Research

I. Information and Asset Pricing

Earnings growth uncertainty and the cross-section of equity valuation  (Job Market Paper)

Presented or scheduled at the NFA Conference (2022), SGF Conference (2022), World Finance Conference (2021), Midwest Finance Association (2021), EFMA Annual Meeting - Doctoral Workshop (2019), and at the Bank of Canada Graduate Student Paper Award (2019).

Abstract:  I develop an equity valuation model where investor learns about the unobservable expected earnings growth. Expected earnings growth can be more challenging to assess for some firms than others, depending on the available information. This implies cross-sectional differences in growth uncertainty. I provide a theoretically founded measure of growth uncertainty, which we structurally estimate at the firm level. I provide the first direct empirical evidence that higher growth uncertainty is associated with lower equity valuation in the cross-section. This paper thus contributes to a better understanding of the cross- section in equity valuation.

How Macro Announcements Revise Firm-Level Beliefs, with Leyla Han 

Abstract:  This paper identifies a new belief revision channel through which macroeconomic announcements affect the cross-section of stock returns: by retroactively changing investor interpretations of prior firm-specific cash flow news. When firms report earnings, investors form joint beliefs about firm-specific and aggregate components. Subsequent macro announcements reveal the aggregate state, prompting a reassessment of the firm-specific signal. We develop a general equilibrium model in which investors learn from both announcements and show that firms with recent earnings—especially those with high macro content—earn negative risk premia on macro days. Empirical evidence supports this prediction: these firms underperform compared to non-earnings firms, with the effect strongest among those whose earnings-day returns comove most with the market.​

Long-Run Risk Unwrapped: An Analytical Expression of the Wealth-Consumption Ratio, with Gabrielle Trudeau 

Abstract: We derive an analytical expression for the wealth-consumption ratio (wcr) in a representative agent model with recursive utility over consumption. Our expression assumes that the wcr is exponential affine in expected consumption growth and sets constraints on the mean-reversion of consumption growth. Our analytical expression for the wcr is nearly identical to the exact numerical solution.

II. Credit Risk and Exchange Rate

A Credit-Based Theory of the Currency Risk Premium, with Pasquale Della Corte and Alexandre Jeanneret (Journal of Financial Economics, 2023)

Presented at the AEA (2021), EFA (2020), AFA (2020),  ECB Exchange Rate Workshop (2019), NFA (2019), Vienna Symposium on Foreign Exchange Markets (2019), Risk Management Conference in the University of Singapore (2019), Asset Pricing Workshop in the University of York (2019), QES European Quantitative and Macro Investing Conference (2019),  Swiss Society for Financial Market Research (2019), CDI-Conference on Derivatives (2019). 

Abstract:  This paper uncovers a novel component for exchange rate predictability based on the price difference between sovereign credit default swaps denominated in different currencies. This new forecasting variable – the credit-implied risk premium – captures the expected currency depreciation conditional on a severe but rare credit event. Using data for 16 Eurozone countries, we find that the credit-implied risk premium positively forecasts the dollar-euro exchange rate return at various horizons. Moreover, a currency strategy that exploits the informative content of our predictor generates substantial out-of-sample economic value against the naïve random walk benchmark.

Option-Implied Local Currency Credit Spreads with Patrick  Augustin, Alexandre Jeanneret, and Manuel Sanchez-Martinez  (available upon request)

Abstract: Building on Culp et al. (2018), we develop a method to extract option-implied corporate credit spreads in both local (LC) and foreign (FC) currencies. Using FX and stock index options from 29 developed and emerging markets, we construct a dataset of matched LC and FC credit spreads that isolate the same underlying default risk. This design ensures that differences between FC and LC spreads reflect currency-specific risk premia, rather than liquidity, legal, or institutional factors, issues that can confound similar measures based on bond data. We document two main findings: (1) LC pseudo credit spreads significantly predict future economic activity at both the country and global levels, and (2) the FC-LC spread differential embeds a novel risk premium from option prices – capturing the cyclical property of exchange rates – that forecasts currency movements. These results underscore the importance of currency denomination in credit pricing and the potential for currency diversification in global credit markets.