption, but it is wildly indirect and hits a lot of unrelated activity. That is what makes proposals like the Climate-Aligned Finance Act (CAFA) so silly. Higher capital charges on fossil-fuel exposures may sound like elegant climate policy, but bank capital regulation is designed to protect bank stability, not decarbonize the environment. In an elegant paper forthcoming at the JF, Martin Oehmke and Marcus Opp, bring some much needed clarity to this contentious policy debate. Their core point is that capital requirements can be useful for prudential climate risk, but they are a clumsy substitute for carbon pricing or direct emissions policy. Trying to make bank regulators solve climate change risks weakening both climate policy and financial regulation. Use the right tool for the job.

🧩 US investors pay active asset managers about 17 times more in fees than informed traders could possibly earn by forecasting prices. In a new paper with Ohad Kadan, we develop a simple, model-free measure of the total value of information in stock markets — an upper bound on what any active manager could capture by trading on superior information about future prices — and bring it to high-frequency US equity data. The idea. Under mild assumptions of Kyle–Back models with competitive market making, the total value of information equals one observable object: the expected covariation between price changes and order flow, E∫dP·dY. Informed traders smooth their orders to disguise them; noise trading is jittery. At high frequency, cov(dP, dY) recovers exactly the losses of noise traders — and thus the gains of the informed — without needing to identify which trades were informed. The numbers. Using intraday TAQ data on US equities, September 2003 to December 2024: - Average value of information per stock: about $3.5 million per year - Aggregate value of information: only 0.04% of market capitalization - Investors pay active managers: about 0.67% of market cap each year (French 2008) The attached figure shows the value of information over time. Validation. The measure behaves the way a value of information should. It rises in turbulent times, is higher for large, growth, and momentum stocks, jumps more than 3-fold on earnings announcement days, and is robust to trade-signing, sampling frequency, and the inclusion of penny stocks. The puzzle. In any reasonable model (e.g. Garleanu-Pedersen 2018), the value of information equals management fees plus the cost of searching for good managers — so fees can be at most as large as the value of information. Our estimate of the value of information is about an order of magnitude smaller than the fees investors actually pay. We work through the candidate explanations — non-competitive market makers, risk aversion, partial information, behavioral mistakes, non-informational services — and most either deepen the puzzle or leave it unresolved. One reading: US equity markets may be so informationally efficient that there is little left for the informed to extract — and most of what investors pay for active management is not paying for information at all. The wedge between the value of information and the cost of seeking it is a target for future theory.