Alexandre Corhay

Assistant Professor of Finance
Rotman School of Management
University of Toronto

105 St. George Street
Toronto, ON M5S 3E6


Competition, Markups and Predictable Returns,with Howard Kung and Lukas Schmid.
Forthcoming, Review of Financial Studies

     Working Papers

Revise & Resubmit, Review of Financial Studies
Risk Management Conference, WFA, Fixed Income and Financial Institutions Conference, SFS Cavalcade, Young Scholars Finance Consortium, Econometric Society North-America, CICF, European Economic Association - European Econometric Society, NUS Annual Risk Management Conference.
This paper examines the relation between industry competition, credit spreads, and levered equity returns. I build a quantitative model where firms make investment, financing, and default decisions subject to aggregate and idiosyncratic risk. Firms operate in heterogeneous industries that differ by the intensity of product market competition. Higher competition reduces profit opportunities and increases default risk for debtholders. Equityholders are protected against default risk due to the option value arising from limited liability. In equilibrium, competitive industries are characterized by higher credit spreads, but lower expected equity returns. I find strong empirical support for these predictions across concentration terciles.

Discount rates, debt maturity, and the fiscal theory, with Thilo Kind, Howard Kung, and Gonzalo Morales.
Revise & Resubmit, Journal of Finance
CEPR European Summer Symposium, Econometrics Society, Macro Finance Workshop, WFA, European Economic Association, CAPR Workshop on Investment and Production Based Asset Pricing, SED, Advances in Fixed Income and Macro-Finance Research, MMCI Research Conference, CEBRA Conference.

This paper explores interactions between the term structure and government debt maturity in the fiscal theory using a macroeconomic model. As the expected returns of government liabilities differ across maturities, rebalancing the maturity structure changes the government cost of capital. In the .fiscal theory, changes in discount rates affect inflation through the intertemporal government budget equation. When the nominal yield curve is upward- (downward-) sloping, the fiscal discount rate channel implies that shortening maturity dampens (amplifies) the stimulative effects of quantitative easing policies. These discount rate effects can help explain the weak inflation responses following the quantitative easing operations.

Strategic product diversity, with Nuno Clara, and Howard Kung.

We document a decreasing pattern in product concentration within multiproduct firms since the early 2000s. Larger firms are increasingly selecting a more diverse product range outside of their core competence. Expanding firm boundaries is closely intertwined with rising industry concentration as industry leaders are consolidating market power by growing horizontally through product creation. We build a general equilibrium model of multi-product firms featuring endogenously fluctuating firm and industry boundaries. External financing costs are quantitatively important for explaining the negative relation between product and industry concentration. The growing importance of the intra-firm extensive margin contributes to the aggregate productivity slowdown and declining trend in idiosyncratic volatility.

Q: Risks, Rents, or Growth?with Howard Kung and Lukas Schmid.

ITAM Finance conference, Mitsui Finance Symposium, EFA, Tepper/LAEF Macro-Finance Conference, AFA, Finance Down Under Conference.

What drives the recent rise in aggregate valuation ratios despite a slowdown in productivity growth? We address this question by estimating an innovation-driven endogenous growth model featuring realistic and endogenously fluctuating risk premia and markups. Our baseline estimates highlight the importance of rising market power and a contraction in aggregate demand for jointly explaining (i) declining aggregate growth associated with slumping physical investment and innovation, (ii) increasing risk premia and higher macroeconomic uncertainty, and (iii) rising Tobin's Q and price-dividend ratios. Nominal rigidities amplify the effects of market power while helping to rationalize low inflation and increasing bond valuations.

Working in Progress

Inflation risk and the finance-growth nexuswith Jincheng Tong.