@techreport{kontzhanson2024,
   title={The Real Cost of Benchmarking},
   author={Kontz, Christian and Hanson, Sebastian},
   type={Working Paper},
   institution={Stanford University},
   year={2024},
}

Benchmark-linked capital flows increase firms' CAPM βs, thereby raising managers' perceived cost of equity and reducing investment. Using exogenous variation from Russell and S&P 500 reconstitutions, we show that inclusion in a benchmark stock index increases a stock's CAPM β. Managers interpret the higher β as a higher cost of equity and reduce investment. Consistent with this mechanism, benchmark inclusion also raises the perceived cost of equity among stock analysts and regulators. Industries with larger increases in βs due to benchmarking have accumulated less capital over the past two decades. Benchmark-induced changes in the cross-section of CAPM βs do not cancel out but affect aggregate investment because higher βs fall on many firms with high investment elasticities, while lower βs benefit a few large but inelastic firms. This mechanism can account for the majority of the missing investment puzzle.

Selected Presentations: AFA Annual Meeting 2026^*, Johns Hopkins Carey Finance Conference, SFS Cavalcade 2025, FIRS 2025, Four Corners/FMRC Conference on Indexing, Investment Company Institute, Northeastern University Finance Conference 2025, UIC Finance Conference 2025^c
(* scheduled, ^c co-author)

Awards: SFS Cavalcade PhD Student Award, FIRS Conference 2025 Prize for PhD Students, Shortlisted for Brandes Center Prize
Media Coverage: Bloomberg's Matt Levine Money Stuff

@techreport{kontz2023esg,
   title={Do ESG Investors Care About Carbon Emissions? Evidence From Securitized Auto Loans},
   author={Kontz, Christian},
   type={Working Paper},
   institution={Stanford University},
   year={2023},
}

This paper documents that ESG preferences in fixed income markets affect real outcomes through securitization. I find that higher ESG scores lower funding costs for auto loan securitizations and that captive lenders pass through these savings to consumers: an 8 basis point ESG funding advantage translates into a 20 basis point lower consumer interest rate. The high pass-through is driven by a 6 percentage point higher probability of receiving subsidized interest rates (e.g., 0% financing). The lower consumer borrowing costs increase loan demand by up to 4.6%. Yet because issuer ESG scores are weak proxies for financed CO2 emissions, the same mechanism reduces the cost of capital for high-emission vehicles. A subjective-beliefs model can explain how investors who intend to price emissions but implement it via ESG scores lower the cost of capital of high-emission vehicles.

Selected Presentations: FIRS Conference 2024, OU-RFS Climate and Energy Conference 2024, GRASFI Conference 2024, SoFiE Conference 2024, CEPR-ESSEC-Luxembourg Conference on Sustainable Financial Intermediation, Harvard Climate Economics Workshop, UC Santa Cruz

Awards: UN PRI Best PhD Student Paper Award 2025, FIRS Conference 2024 Prize for PhD Students, GRASFI Conference 2024 Best PhD Paper Award, Myron S. Scholes PhD Prize 2024, Finalist FIASI Fixed Income Competition 2024

This paper documents that index investing distort risk measures used in regulatory price-setting. Exploiting quasi-experimental variation from Russell index reconstitutions, we find that a utility's inclusion in a more heavily benchmarked index inflates its CAPM β. We then show this effect leads regulators to authorize higher returns on equity, which are ultimately passed on to consumers. This mechanism has substantial aggregate consequences, generating over $85 billion in total economic costs from 1998-2018. Evidence from the regulated railroad industry confirms the mechanism's external validity, highlighting a significant, previously undocumented consequence of modern financial market structure on regulated industries.

Selected Presentations: German Economist Abroad Annual Meeting (UHH)*
(* scheduled)

Using the option-implied expected excess returns of a risk-averse representative investor whose wealth is fully invested in equities, I find that the lower bound on expected excess returns increases when a stock is added to a benchmark index and decreases when it is removed. This finding is robust to controls for firm characteristics, industry-time effects, and size effects, and it holds for the S&P 500, Nasdaq 100, Russell 1000, and Russell 2000 indices.

This paper studies the impact of environmental, social, and governance (ESG) investing on the real economy. Using within industry-year variation, I find that 1.) firms with high ESG ratings have low marginal revenue products of capital (MRPK), while, 2.) firms with high sales per tCO2 emission have high MRPKs. This suggests that reallocating capital to firms with high ESG ratings lowers allocative efficiency while reallocating capital to greener firms increases it. Motivated by these facts, I estimate a dynamic investment model featuring convenience yields on ESG assets and a CO2 externality to explore the implications of ESG investing for capital misallocation and climate change mitigation.