Iván Alfaro


Department of Finance

BI Norwegian Business School

Nydalsveien 37, 0442, Oslo, Norway


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 - Working Papers

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. 

                *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.

Abstract: I derive a novel production-based asset pricing identity that relates exchange rate appreciation 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 in 44 countries with data since the 1980s, the model successfully prices the cross-section of currency carry trade, with spreads explained by their mapping to fundamentals across US foreign affiliates.

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

Presentations: Seminars & Conferences

Academic Discussions

Grants, Honors, and Awards


Non-Refereed Publications

Teaching Experience