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Curriculum Vitae
Working Papers
Equilibrium Subprime Lending, (with G. Plantin). [Latest version December 2009].
Abstract: This paper develops an
equilibrium model of a subprime mortgage market. The model is analytically
tractable and delivers plausible orders of magnitude for borrowing capacities,
loan-to-income ratios, home prices, and default and trading intensities. We offer
simple explanations for several phenomena in the subprime market, such as the
prevalence of “teaser rates” and the clustering of defaults. In our model, the
degree of income co-movement among households plays an important role. We find
that both systematic and idiosyncratic income risks reduce debt capacities,
although through quite distinct channels, and that debt capacities and home
prices need not be higher when a larger fraction of income risk is
idiosyncratic.
Forecasting the Forecasts of Others: Implications for Asset Pricing, (with O. Rytchkov). [Latest version January 2009].
Abstract: We study rational
expectation equilibria (REE) in dynamic asset pricing models with
heterogeneously informed agents. The contribution of the paper is twofold.
First, we show that under mild conditions the state space of such models can be
infinite dimensional. This result indicates that the domain of analytically
tractable dynamic models with asymmetric information is severely restricted.
Second, we demonstrate that even though dynamics of stochastic supply place
significant restrictions on the possible sign of return autocorrelations, under
some circumstances asymmetric information can generate positive autocorrelation
in REE.
Sources of Systematic Risk, (with D. Papanikolaou). [Latest version January 2009]. Winner of Crowell Memorial Prize (second place), PanAgora Asset Management, 2007.
Abstract: Using the restrictions
implied by the heteroskedasticity of stock returns, we identify four factors in
the U.S. industry returns. The first correlates highly with the market
portfolio; the second is a portfolio of stocks that produce investment goods
minus stocks that produce consumption goods; the third differentiates between
cyclical and noncyclical stocks. The fourth, a portfolio of industries that
produce input goods minus the rest of the market, is a robust predictor of
excess returns on the market portfolio and bond returns. The extracted factors
are shown to contain significant information about future macroeconomic and
financial variables.
How to Reward Trading Skills without Inducing Gambling , (with G. Plantin). [Coming soon].
Published Papers
The Equity Risk Premium and the Risk-free Rate in an Economy with Borrowing Constraints, (with L. Kogan and R. Uppal) , Mathematics and Financial Economics 1, (2007)
An Econometric Analysis of Serial Correlation and Illiquidity in Hedge-Fund Returns, (with M. Getmansky and A. Lo) , Journal of Financial Economics 74, (2004)
Debt Overhang and Barter in Russia, (with S. Guriev and M. Maurel) , Journal of Comparative Economics, (2002)