We collect stock-level data on monthly total returns, market capitalization, and book value from three sources: Compustat Global, Datastream, and Prowess. Prowess reports data from both of India's major stock exchanges, the Bombay and National Stock Exchanges (BSE and NSE). In addition, monthly price returns can be inferred from the month-end holding values and quantities in the NSDL database. We link the datasets by ISIN. 2 To verify reliability of returns data, we compare total returns from the available data sources, computing the absolute differences in returns series across sources. For each stockmonth, we use returns from one of the datasets for which returns match another dataset most closely, where the source from amongst those datasets is selected in the following order of priority: Compustat Global, Prowess NSE, then Prowess BSE. If returns are available from only one source, or the difference(s) between the multiple sources all exceed 5% then we compare price returns from each source with price returns from NSDL. We then use total returns from the source for which price returns most closely match NSDL price returns, provided the discrepancy is less than 5%.After computing total returns, we drop extended zero-return periods which appear for non-traded securities. We also drop first (partial) month returns on IPOs and re-listings, which are reported inconsistently. For the 25 highest and 25 lowest remaining total monthly returns, we use internet sources such as Moneycontrol and Economic Times to confirm that the returns are valid. We also use internet sources to look up and confirm returns for stockmonths where returns are missing and the stock comprises at least one percent of stock holdings for the representative individual investor for either the previous or current month.We follow a similar data verification procedure for market capitalization and book value, confirming that the values used are within 5% of that reported by another source. Where market capitalization cannot be determined for a given month, we extrapolate it from the previous month using price returns. Where book value is unknown, we extrapolate it forward using the most recent observation over the past year.

Using a large representative sample of Indian retail equity investors, many of them new to the stock market, we show that both years of investment experience and feedback from investment returns have significant effects on investor behavior, favored stock styles, and performance. We identify two channels of feedback: performance relative to the market, and the directly experienced returns to behavior and styles of stock. Both of these vary across investors at a point in time because investors are imperfectly diversified and receive idiosyncratic returns. We find that experienced investors generally behave in a manner more consistent with the recommendations of finance theory, although this tendency is weakened by strong investment performance. High trading profits increase turnover, while high returns to equity styles have a short-term negative and a longer-term positive effect on investors' style demands, possibly reflecting the offsetting effects of disposition bias and style chasing. We document high returns on a portfolio of stocks held by experienced investors, and on individual Indian stocks with an experienced and low-turnover investor base.

We evaluate the economic costs and benefits of bank capital in the United States. The analysis is similar to that found in previous studies though we tailor the analysis to the specific features and experience of the U.S. financial system. We also make adjustments to account for the impact of liquidity and resolution-related regulations on the probability of a financial crisis. The conceptual framework identifies the benefits of bank capital with a lower probability of financial crises, which decrease economic output. The costs of bank capital are identified with increases in banks' cost of funding. These increases are passed along to borrowers in the form of higher borrowing costs, resulting in a lower level of economic output. Optimal capital levels maximize the difference between benefits and costs, or maximizes net benefits. Using a range of empirical estimates, we find that optimal bank capital levels in the United States range from just over 13 percent to over 26 percent.We assess the benefits of bank capital through calculating (1) how the probability of a financial crisis declines as the economy-wide level of bank capital increases and (2) the output cost of a financial crisis. The probability of a financial crisis is estimated using a bottom up approach that uses bank-level data from advanced economies and a top down approach that uses aggregate data from the same economies. The output costs associated with a financial crisis are estimated by considering short-run and long-run output costs. Short run costs are taken primarily from recent research by Romer and Romer (2015) that is adjusted to focus more heavily on the experience of large, advanced economies which are more similar to the United States. The long-run costs are estimated assuming that financial crisis either have permanent or temporary but persistent effects. We find that the net present value of the output cost of a financial crisis ranges from roughly 40 to 100 percent of annual GDP.The costs of bank capital arise from the effect of capital on banks' cost of funding. Bank equity is more expensive than debt, but an increase in capital makes investing in banks less risky. Informed by recent research that focuses on U.S. banks, we assume that a bit less than 50 percent of the increase in capital costs is offset by the reduced risk of bank equity. Overall, our results suggest that if banks pass all of the increase in funding costs onto borrowers then borrowing rates would increase by 0.07 percentage points. We also consider a situation in which only half of the increase is passed onto borrowers.Considering the benefits and costs of bank capital in the U.S. that we measure, the level of capital that maximizes the difference between total benefits and total costs ranges from just over 13 percent to Page 2 of 51 just over 26 percent. The reported range reflects a high degree of uncertainty and latitude in specifying important study parameters that have a significant influence on the resulting optimal capital level, such as the output cost of a fi...