Iván Alfaro
Contact:
Department of Finance
BI Norwegian Business School
Nydalsveien 37, 0442, Oslo, Norway
Email:
ivan.alfaro[at] bi [dot] no
I am an Assistant Professor of Finance at BI Norwegian Business School in Oslo, Norway. I graduated with a Ph.D. in Finance from the Fisher College of Business, The Ohio State University. My research interest includes examining the effects of uncertainty on firms and households, production-based asset pricing, and international finance.
I have refereed for the Journal of Political Economy, The Review of Financial Studies, Journal of Financial Economics, Management Science, American Economic Journal: Macroeconomics, Quantitative Economics, Journal of Empirical Finance, Review of Economic Dynamics, Economics Letters, International Economic Review, Financial Innovation.
Academic Research - Papers
The Finance Uncertainty Multiplier -- Journal of Political Economy, Volume 132, Number 2, February 2024 (with Nick Bloom [Stanford] and Xiaoji Lin [Minnesota]) [DATA UPDATED TO 2023: firm-level instruments for uncertainty] [CODE: Empirics replication code] [CODE: Matlab model code]
Abstract: We show how real and financial frictions amplify, prolong and propagate the impact of uncertainty shocks. We first use a novel instrumentation strategy to address endogeneity in estimating the impact of uncertainty, by exploiting differential firm exposure to exchange rate, policy, and energy price volatility in a panel of US firms. Furthermore, using common proxies for financial constraints, we show that ex-ante financially constrained firms cut their investment more than unconstrained firms following an uncertainty shock. We then build a general equilibrium heterogeneous firms model with real and financial frictions. We show that adding financial frictions: i) amplifies uncertainty shocks by doubling their impact on output; ii) increases persistence by extending the duration of the drop by a half; and iii) propagates uncertainty shocks by spreading their impact onto financial variables. These results highlight why in periods of greater financial frictions uncertainty can be particularly damaging.
Firm Uncertainty and Household Spending -- Revise&Resubmit (with Hoonsuk Park [University of Melbourne])
*Prize for Best Paper at The Fourteenth Conference on Asia-Pacific Financial Markets (CAFM) Seoul, Korea, December 6~7, 2019 (US$2,000)
*Semifinalist for Best Paper Award in Corporate Finance at the 2021 Financial Management Association Annual Meeting
Abstract: We map rich micro-data from financial accounts of US households to employers listed in the US stock market. Using banking and credit card transaction data, we test whether households adjust their spending in response to labour-income uncertainty, as proxied by employer-specific option-implied volatility. A 10 percent change in firm uncertainty leads households to change their average monthly spending over the next 6-months by -0.95 percent. This negative second-moment firm uncertainty effect is larger than the positive first-moment effect of firm stock returns. The employer-specific effect is robust to both industry- and aggregate-level volatility effects. The intensity of the spending response increases in the forecast horizon window, up to nine months. The spending response is more pronounced for low- and middle-income households, and for households that work at firms that recently had low employee growth, high CAPM Beta, and low Tobin's Q. Additionally, household spending shows an asymmetric response to `good' and `bad' uncertainty.
Production-Based Exchange Rates: The q-Theory of Multinationals -- (revised June 2024) Under review
Abstract: I derive a novel production-based asset pricing result that relates exchange rates to the intertemporal marginal rates of transformation of capital (i.e., returns on investment) within multinational firms with headquarters at home and foreign affiliates abroad. This q-theory of multinationals is analogous to a standard international consumption-based model, but uses multinational producers and production functions rather than consumers and stochastic discount factors. Its structural estimation infers exchange rates from US multinational aggregates on real investment, output, and capital stocks. Tested across 44 countries since the 1980s, it successfully prices cross-sectional carry trade spreads through the fundamentals of US foreign affiliates.
Decomposing and Reassembling the Investment CAPM: The Role of Intangible Capital -- (August 2024) (with Alessandro Graniero [BI Norwegian] and Kevin Schneider [University of Cambridge])
Abstract: We decompose cum-dividend stock returns into capital gains and dividend yields and assess the performance of investment-based asset pricing models to match their average cross-section. Even when directly targeting the return components, our structural estimations of state-of-the-art models reveal surprisingly large pricing errors in both capital gains and dividend yields. Incorporating intangible capital as a second capital input factor and refining the accuracy of corporate dividend yield measurements significantly enhances the pricing performance of the model. Our model goes a long way in resolving several further challenges posed to investment-based asset pricing.
Abstract: Recent models with Kreps-Porteus [1978] recursive preferences highlight the role of long-run mean risk in accounting for many stylized facts in international finance and international macroeconomics. These recursive preferences are a special case of the generalized disappointment-aversion preferences (GDA) recently introduced by Routledge and Zin [2010]. I examine GDA preferences in a setting that exhibits both country-specific and global economic uncertainty in a fully specified production economy. By nature of the GDA preferences, economic uncertainty plays a more important role than long-run mean risk and is the main source behind time-variation in the probability of disappointing economic outcomes. This time-varying probability drives productivities, risk-sharing arrangements between representative agents, and exchange rate movements. The model highlights how domestic and international uncertainty is relevant for asset prices and cross-border flows. I present the model with two countries, two goods, and asymmetric investment frictions.
Work in Progress
Multinational Firm-level Dynamics of Production and Exchange Rates
Business Groups, Media Ownership, and Media Bias (with Isil Erel [Fisher OSU] and Serdar Dinc [Rutgers])
Exposure to Macroeconomic Fundamentals and Stock Returns
Presentations: Seminars & Conferences
Financial Management Association International Annual Meeting, 2024
Stanford Institute of Theoretical Economics, Asset Pricing Session, Stanford University, 2024
University of Oxford Saıd–VU SBE 2024 Macro-finance Conference
Norwegian School of Economics, 2024
Finance Forum of the 2024 Annual Meeting of the Spanish Finance Association, 2024
Universidad de La Laguna, Tenerife, 2024
University of Oslo, 2024
BI-Swedish House of Finance Conference in Asset Pricing and Financial Econometrics, 2023
Workshop on Production-based Asset Pricing, BI Norwegian Business School, 2023
Oslo Macro Group Seminar, 2022
Norges Bank, 2022
University of Stavanger, 2022
NBER Corporate Finance Program Meeting Spring, 2021
Western Finance Association Annual Meeting, 2021
University of Cambridge, 2021
Financial Management Association International Annual Meeting, 2021
Oslo Macro Group Seminar, 2021
American Finance Association Annual Meeting, 2021
European Financial Association Annual Meeting, 2020
Oslo Macro Workshop, 2020
SFS Cavalcade North America, 2020
Centre for Economic Policy Research Conference on New Consumption Data, 2020
The Ohio State University 2020 Alumni Finance Conference, 2020
HEC Paris 2020 Spring Finance Conference, 2020
Midwest Finance Association Annual Meeting, Chicago, 2020
NFN Young Scholars Nordic Finance Workshop, Stockholm, 2019
Stanford Institute of Theoretical Economics, Stanford University, 2019
NBER Summer Institute, 2019
Workshop on Production-based Asset Pricing, BI Norwegian Business School, 2018
Adam Smith Workshop in Asset Pricing, LBS, London, 2018
Society for Nonlinear Dynamics and Econometrics, Tokyo Japan, 2018
American Finance Association Annual Meeting, Philadelphia, 2018
European Finance Association Annual Meeting, Mannheim, 2017
Society for Economic Dynamics, Edinburgh, 2017
Midwest Finance Association, Chicago, 2017,
Workshop on Time Varying Uncertainty in Macro, University of St. Andrews, Scotland, 2017 Stanford Institute of Theoretical Economics, Stanford University, 2016
Macro Finance Society, University of Chicago, 2017
The Charles A. Dice Center Seminar, The Ohio State University, 2016
Stanford Institute of Theoretical Economics, Stanford University, 2015
The Charles A. Dice Center Corporate Finance Conference, The Ohio State University, 2015
Academic Discussions
Finance Forum of the 2024 Annual Meeting of the Spanish Finance Association, 2024
European Finance Association Annual Meeting, Amsterdam Netherlands, 2023
BI-Swedish House of Finance Conference in Asset Pricing and Financial Econometrics, 2023
Workshop on Production-based Asset Pricing, BI Norwegian Business School, 2023
Workshop on Production-based Asset Pricing, BI Norwegian Business School, 2021
Swedish House of Finance 9th National PhD Workshop in Finance, 2020
BI-SHoF Conference in Asset Pricing and Financial Econometrics
BI Norwegian Business School, 2019
Workshop on Production-based Asset Pricing, BI Norwegian Business School, 2019
Workshop on Production-based Asset Pricing, BI Norwegian Business School, 2018
European Finance Association Annual Meeting, Warsaw Poland, 2018
Workshop on Production-based Asset Pricing, BI Norwegian Business School, 2017
Grants, Honors, and Awards
Research Grant from the Provost for Research and Academic Resources, 2020, 2022, 2023, 2024
Prize for Best Paper at The Fourteenth Conference on Asia-Pacific Financial Markets (CAFM) Seoul, Korea, December 6~7, 2019 (US$2,000)
Macro Finance Society 8th Workshop, Sloan Foundation, Ph.D Student Travel Grant, 2016
Stanford Institute of Theoretical Economics, Travel Grant, 2016
Charles A. Dice Center, The Ohio State University, Seminar Travel Grant, 2016
Becker-Friedman Institute, University of Chicago, Travel Grant, 2015
American Finance Association, Doctoral Student Travel Grant, 2015
Education
The Ohio State University - Ph.D. in Finance, 2017
INCAE Business School - MBA, 2007
IE Business School - International MBA Exchange Program, 2006
Galileo University - B.S., Engineering and Computer Science, 2005
Non-Refereed Publications
"SMEs as Backbone of Economies: Opportunities, Constraints and Challenges". INCAE Business Review, Jan-April Edition, Vol. 1. No. 10, 2010 [with Anna Lucia Alfaro and Luis Noel Alfaro Gramajo]
"The Case of BANRURAL: A Development Bank". INCAE Business Review, Jan-April Edition, Vol. 1. No. 10, 2010 [with Anna Lucia Alfaro]
Teaching Experience
BI Norwegian Business School
Theory of Financial Markets (Masters of Finance Program), Fall 2017 & 2018, BI Norwegian Business School
Strategic Asset Allocation (Masters of Finance Program), Fall 2019, BI Norwegian Business School
Financial Modeling in Practice (Bachelors in Business and Finance), Spring 2021-2024, BI Norwegian Business School
The Ohio State University, Undergraduate
Investment I, Spring 2015, Department of Finance, The Ohio State University
Problems and Policies in World Population, Food, and Environment, Summer 2012, Department of International Studies and AEDE, The Ohio State University