PhD Candidate in Finance (Expected 2013)
I will be joining Yale SOM as Assistant Professor of Finance in July 2013.
Phone: (949) 632-4190
Research Interests: Asset Pricing, Financial Intermediaries, Liquidity
Job Market Paper:
Financial Crises, Risk Premia, and the Term Structure of Risky Assets. January 2013.
- WFA (2013)
- Finalist, 2012 Best Finance Ph.D. Dissertation Award and Poster Session, Washington University of St. Louis
The literature on rare disasters shows that low probability events can explain high, time-varying risk premia. I find that large spikes in risk premia occur around financial crises but not around other disasters such as wars. A model with financial intermediaries generates endogenous financial crises that quantitatively match those in the data, while also replicating high equity risk premia and volatility. Compared to a standard disasters framework, the model makes additional empirical predictions which I confirm in the data. First, the equity of the intermediary sector strongly forecasts stock returns. Second, financial crises are temporary, which implies that the term structure of risky assets is downward sloping during financial crises when risk premia are concentrated in the near term. The model explains the level and slope of the term structure of risky assets including equities, corporate bonds, and VIX, both unconditionally and in a crisis. I then use the term structure of risky assets to infer the daily probability and persistence of a financial crisis in real time, providing a useful tool to analyze policy responses in a crisis.
Financial Intermediaries and the Cross-Section of Asset Returns (with Tobias Adrian and Erkko Etula). March 2012. (Local download)
Journal of Finance, forthcoming
- Utah Winter Finance Conference (2013), NBER Asset Pricing (2012), AFA (2012), EFA (2011), SED (2011), SoFie (2011)
- Presentation at the Utah Winter Finance Conference
Data: Leverage Factor Series
Financial intermediaries trade frequently in many markets using sophisticated models. Their marginal value of wealth should therefore provide a more informative stochastic discount factor (SDF) than that of a representative consumer. Guided by theory, we use shocks to the leverage of securities broker-dealers to construct an intermediary SDF. Intuitively, deteriorating funding conditions are associated with deleveraging and high marginal value of wealth. Our single-factor model prices size, book-to-market, momentum, and bond portfolios with an R2 of 77% and an average annual pricing error of 1% performing as well as standard multi-factor benchmarks designed to price these assets.
Aggregate Issuance and Savings Waves (with Andrea Eisfeldt). January 2013. (Local download)
- NBER SI Capital Markets and the Economy (2012), UBC Winter Finance (2012), SED (2012), NBER Corporate (2011)
- Previously titled: The Joint Dynamics of Internal and External Finance
We document the fact that at both the aggregate and the firm level, corporations tend to simultaneously raise external finance and accumulate liquid assets, and we use this fact to learn about the aggregate cost of US firms' external finance over time. For all but the very largest firms, the aggregate correlation between external finance raised and liquidity accumulation is 0.6, and the average firm level correlation is 0.2. Conditioning on firms that raise external finance, the aggregate correlation increases to 0.74. We also show that firms' decisions in the cross-section about their sources and uses of funds can be useful for identifying the aggregate level of the cost of external finance. We construct a dynamic quantitative model of firms' financing and savings decisions in which both aggregate productivity, and the aggregate cost of external finance, vary over time. We show that, when the cost of external finance is low, firms optimally raise external finance and accumulate liquid assets, despite their low physical return. Consistent with the model, we show empirically that the cross-sectional correlation between liquidity accumulation and external finance at each point in time is highly correlated with observable proxies for the aggregate cost of external finance. We then use the model and cross-sectional data on firm policies to infer the average cost of external finance per dollar raised in the US time series 1980-2010.
Intermediary Leverage and the Cross-Section of Expected Returns. June 2010. (Local download)
- Older working paper that eventually merged into Financial Intermediaries and the Cross-Section of Asset Returns