Research
Asset Pricing | Investments | Financial Econometrics
This is my personal website and all views are my own and do not necessarily reflect the views of the Bank of England or state Bank of England policy. Any papers should therefore not be reported as representing the views of the Bank of England or members of the Monetary Policy Committee, Financial Policy Committee or Prudential Regulation Committee.
Publications and Accepted Submissions:
1) Do Personal Taxes Affect Investment Decisions and Stock Returns? Accepted for Publication in the Journal of Financial Economics
[Bank of England Staff Working Paper 988] [SSRN] [Bank Underground Post] [Bloomberg Press Coverage]
Presented at: [2023] European Economic Association - Econometric Society European Meeting (Barcelona) [2021] Bank of England, University of Bristol, ESCP Business School, Paris-Dauphine [2020] Computational & Financial Econometrics Conference (London), Trans-Atlantic Doctoral Conference (LBS, cancelled), Queen Mary University of London
Abstract: This paper studies the causal effects of personal investment taxes on stock returns and the financial decisions of companies. I exploit a change in legislation in 2013 which allowed stocks listed on the Alternative Investment Market, a sub-market of the London Stock Exchange, to be held in capital gains and dividend tax-exempt investment accounts for the first time. Using a difference-in-differences approach, I find that excess stock returns decreased by their pre-legislation change effective tax rate, and that firms adjusted their capital structure and increased their spending on dividends, capital, and labour, in line with the ‘traditional view’ of corporate investment.
Working Papers:
2) Equity Risk Premium: What Can We Learn From Machine Learning? with Elise Gourier (ESSEC) and Pietro Sparago (LSE)
Presented at: [2023] Bank of England
3) QE vs QT: Who is In When the Central Bank is Out? with Iryna Kaminska (BoE) and Walker Ray (LSE)
Presented at: [2023] European Economic Association - Econometric Society European Meeting (Barcelona), Bank of England
4) Dealer Intermediation and Shock Propagation, with Anil Kashyap (Chicago), Rodrigo Guimaraes (BoE), Gabor Pinter (BIS), and Jean-Charles Wijnandts (BoE)
Presented at: [2024] Chicago Booth Brownbag
5) Above and Beyond Interest Rates: Risk Taking at the Zero Lower Bound, with Filippo Busetto (BoE), Radu Cristea (Cambridge), and Iryna Kaminska (BoE)
Presented at: [2023] IMF, Bank of England
Other Papers:
6) Option-Implied Price of Risk [SSRN]
Presented at: [2019] University of California Los Angeles, American Finance Association poster session (Atlanta) [2018] European Economic Association - Econometric Society European Meeting (Cologne), Trans-Atlantic Doctoral Conference (LBS) [2017] Computational & Financial Econometrics Conference (London), Queen Mary University of London, Ecosta (Hong Kong)
Abstract: I use index prices and options to estimate the pricing kernel's elasticity, which equals the market price of risk. I show that my estimate predicts future market returns, is priced in a cross-sectional analysis, and that it is highly correlated to business cycle variables. Building on the external habits model of Campbell and Cochrane (1999), I rationalize my results by assuming a time-varying relationship between consumption growth and market returns, and therefore introduce a new way of estimating the latent surplus consumption ratio without using problematic consumption data. My results provide novel empirical support for consumption-based asset pricing models.
7) Pricing of Idiosyncratic Equity and Variance Risks, with Elise Gourier
Presented at: [2018] Computational & Financial Econometrics Conference (London) [2016] American Finance Association (Boston), European Finance Association (Oslo)
Abstract: This paper decomposes the risk premia of individual stocks into contributions from systematic and idiosyncratic risks. We introduce an affine jump-diffusion model, which accounts for both the factor structure of asset returns and that of the variance of idiosyncratic returns. The estimation is performed on a time series of returns and option prices from 2006 to 2012. We find that investors not only require compensation for the systematic movements in returns and variance, but also for non-hedgeable idiosyncratic risks. For the stocks of the Dow Jones, these risks account for an average of 50% and 80% of the equity and variance risk premia, respectively. We provide a categorization of sectors based on the risk profile of their Exchange Traded Funds and highlight the high prices of idiosyncratic risks in the Energy, Financial and Consumer Discretionary sectors. Other sectors are found to be appealing alternatives for investors who are not willing to be exposed to non-diversifiable risks.