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- 9/2026 Presentation at NSE PhD and Postdoctoral Workshop
- 10/2026 Presentation at Economics Graduate Student Conference
- 10/2026 Presentation at FMA Doctoral Student Consortium
- 1/2027 Poster at AFA Ph.D. session
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Abstract
I quantitatively study the efficiency in capital allocation and financial risk sharing jointly in a general equilibrium model. Leveraged intermediaries allocate wealth across equity claims to sectors that differ in productivity and risk exposure, and face state-dependent margin constraints. I find that intermediaries shape allocative efficiency through their allocation of risk-bearing capacity across assets. Three forces drive this result. First, strong financial balance sheets support efficient risk sharing and sectoral investment guided by risk-adjusted costs of capital. Second, binding constraints during downturns impair intermediaries’ risk allocation across assets, distorting sectoral valuations and investment relative to the unconstrained benchmark persistently. Third, these investment responses change the evolution of capital composition, which in turn shapes the risks investors share and their equilibrium pricing. The model identifies a risk-sharing channel of capital misallocation and characterizes a two-way interaction between financial risk sharing and productive capital accumulation.