Welcome! I am an associate professor of finance at the University of Chicago Booth School of Business. For more information, please see my CV.
Working Papers
Equity Duration and Interest Rates (with Eben Lazarus), April, 2025, Preliminary draft.
How do changes in interest rates affect stock prices? It depends on why interest rates change. We identify “pure discount rate shocks,” which are movements in interest rates driven by neither changes in expected growth nor risk. Pure discount rate shocks explain 80% of changes in equity valuations in G7 countries over the last 30 years.
Firms’ Perceived Cost of Capital (with Kilian Huber), June 2024, Slides. Revision requested, Quarterly Journal of Economics
Firms’ perceived cost of capital differs from expected returns in financial markets. The differences distort the allocation of capital and reduce TFP by 5% in a standard model.
See website for cost of capital project.
Sticky Discount Rates (with Masao Fukui and Kilian Huber), November 2024.
Firms’ nominal discount rates are sticky with respect to expected inflation. Sticky discount rates make firms’ investment demand increase when inflation increases, leading to a distinct source of monetary non-neutrality. Online supplement.
See website for cost of capital project. BFI brief. Featured in FT.
Climate Capitalists (with Kilian Huber and Simon Oh), December 2024. Slides.
Green firms think their cost of capital is substantially lower than brown firms do. The difference incentivizes firms to invest in the green transition. 2024 Moskowitz Prize.
See website for cost of capital project. Kellogg brief. BFI brief. Featured in Mark Hulbert.
Forward Return Expectations (with Mihir Gandhi and Eben Lazarus), March 2025. Online Appendix. Slides. Revision requested, Review of Financial Studies.
Investors overestimate forward expected returns during market crashes. The forecast errors can explain half of the stock markeret drop during the GFC and all the of the drop during Covid-19.
Rainy Day Stocks (with Robin Greenwood), January 2017. The performance of equity risk factors varies between good and times.
Publications
Corporate Discount Rates (with Kilian Huber), March 2025. Slides, Forthcoming, American Economic Review.
New dataset on firms’ perceived cost of capital and discount rates. Firms’ discount rates do not move one-for-one with the perceived cost of capital, leading to time-varying discount rate wedges that account for low US investment in recent decades.
See website for cost of capital project. Non-technical research brief from BFI. Featured in Barrons, Matt Levine, FT, Vox EU, Hobart,
Higher-Moment Risk (with Christian Skov Jensen), December 2023, Forthcoming, Journal of Finance.
New stylized facts about variation in higher-order moments of stock returns. They are inconsistent with leading disaster-based models and alter our understanding of tail risk.
Conditional Risk (with Christian Skov Jensen), 2024, Journal of Financial Economics, 162. Slides.
Conventional wisdom on conditional risk is flawed: time variation in betas could, in principle, explain all of the alpha to trading strategies — and in practice it has a meaningful impact.
Selfish Corporations (with Emanuele Colonnelli and Tim McQuade), 2024, Review of Economic Studies, 91 No. 3, 1498-1536.
The public demands corporations to behave better within society. This big business discontent can influence public support for economic policies and cause firms’ political communication to backfire.
Find the videos used in our survey here.
Financial Markets and the COVID-19 Pandemic (with Ralph S. J. Koijen), 2023, Annual Review of Financial Economics, 15, 69-89.
We review the literature on the impact of COVID-19 on financial markets. We argue that we need new asset pricing models to account for the price-fluctuations observed during the pandemic.
Duration-Driven Returns (with Eben Lazarus), 2023, Journal of Finance, 78(3), 1393-1447.
The major equity risk factors invest in short-duration firms and can therefore be explained by models that produce premia on near-future cash flows. New data provide identification.
Featured in Financial Times, Alpha architect
Time Variation of the Equity Term Structure, 2021, Journal of Finance 76(4), 1959-1999.
I study and reconcile time variation in the equity term structures of returns and yields. New model to account for the facts.
Implied Dividend Volatility and Expected Growth (with Ralph S.J. Koijen and Ian W. Martin), 2021, American Economic Association Papers & Proceedings, 111, 361-365.
The implied volatility from dividend derivatives can be used to estimate growth uncertainty, expected returns on dividend claims, and expected growth in real time.
Coronavirus: Impact on Stock Prices and Growth Expectations (with Ralph S. J. Koijen), 2020. Review of Asset Pricing Studies 10 (4), 574-597. Lead paper.
Methods for understanding movements in stock prices and recovering growth expectations in real time. The stock market crash around the coronavirus outbreak was too severe to be justified by the drop in firms’ expected earnings.
Featured in: Forbes, Financial Times, Vox, Seeking alpha, Pro market
Betting Against Correlation: Testing Theories of the Low-Risk Effect (with Cliff Asness, Andrea Frazzini, and Lasse Heje Pedersen), 2020. Journal of Financial Economics 135 (3), 629-652.
Fama-DFA Prize 2020 (second prize), Roger F Murray Price 2018
Two new factors separate competing theories for the low-risk effect: BAC is strong, consistent with leverage constraints; SMAX works too, consistent with lottery demand. Featured in: WSJ, Institutional Investor, Alpha Architect, Barrons, Cliff’s Perspective
