Sang Byung Seo

Associate Professor of Finance
John and Anne Oros Professor (2023 – present)
Wisconsin School of Business
University of Wisconsin–Madison

5253 Grainger Hall
975 University Avenue
Madison, WI 53706-1324

E-mail: sang.seo@wisc.edu | Phone: (608) 262-9777
CV | SSRN | Google Scholar

EDUCATION

The Wharton School, University of Pennsylvania
Ph.D. & M.A. in Finance, 2010 – 2015

KAIST (Korea Advanced Institute of Science and Technology)
B.S. in Management Engineering & Mathematics, 2003 – 2007

PUBLISHED AND ACCEPTED PAPERS

Do Rare Events Explain CDX Tranche Spreads?, with Jessica A. Wachter

Journal of Finance 73 (5): 2343-2383, October 2018. Internet Appendix
Awarded Marshall Blume Prize in Financial Research (honorable mention)

Option Prices in a Model with Stochastic Disaster Risk, with Jessica A. Wachter

Management Science 65 (8): 3449-3469, August 2019.

Learning, Slowly Unfolding Disasters, and Asset Prices, with Mohammad Ghaderi and Mete Kilic

Journal of Financial Economics 143 (1): 527-549, January 2022. Internet Appendix
Previously circulated under the title "Slowly Unfolding Disasters"

Characterizing the Variance Risk Premium: The Role of the Leverage Effect, with Guanglian Hu and Kris Jacobs

Review of Asset Pricing Studies 12 (2): 500-542, June 2022.

Synthetic Options and Implied Volatility for the Corporate Bond Market, with Steven Chen and Hitesh Doshi

Journal of Financial and Quantitative Analysis 58 (3): 1295-1325, May 2023. Internet Appendix
Previously circulated under the titles "Corporate Bond VIX" and "Ex Ante Risk in the Corporate Bond Market: Evidence from Synthetic Options"
Data: Corporate Bond VIX time series

Why Do Rational Investors Like Variance at the Peak of a Crisis? A Learning-Based Explanation, with Mohammad Ghaderi and Mete Kilic

Journal of Monetary Economics, 142, March 2024. Internet Appendix

The Risk and Return of Equity and Credit Index Options, with Hitesh Doshi, Jan Ericsson, and Mathieu Fournier

Journal of Financial Economics, 161, November 2024. Internet Appendix
Previously circulated under the title "Asset Variance Risk and Compound Option Prices"

Options on Interbank Rates and Implied Disaster Risk, with Hitesh Doshi and Hyung Joo Kim

Journal of Financial and Quantitative Analysis, Forthcoming. Internet Appendix
Best Paper Award Semifinalist, FMA

WORKING PAPERS

Is There a Macro-Announcement Premium?, with Mohammad Ghaderi

R&R at Management Science

Abstract: The conditional return volatility barely drops at macro-announcements. This is at odds with the notion that high announcement returns are a manifestation of a large announcement premium. We show that models with an announcement premium cannot explain the joint patterns of return and volatility over announcement days. Surprisingly, traditional models, which do not feature such a premium, can. Our estimation results based on a statistical setup indicate that the average announcement return is mostly attributable to the monetary policy surprise and pure small-sample components, which do not average out in-sample; the announcement premium is estimated to be small, if any.

Learning and Subjective Beliefs About Good and Bad Inflation Ranges, with Mohammad Ghaderi and Ivan Shaliastovich

Previously circulated under the title "Learning, Subjective Beliefs, and Time-Varying Preferences for Different Inflation Ranges"

Abstract: We identify desirable/undesirable inflation outcomes under subjective beliefs by comparing survey-based and risk-adjusted distributions of inflation. Intuitively, investors dislike inflation at both extremes, preferring a range in the middle. This "good inflation" region, which investors associate with lower-than-average marginal utility, varies substantially over time in position and width, revealing time-varying preferences across inflation ranges. Different ranges contribute to the inflation risk premium with mixed signs, offsetting each other and often masking important insights into the pricing of inflation risk. We rationalize these empirical patterns using a model where investors learn and update beliefs about hidden deflationary and inflationary recession states.

Pricing of Corporate Bonds: Evidence From a Century-Long Cross-Section, with Mohammad Ghaderi, Sebastien Plante, and Nikolai RoussanovAbstract: We construct a new historical corporate bond database spanning 128 calendar years to address longstanding data limitations hampering corporate bond research. By hand-collecting monthly corporate bond quotes from three archival print sources, we complement existing datasets and create an extensive database dating back to 1895, comprising nearly 110,000 unique bonds and 8 million observations. Leveraging this expanded sample, we find that the lack of priced risks in corporate bonds documented by recent studies stems from their reliance on short samples. With greater statistical power, we show that prominent bond and stock factors as well as several nontraded macroeconomic factors are significantly priced with theoretically consistent signs. At the same time, the predictive power of corporate bond spreads for real activity is largely robust in the longer sample, except when pre-war data are included. Our database, covering major economic episodes like the Great Depression, not only helps validate previous empirical findings but aims to facilitate further research by serving as a CRSP counterpart for corporate bonds.

INACTIVE WORKING PAPERS

CDS-Implied Risk of Economic Catastrophes

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