About

Robert L. McDonald is the Gaylord Freeman Distinguished Chair in Banking and a Professor of Finance at the Kellogg School of Management, Northwestern University. He has been a faculty member at Kellogg since 1984 and has served as the chair of the Finance Department and as Senior Associate Dean for Faculty and Research. His academic background includes a Ph.D. in Economics from MIT and a BA in Economics from the University of North Carolina. Professor McDonald's research interests encompass corporate finance, derivatives, taxation, and applications of option pricing theory to corporate investments. He has taught courses in derivatives, corporate finance, taxation, and data analytics. Throughout his career, he has received numerous research awards and has held editorial positions in prominent finance journals. He has also served as a visiting professor at the University of Chicago and was a faculty member at Boston University prior to joining Kellogg.

Research topics

• Business
• Finance
• Economics
• Financial system

Selected publications

• The Role of Pilot Studies in Financial Regulation

  The Review of Corporate Finance Studies · 2025-09-19

  article

  Abstract Financial regulators considering the desirability of a new rule or regulation sometimes use pilot studies for evidence-based decision making. Although pilot studies can generate new knowledge, they also can be expensive and subject to serious selection biases, spillover problems, and the infeasibility of a blind design. Alternatively, regulators can often evaluate a proposed regulation’s impact by analyzing archival data or applying theory based on well-accepted economic principles. We discuss why pilot studies can be useful, but also why regulators and industry participants sometimes favor pilot studies with little scientific value. We illustrate these issues by discussing various SEC pilot studies. (JEL G18, G28, G38, K22, L51)

  PublisherDOI

• Liquidity Crises and the Market‐Maker of Last Resort

  Journal of money credit and banking · 2025-09-12

  articleOpen accessSenior author

  Abstract We study market illiquidity in an economy subject to nonfundamental shocks. Asset trading occurs via decentralized bargaining. The model has multiple rational expectations equilibria; we associate certain Pareto‐inferior equilibria with liquidity crises. The government can improve welfare by acting as a “market‐maker of last resort” (MMLR), purchasing assets at above‐market prices. Several policies employed by the United States during the financial crisis are examples of MMLR. We consider “aggressive” and “conservative” MMLR policies. The aggressive policy supports the unique Pareto‐optimal equilibrium. The conservative policy, which embeds a “no‐bailout constraint,” only supports an inefficient equilibrium.

  PublisherOA PDFDOI

• Liquidity Crises and the Market-Maker of Last Resort

  National Bureau of Economic Research · 2025-03-01

  reportOpen accessSenior author

  We study market illiquidity in an economy subject to non-fundamental shocks.Asset trading occurs via decentralized one-on-one bargaining.The model has multiple rational expectations equilibria; we associate certain Pareto inferior equilibria with liquidity crises.The government can improve welfare by acting as a "market-maker of last resort" (MMLR), purchasing assets at above-market prices.Several policies employed by the US during the financial crisis are examples of MMLR.We consider "aggressive" and "conservative" MMLR policies.The aggressive policy supports the unique pareto optimal equilibrium.The conservative policy, which embeds a "no-bailout constraint," only supports an inefficient equilibrium.

  PublisherDOI

• Liquidity Crises and the Market-Maker of Last Resort *

  SSRN Electronic Journal · 2025-01-01

  articleOpen accessSenior author
  PublisherDOI

• Liquidity Crises and the Market-Maker of Last Resort

  SSRN Electronic Journal · 2025-01-01

  articleOpen accessSenior author
  PublisherDOI

• The Role of Pilot Studies in Financial Regulation

  SSRN Electronic Journal · 2021 · 3 citations

  • Business
  • Financial system
  • Finance
  PublisherDOI

• Photo Vignette - Restraining the Welfare State Solidarity

  Open Collections · 2019-02-27 · 1 citations

  articleOpen access1st authorCorresponding

  Photo Vignette - Restraining the Welfare State Solidarity

  PublisherDOI

• Statement on Evidence-Based Regulation and the Limits of Pilot Studies

  SSRN Electronic Journal · 2019-01-01 · 1 citations

  articleOpen access
  PublisherDOI

• Ratings and Asset Allocation: An Experimental Analysis

  National Bureau of Economic Research · 2018-09-01 · 5 citations

  reportOpen access1st authorCorresponding

  Investment ratings (e.g., by Morningstar) provide a simple ordinal scale (e.g., 1 to 5) for comparing investments. Typically, ratings are assigned within categories -groups of assets sharing common characteristics -but using the same ordinal scale for all groups. Comparing such categorized ratings across categories is potentially misleading. We study the effect of categorized ratings in an asset allocation experiment in which subjects make repeated allocation decisions under complete information. Subjects initially see no ratings, and they then see either categorized or uncategorized ratings. Although ratings convey no information, categorized ratings affect subject investment choices and harm performance in the experiment. Subjects do not simply invest more in highly rated assets. Rather, rating effects seem to occur when ratings conflict with subjects' own evaluation of assets: subjects reduce their investment in a high quality asset which receives an intermediate rating, but they do not increase their investment in a highquality asset that receives a high rating. Knowledge and experience help with the base allocation task but do not mitigate the harmful effect of categorized ratings.

  PublisherDOI

• derivmkts: Functions and R Code to Accompany Derivatives Markets

  2016-05-08 · 1 citations

  datasetOpen access1st authorCorresponding
  PublisherOA PDFDOI

Frequent coauthors

• Deborah Lucas

  Massachusetts Institute of Technology

  47 shared

• Alex Kane

  15 shared

• Malcolm D. Gynther

  Auburn University

  8 shared

• Alan J. Marcus

  8 shared

• Donald S. Siegel

  7 shared

• Zvi Bodie

  7 shared

• Robert A. Korajczyk

  6 shared

• Charles M. Kahn

  University of Illinois Urbana-Champaign

  6 shared

Awards & honors

• Graham and Dodd Scroll from the Financial Analyst's Federati…
• Iddo Sarnat Prize from the Journal of Banking and Finance
• Smith Breeden Prize from the Journal of Finance
• Review of Financial Studies Prize from the Review of Financi…
• Elected Director of the American Finance Association (2010-2…