Erik J. Mayer

Bio: Erik J. Mayer is an academic researcher from Southern Methodist University. The author has contributed to research in topics: Ceteris paribus & Basis point. The author has an hindex of 4, co-authored 5 publications receiving 36 citations.

Racial Discrimination in the Auto Loan Market

Abstract: We provide evidence of discrimination in auto lending. Combining credit bureau records with borrower characteristics, we find that Black and Hispanic applicants’ loan approval rates are 1.5 percentage points lower, even controlling for creditworthiness. In aggregate, discrimination crowds out 80,000 minority loans each year. Results are stronger where racial biases are more prevalent and banking competition is lower. Minority borrowers pay 70 basis point higher interest rates, but default less ceteris paribus, consistent with racial bias rather than statistical discrimination. A major anti-discrimination enforcement policy initiated in 2013, but halted in 2018, reduced discrimination in interest rates by nearly 60%.

Advertising, investor attention, and stock prices: Evidence from a natural experiment

Abstract: Investors pay attention to stocks when interesting, value-relevant events occur at firms, making it difficult to separate the effect of attention on equity prices from the effect of underlying events on prices. To identify the direct effect of investor attention, I study events that place millions of Americans’ attention on firms for reasons unrelated to fundamentals. For events drawing the most attention, I find cumulative abnormal returns of 1.51% in days 1-5, with a reversal of 1.09% the following week. These stocks experience abnormal turnover, individual investors are net buyers, and institutional investors drive the reversal towards fundamental values.

Investor Attention and Stock Prices: Evidence from a Natural Experiment

Abstract: Investors pay attention to stocks when interesting, value-relevant events occur at firms, making it difficult to separate the effect of attention on equity prices from the effect of underlying events on prices. To identify the direct effect of investor attention, I study events that place millions of Americans’ attention on firms for reasons unrelated to fundamentals. For events drawing the most attention, I find cumulative abnormal returns of 1.51% in days 1-5, with a reversal of 1.09% the following week. These stocks experience abnormal turnover, individual investors are net buyers, and institutional investors drive the reversal towards fundamental values.

Big Banks, Household Credit Access, and Intergenerational Economic Mobility

Abstract: Consolidation in the United States banking industry has led to larger banks. I find that low income households face reduced access to credit when local banks are large. This result appears to stem from large banks’ comparative disadvantage using soft information, which is particularly important for lending to low income households. In contrast, the size of local banks has little or no effect on high income households. Consistent with low income parents’ credit constraints limiting investment in their children’s human capital, areas with larger banks exhibit a greater sensitivity of educational attainment to parental income, and less intergenerational economic mobility.

Racial Disparities in the Auto Loan Market

Abstract: We document racial disparities in auto lending. Combining credit bureau records with borrower characteristics, we find that Black and Hispanic applicants’ approval rates are 1.5 percentage points lower, even after controlling for creditworthiness. In aggregate, this effect crowds out 80,000 minority loans each year. Results are stronger where racial biases are more prevalent and lending competition is lower. Minority borrowers pay 70-basis-point higher interest rates, but default less ceteris paribus, consistent with racial bias rather than statistical discrimination. A major antidiscrimination enforcement policy initiated in 2013, but halted in 2018, reduced unexplained racial differences in interest rates by 60%.

Brand Perceptions and the Market for Common Stock, forthcoming, Journal of Financial and Quantitative - eScholarship

Abstract: This paper investigates the effect of company brand perceptions on investor incentives to hold stocks. We find that, after controlling for other postulated determinants of stockholdings, there is a negative and significant cross-sectional relation between percentage institutional holdings and brand visibility. This finding indicates a propensity for individual investors to hold stocks with strong brand recognition, which is consistent with the hypothesis that individuals prefer to invest in companies whose products are readily recognized. Furthermore, we find that institutional holdings are positively related to firm size and beta, while being negatively related to total return volatility. Our analysis supports the notion that institutional portfolios eschew the relatively neglected sector characterized by small firms with high total volatility, whereas individual investors prefer holding stocks with low systematic risk and high recognition. The results contribute to our understanding of how financial market investors form their equity portfolios.

Advertising, attention, and financial markets

Abstract: Using daily advertising data, we analyze short-term effects of advertising on investor attention and on financial market outcomes. We develop a new proxy for investor attention based on companies' Wikipedia page views and show that advertising has a positive impact on investor attention, but only little impact on turnover and liquidity. Most importantly, short-term stock returns are not influenced by advertising. Further results suggest that previous findings of a positive relation between advertising and returns are due to reverse causality. Thus, the belief that stock prices can be temporarily inflated via advertising is misguided.