PUBLISHED AND FORTHCOMING ARTICLES
“Valuation Risk and Asset Pricing” (with Martin Eichenbaum, Victor Luo and Sergio Rebelo) Slides for presentation at Bundesbank from May 2012 (under old title of “Understanding the Equity-premium Puzzle and the Correlation Puzzle”). Journal of Finance forthcoming.
Identifies a novel component of the equity premium due to time preference shocks. The model accounts for key asset pricing moments, such as the equity premium, the bond term premium, and the weak correlation between stock returns and fundamentals.
“Long-run Bulls and Bears” (with Martin Eichenbaum, Dimitris Papanikolaou and Sérgio Rebelo) Journal of Monetary Economics 76 (supplement), S21-S36, 2015.
We find that there is a high correlation between stock returns and fundamentals across bull and bear stock market episodes.
First estimates of the marketability discount in large controlling blocks.
"Investment Analysis of Autocallable Contingent Income Securities," (with Raquel Gaspar and Allen Michel) Financial Analysts Journal 71, 61-83, 2015.
Presents a systematic analysis of the return properties of a structured product of growing relevance in the US market and shows the weaknesses of using the geometric Brownian motion model to value structured products.
“Trade Credit and Cross-Country Predictable Firm Returns,” (with Tarun Ramadorai and Sumudu Watugala) Journal of Financial Economics 115, 592-613, 2015. Recipient of the 2012/2013 Inquire Third Prize at the Autumn Seminar in Istanbul.
Shows that international costumer-producer linkages lead to cross-return predictability especially when firms have high trade credit.
“The Marketability Discount of Controlling Blocks of Shares,” (with Enrique Schroth) June 2014. KPMG Global Valuation Institute (white paper series). KPMG GVI web site.
Managerial version of “The Value of Control and the Costs of Illiquidity.”
“Advance Information and Asset Prices,” (with Jianjun Miao) Journal of Economic Theory 149, 236-275, 2014.
Momentum in stock returns arises when information about future earnings drives both stock returns and liquidity trades by some investors.
Studies the agency problem that arises when CEOs are the main promoters of governance mechanisms.
“Skewness in Stock Returns: Reconciling the Evidence on Firm versus Aggregate Returns,” Review of Financial Studies 25, 1630-1673, 2012. Online appendix with proof that firm returns are positively skewed.
Proposes a theory for why firm stock returns are positively skewed and aggregate stock returns are negatively skewed based on the properties of firm announcement events.
“Quantifying private benefits of control from a structural model of block trades,” (with Enrique Schroth) Journal of Financial Economics 96, 33-55, 2010.
Presents the first estimates of private benefits of control and associated deadweight losses.
“Comment on: Optimal taxation in the presence of bailouts,” Journal of Monetary Economics 57, 117-119, 2010.
“Global Private Information in International Equity Markets,” (with Greg Bauer and Martin Schneider) Journal of Financial Economics 94, 18-46, 2009.
First paper documenting a global return chasing pattern in stock returns by US investors and presents theory that rationalizes this and other properties of international equity flows and returns.
“Economic News and International Stock Market Co-Movement,” (with Clara Vega) Review of Finance 13, 401-465, 2009 (lead article).
Documents co-movement across markets based on economic fundamentals.
“Marketwide Private Information in Stocks: Forecasting Currency Returns,” (with Eva de Francisco and Luis Marques) The Journal of Finance 63, 2297-2343, 2008.
Documents a component of equity order flow that is due to marketwide private information.
Models the investment and asset pricing consequences of having controlling shareholders.
“The Forward Premium Puzzle in a Model of Imperfect Information: Theory and Evidence” Economics Letters 99, 461-464, 2008.
Shows that time fixed-effects can explain the forward premium anomaly and provides a rationale for the fixed-effects.
“International Equity Flows and Returns: A Quantitative Equilibrium Approach”, (with Greg Bauer and Martin Schneider) The Review of Economic Studies 74, 1-30, 2007. Appendix to “International Equity Flows and Returns” here.
First calibrated model explaining international portfolio allocation and returns.
“Optimal Currency Hedging”, Global Finance Journal 18, 16-33, 2007.
Proves that forward contracts are better hedges of downside risk than option contracts when exposure is certain.
“World Market Integration Through the Lens of Foreign Direct Investors,” (with Norman Loayza and Luis Servén) Journal of International Economics 66, 267-295, 2005 (lead article).
First paper to document globalization trends using foreign direct investment flows.
“Optimal Lending Contracts and Firm Dynamics”, (with Hugo Hopenhayn) The Review of Economic Studies 71, 285-315, 2004.
Models investment and dividend policies in the presence of endogenous financial frictions.
“The Composition of International Capital Flows: Risk Sharing Through Foreign Direct Investment,” Journal of International Economics 61, 353-383, 2003.
Paper presents new evidence that foreign direct investment is linked to a country's degree of financial constraints and explains why foreign direct investment is less volatile than other flows.
“On the Dynamics of Trade Reform,” (with Sergio Rebelo) Journal of International Economics 51, 21-47, 2000.
Models the implication of fixed costs in delaying the effects of trade reforms.