Igor Makarov

London Business School
Regent's Park, London NW1 4SA, UK
Tel: +44 (0)20 7000 8265
Fax: +44 (0)20 7000 8201
Email: imakarov(at)london(dot)edu



Curriculum Vitae

Published Papers

CDS Auctions , (with M. Chernov and A. Gorbenko), Review of Financial Studies, accepted for publication.

- NASDAQ OMX Award for the best paper in asset pricing at the WFA 2012.
- Media coverage: Bloomberg brief, 7 October 2011.

Equilibrium Subprime Lending, (with G. Plantin), Journal of Finance, forthcoming.

Forecasting the Forecasts of Others: Implications for Asset Pricing, (with O. Rytchkov), Journal of Economic Theory 147, (2012).

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). Lead article, inaugural issue.

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).

Working Papers

Deliberate Limits to Arbitrage , (with G. Plantin). [Latest version May 2012].

Abstract: This paper develops a model in which arbitrageurs are collectively unconstrained, but may still prefer to incur individual limits to arbitrage rather than make full use of their combined resources. These deliberate limits arise because the communication of an arbitrage position reveals the underlying idea, which creates future competition in the absence of relevant property rights. We allow arbitrage opportunities to vary along two dimensions: the ease with which they can be identified and the speed at which they mature. We find that deliberate limits to arbitrage arise for opportunities in the mid-range of the maturity dimension. This range widens when the opportunities are easier to find. Our results thus offer a set of theoretical predictions about the arbitrage trades that are likely to exist in the market.

Rewarding Trading Skills Without Inducing Gambling , (with G. Plantin). [Latest version October 2012].

Abstract: This paper develops a model of active asset management in which fund managers may forego alpha-generating strategies, and prefer instead to take negative-alpha trades that enable them to temporarily manipulate the investors' perception of their skills. We show that such "fake alpha" is optimally generated by taking on hidden tail risk, and that it is more likely to occur when fund managers are impatient, their trading skills are scalable, and generate a high profit per unit of risk. We exhibit long-term contracts that deter this behavior by dynamically adjusting the dates at which the manager is compensated in response to her cumulative performance.

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.

Teaching

Derivatives
Finance I


Updated October 2012