Research

Publications

The Impact of Economic News on Bond Prices: Evidence From the MTS Platform, 2014, Journal of Banking and Finance, Vol. 49, 302-322.

Although there is an extensive literature on the impact of macroeconomic announcements on asset prices, the bond market has received less attention than the foreign exchange and equity markets, even less if we consider the European market. This paper uses high-frequency intra-day data over a three-year period to investigate the impact of regularly scheduled macroeconomic news and monetary policy announcements on the returns of the Italian government bond market, the largest one in the Euro-zone. With respect to the previous papers, we use a much broader set of announcements, 68, and a relatively novel dataset (MTS). We find that 25 news have a significant impact on bond returns and that almost all announcements are incorporated into prices within 20 min from the release.

Informed Trading in Parallel Bond Markets, 2015, Journal of Financial Markets, Vol. 26, 103-121

European government bond market segmentation has not been extensively investigated. I contribute to this scant literature by studying the market microstructure of the Italian government bond market, the largest one in the eurozone. Using a sequential trade model, I analyze the probability of informed trading (PIN) in the parallel trading of the same bond on two secondary electronic platforms: the inter-dealer MTS and the dealer-to-customer BondVision; an aspect that has never been investigated before. I find that the PIN is significantly lower in the dealer-to-customer segment than in the inter-dealer one.

Feedback quality and performance in organisations (with Michalis Drouvelis), 2022, The Leadership Quarterly, Vol. 33 (6)

The provision of feedback is fundamental for promoting employee performance in modern organisations; however, little is known about how the quality of feedback affects performance. We report an experiment where subjects perform a real-effort task repeatedly in a flat-wage environment which varies the quality of feedback across treatments. In the baseline treatment, subjects receive no feedback about their rank in their group. In the two main treatments, feedback quality varies in that subjects know (“High-Quality Feedback”) or do not know (“Low-Quality Feedback”) their exact rank in their group. We show that the quality of feedback is an important driver of productivity. Average performance is significantly higher for high-quality feedback than for low-quality or no feedback, where no significant overall performance differences are observed. Our results have significant implications for designing and implementing cost-effective policies within organisations. 

Dealing with "Do Not Know" Responses in the Assessment of Financial Literacy: The Use of a Sample Selection Model (with Anna Conte and Jacopo Temperini),  2024, International Journal of Financial Studies, Vol. 12 (3)

Financial literacy assessments typically rely on sample surveys containing sets of questions designed to gauge respondents’ comprehension of fundamental financial concepts necessary for making informed decisions. The answers to such questions, either categorical or continuous in nature, generally include a “Do not know” option. If those who choose the “Do not know” option are not a random sample of the population but exhibit peculiar characteristics, treating these observations as either incorrect responses or as missing data may distort the results regarding the determinants of financial literacy. A noteworthy case lies in the observation from survey studies that women tend to choose the “Do not know” option more frequently than men. In similar cases, treating the “Do not know” responses as incorrect answers increases the gender gap in financial literacy while treating them as missing values reduces the gap. We propose using a model with sample selection, which enables us to disentangle the inclination to answer “Do not know” from actual responses. By applying this model to a representative sample of the UK population, we do not find any systematic gender gap in financial knowledge. The study’s novel treatment of “Do not know” responses contributes valuable insights to the broader discourse on the determinants of financial literacy and the related gender-based differences. 

Anonymity in dealer-to-customer markets, (with Daniela Di Cagno and Emanuela Sciubba), 2024, International Journal of Financial Studies, 12(4), 119

We use a laboratory experiment to explore the effect of a change in pre-trade anonymity in a quote-driven dealer-to-customer market, organised as a request for quote (RFQ). We consider two treatments in which dealers interact with two types of customers (informed or uninformed). In the first treatment, there is no anonymity: dealers know whether the customer that sent them the request for quote is informed or uninformed. In the second treatment, there is complete anonymity: dealers do not know the type of customers they are interacting with. We find that anonymity improves price efficiency, whereas it does not adversely impact dealers’ trading profits. Our results contribute to the debate on transparency versus the adoption of anonymity in financial markets. 

Chronicles of Choice: Survey Insight into Intertemporal Preferences (with Anna Conte, Gianmarco De Santis, Giulia Melissari and Jacopo Temperini),  2024, Journal of Behavioral Economics for Policy, Vol. 8 (S2) 

This study utilises data from the 2020 Survey on Household Income and Wealth (SHIW) conducted by the Bank of Italy to investigate the determinants of individuals’ time-discounting behaviour, which plays a crucial role in economic decision-making. We explore the idea that financial literacy could mitigate higher discount rates, which usually lead to irrational behaviours. Our findings confirm this hypothesis, showing that individuals with a better grasp of compounded interest reduce their discount rates significantly. However, other aspects of financial literacy, such as inflation and risk diversification, do not affect discount rate preferences. We also consider the impact of the COVID-19 pandemic, finding that support measures may increase discount rates, possibly due to the heightened financial stress experienced by recipients.

Working Papers and Completed Papers

How do Gender Differences and Behavioural Traits Matter in Financial Decision-Making? Insights from Experimental and Survey Data (with Giuseppe Attanasi, Simona Cicognani and Maria Luigia Signore)

Several studies have investigated systematic gender differences in decision-making across various contexts. One core sector for observing gender disparities is the financial market, where investment choices often reveal distinct patterns based on gender. This study aims to explore the complex interplay between gender differences and financial investment decision-making within three distinct psychological domains of uncertainty. These domains are encapsulated in three aggregate indices: EU-consistency, Risk-consistency and Ambiguity-consistency. Based on a sample of approximately 1,100 Economics students from different Italian and French universities, our research combines experimental and survey data to examine how individuals' psycho-behavioral traits influence their real-life financial investment decisions, aiming to quantify the influence of gender differences. We discover, contrary to a deterministic link between gender and behavior, a nuanced context-dependent nature of gender-related traits. Gender alone cannot unequivocally predict diverse financial behaviors, emphasizing the need to consider contextual factors in decision-making. Furthermore, our research supports the existing evidence that female investors consistently demonstrate a lower likelihood of engaging in financially risky activities across certain financial domains. The implications of these gender differences are significant, as women's tendency to invest less in risky financial assets may limit their potential for accumulating greater wealth over time, especially considering lower labor income and an extended average lifespan. These findings highlight the need for tailored financial education and investment strategies that account for gender-specific uncertain attitudes. 

Dash and dine, for tomorrow we dice (with Anna Conte and Jacopo Temperini)

This study examines the impact of the COVID-19 pandemic on individual attitude towards risk by analysing data sourced from the Italian Survey on Household Income and Wealth, administered by the Bank of Italy. Leveraging the longitudinal structure of the dataset, we compare individuals’ risk attitudes in the period that precedes and during the pandemic. Our findings reveal noticeable differences. At the population level, we discern an overall increase in risk proneness. However, at the individual level, a more nuanced picture emerges: socio-economic and behavioural factors that expose individuals’ vulnerability to the pandemic result in a heightened aversion to risk. Conversely, factors potentially alleviating these challenging circumstances are often associated with greater risk tolerance. Through our analysis, we shed light on the evolving landscape of risk preferences and their ramifications for risky behaviour, offering valuable insights into the dynamics of risk attitudes and their implications for managing risk during extraordinary circumstances.

Matching risk attitude to investment behaviour: Insights from self-reported responses (with Anna Conte and Jacopo Temperini)

Using data from the 2004-2022 waves of the Italian Survey of Households Income and Wealth (SHIW), this paper evaluates the reliability of self-reported financial risk attitudes by comparing them with declared participation in financial markets. The survey allows respondents to self-assess their risk tolerance, specify the types of investments they hold (categorised as more or less risky), and report the corresponding amounts. The consistency observed across these three elements supports the reliability of the reported risk aversion levels. The findings contribute to the ongoing discussion in Experimental Economics methodology, demonstrating that self-reported measures can be reliable and robust when validated against real-world actions.

Social Incentives and Leadership by Example (with Edward Cartwright and Michalis Drouvelis)

Corporate philanthropy has been frequently used as a tool to motivate behaviour in modern organisations. Using a large sample of subjects from an online experiments (N=2,376), we study the impact of social incentives on leading-by-example in two separate studies. Study 1 considers treatments where leaders and followers are exogenously assigned to donate 0%, 20% or 40% of their income from a group project to charity. We find that the introduction of social incentives leads to a non-monotonic increase in contributions to the project for both leaders and followers. Study 2 examines behaviour in endogenous treatments where the assigned leaders choose the proportion of project income donated to charity. We show that social incentives increase contribution behaviour in a monotonic way. Consonant with previous literature, we find that part of our observed social incentive effects can be explained by shifts in beliefs.

Informed trading in a two-tier market structure under financial distress, (with Claudio Impenna)

The sovereign bond market has traditionally been the dominant segment of the euro area bond market and it is one of the largest in the world. Secondary market liquidity is an essential feature of a well-functioning and resilient government bond market. The secondary market of the European sovereign bonds is organised as a two-tier electronic market, with an inter-dealer and a dealer-to-customer segment. The previous literature uses a sequential trade model, to investigate the probability of informed trading (PIN) in the parallel trading of the same bond on these two venues, finding that the PIN is significantly lower in the dealer-to-customer segment than in the inter-dealer one. We contribute to the existing literature analysing this two-tier market for a longer period, which includes episodes of financial distress in the Eurozone and various ECB interventions to try to contain the crisis. We show that the crisis deeply affected the two segments of the market, reverting the conclusion about the presence of informed traders in the two platforms for some periods, and questioning the need for this trading structure and its stability.

Gender effects in a social dilemma with third-party punishment opportunities, (with Daniela Di Cagno and Michalis Drouvelis)

This paper investigates whether contribution behaviour and third-party punishment are susceptible to gender effects when cooperation norms are violated. Our framework is a one-shot social dilemma game with third-party punishment opportunities. In our experiment, subjects are informed of the others’ gender within their group, allowing us to estimate differences in behaviour due to the group’s gender composition. Our main findings show that third-party punishment is susceptible to gender effects, with males punishing more in homogeneous (same-gender) than in heterogeneous (mixed-gender) groups, irrespective of whether the gender of the contributor is male or female. Overall, our results have important implications for the design of teams in the presence of free-riding incentives. 

Books 

[In Italian] “La Microstruttura dei Mercati Finanziari: Teorie, Applicazioni ed Esperimenti”, 2021, Giappichelli Editore, Torino