Assistant Professor, September 2017 – present
Visiting Assistant Professor, August 2015 – August 2017
Visiting Scholar, September 2014 – August 2015
Doctoral Student and Postdoctoral Fellow, December 2008 – August 2014
Ph.D. in Finance (grade: summa cum laude), October 2013
Visiting Ph.D. Student, September 2011 – January 2012
Master of Science, Mathematics, November 2008
We construct a new measure that captures the disparity between the market reaction to earnings information and the earnings surprise ("Return-Earnings Gap", "REG"). High REG scores positively predict analyst forecast errors and firm mispricing (overvaluation) scores, especially for build-up anomalies. Analyst forecast errors are slower to converge when REG provides confirming information. In turn, REG is positively predicted by analyst forecasts errors and higher mispricing, leading to a continuation of firm overvaluation over a few quarters. Overall, our results reveal how the market’s (mis)reaction feeds back into the belief formation of analysts, which partially explains the slow correction of firm mispricing.
Presentations: China International Conference in Finance 2022 (scheduled), Midwest Finance Association 2022, TBEAR Network Asset Pricing Workshop 2022
In equity option markets, traders face margin requirements both for the options themselves and for hedging-related positions in the underlying stock market. We show that these requirements carry a significant margin premium in the cross-section of equity option returns. The sign of the margin premium depends on demand pressure: If end-users are on the long side of the market, option returns decrease with margins, while they increase otherwise. Our results are statistically and economically significant and robust to different margin specifications and various control variables. We explain our findings by a model of funding-constrained derivatives dealers that require compensation for satisfying end-users' option demand.
Presentations: American Finance Association 2018, European Finance Association 2017, SFS Finance Cavalcade 2017, Midwest Finance Association 2017, Swiss Society for Financial Market Research 2017, Paris December Finance Meeting 2016, German Finance Association 2016
This paper analyzes the climate-related transition from brown towards green industries through the lens of the oil sector. We show that the relative valuations of oil firms have decoupled from the oil price around the year 2000, and they have declined by one third with the rise of climate change risk awareness. A macro asset pricing model matches this devaluation and allows us to characterize asset prices, risk premia, and macroeconomic quantities over the transition. The model predicts that carbon premia become more positive as the climate transition proceeds.
Presentations: OCC Symposium on Climate Risk in Banking and Finance 2022 (scheduled), Financial Management Association 2021, Global Research Alliance for Sustainable Finance and Investment 2021, Central Bank Research Association 2020, Toulouse Conference on the Economics of Energy and Climate 2019, Commodity and Energy Markets Association 2019
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What is the role of macroeconomic fluctuations and of oil supply shocks for oil prices, volatilities, and risk premia? I analyze this question within a general equilibrium asset pricing framework with an oil sector. The benchmark calibration shows that short-run macroeconomic growth shocks and oil productivity shocks account for the largest part of the volatility in the oil market and are responsible for the mean-reversion behavior of oil prices. On the other hand, long-run macroeconomic growth risks are the main driver of risk premia on oil futures and their upward-sloping term structure, which is observed in the data. The model consistently explains quantity and price dynamics in the oil sector and in the general macroeconomy, and furthermore sheds light on the intricate relationship between oil and equity returns.
Presentations: NBER Economics of Commodity Markets Meeting 2016, SFS Finance Cavalcade 2016, Northern Finance Association 2016, Financial Management Association 2016, SAFE Asset Pricing Workshop 2015, UCLA IPAM Commodities Workshop 2015, German Finance Association 2015
This paper investigates the costs of oil shocks for the economy's welfare. Using a VECM, we empirically show that domestic US oil production shocks only have a weak and temporary impact on macroeconomic variables, while the effect of global oil price shocks is persistent and economically and statistically significant. We rationalize these findings within a calibrated two-sector model in which oil is an input factor for industrial production and also part of the household's consumption bundle. Based on the model, we show that oil shocks are associated with considerable welfare costs for oil-importing economies. Our framework enables several experiments regarding the welfare implications of a reduced oil share in production and consumption, the strategic petroleum reserve, and technological innovations such as fracking.
Presentations: Society for Economic Dynamics 2017, Commodity and Energy Markets Annual Meeting 2017, Econometric Society North American Summer Meeting 2016, Commodity Markets Conference 2016, World Finance Conference 2016
We examine how investor demand for leverage shapes asset management fees. We show that in the sample of U.S. equity mutual funds: (1) fees increase in fund market beta precisely for beta larger than one; (2) this relation becomes stronger and high-beta funds experience larger inflows when leverage constraints tighten; and (3) low net alphas are especially common among high-beta funds. These results are consistent with a model in which asset managers compete for leverage-constrained investors with heterogeneous risk aversion. The asymmetric relation between betas and fees also extends to the HML and SMB factors.
The option-implied oil price volatility is a strong negative predictor of economic growth beyond traditional uncertainty measures. A rise in oil volatility also predicts an increase in oil inventories and a reduction in oil consumption, in line with a propagation channel through the oil sector. We explain these findings within a macro-finance model featuring stochastic uncertainties and precautionary oil inventories: firms increase oil inventories when oil volatility rises, which curbs oil use for production and depresses economic activity. In the model and the data, aggregate equity prices fall at times of high oil volatility, with differential exposures across economic sectors.
The design of environmental trading systems induces specific features of the emission permit price dynamics. In this paper, we evaluate the performance of reduced-form models for emission markets that capture these features in a simplified way and are still feasible for calibration to permit spot, futures, and option prices. Using market data from the European Union Emissions Trading System as the world's largest environmental market, we show that appropriately specified reduced-form models outperform standard approaches with respect to both the historical fit to futures prices and the option pricing performance. Moreover, the performance of reduced-form models critically depends on their consistency with the design of the emission trading system.
This article presents a stochastic equilibrium model for environmental markets that allows us to study the characteristic properties of emission permit prices induced by the design of today’s cap-and-trade systems. We characterize emission permits as highly nonlinear contingent claims on economy-wide emissions and reveal their hybrid nature between investment and consumption assets. Our model makes predictions about the dynamics and volatility structure of emission permit prices, the forward price curve, and the implications for option pricing in this market. Empirical evidence from existing emissions markets shows that the model explains the stylized facts of emission permit prices and related derivatives.
This paper investigates the impact of the yearly announcement of realized emissions on the European carbon permit market. We find that this event generally leads to significant absolute abnormal returns on the event day, which are accompanied by increased trading volumes and high intraday volatilities. To the contrary, trading is particularly calm on the days before the event, as suggested by significantly lower trading volumes and volatilities. The high event-day volatility is expected by the market and incorporated in emission permit option prices. In line with these significant market reactions, we provide evidence that the emissions announcement has an outstanding information content for the market compared to other relevant news events.
This thesis studies the stochastic behavior of emission permit prices and its implications for related derivatives from a theoretical and an empirical perspective. It presents an equilibrium model for cap-and-trade systems, evaluates the empirical performance of reduced-form models for emission permit prices, and studies the effects of the yearly emissions announcement event on the European market for carbon emissions.
Last update: May 2022