Arthur G. Korteweg

Arthur's research is in the areas of corporate capital structure and private equity, as well as alternative assets more generally. In his capital structure work, Arthur uses insights from dynamic models to quantify the size and relative importance of economic frictions in explaining firms’ capital structure decisions. In recent work he has estimated the magnitude of the benefits and costs of leverage for publicly traded corporations, their target capital structures, and the thresholds at which firms decide to refinance. He is currently working on methods for comparing and testing dynamic models of the firm. Arthur’s research in private equity focuses on the endogenous trading of illiquid assets. In particular, he has estimated the risk and return trade-off to investments in Venture Capital funds and entrepreneurial firms, the evolution of loan-to-value distributions and home price indices of residential real estate during the recent subprime crisis, and investors’ optimal portfolio allocations to art. Current work is on quantifying the degree of persistence in Venture Capital and Leveraged Buyout funds. In other work, Arthur has considered pricing and investment decisions when investors do not know the true parameters and models but instead have to learn about them over time. For example, he has shown that parameter and model uncertainty matter for corporate bond prices, as well as for investor portfolio decisions when investors learn about stock return predictability over time.