Research

Institutional Investors, Heterogeneous Benchmarks and the Comovement of Asset Prices 

We study the equilibrium implications of a multi-asset economy in which asset managers’ performance is tied to different benchmarks, reflecting heterogeneity in their investment mandates. Fluctuations in the capital asset managers invest for benchmarking purposes, scaled by the size of the economy, induce price pressure that results in negative spillovers across assets. We characterize a rich structure of asset price comovement within and across benchmarks by analyzing shock elasticities and cross-elasticities of price-dividend ratios. Evidence on the heterogeneity of mutual fund mandates and the benchmarking-induced predictability of return comovement across cap-style and industry-sector portfolios corroborates the model assumptions and predictions. 

Asset Pricing Implications of Heterogeneous Investment 

The paper shows that differences in investment horizons between short-term asset managers and long-term value investors rationalize the empirical puzzle stating that short-term dividend strips' risk premium, volatility, and Sharpe ratio are higher than their long-term counterparts.  

Listed on SSRN's recent top ten download list for Other Investments Topic

Financing Innovation with Future Equity 

Early-stage firms do not expect to generate cash flows, leading to difficulties in assessing their valuations and signing equity rounds. In these cases, entrepreneurs attain resources against future equity --- a promise for equity when expected cash flows jump. When there is moral hazard friction, these contracts are optimal for motivating entrepreneurs to develop innovative technologies, while a traditional equity round is suboptimal, even with agreement on valuations. Lastly, we introduce the implied probability of success --- a measurable risk estimate determining the breakthrough probability. We demonstrate its use to empirically estimate investors' skills and correct selection bias in realized returns. 

Listed on SSRN's recent top ten download lists for Information Asymmetry Models and Science & Technology Topics

Cryptocurrency, Mining Pools' Concentration, and Asset Prices

The paper shows that mining pools' concentration amplifies cryptocurrency volatility and depresses its prices, even when we introduce a pricing bubble. The model builds on the international finance asset pricing literature and connects well with established asset pricing theories.

Asset Pricing Implications of Risk-on and Risk-off Incentives 

The paper shows that mutual funds managers’ incentives contracts lead to momentum and reversal in asset returns. 

Listed on SSRN's recent top ten download lists for several topics