Research

"How Financial Markets Create Superstars"   with Vladimir Vladimirov (Accepted at Review of Financial Studies)

By aggregating information into stock prices, financial markets help guide the allocation of resources. We show that speculators without information about firms' fundamentals can exploit this allocational role of prices and profit from inflating firm valuations. Uninformed speculation is profitable because high valuations attract employees, business partners, and investors, creating value at targeted firms at the cost of diverting resources away from better firms. Both large and smaller speculators without an inventory of the firm's stock can profit from uninformed speculation, particularly when targeting firms with moderate Q, operating in "normal" (neither hot nor cold) markets, and using performance pay or equity to attract stakeholders.

Presented at: AFA (2024), SFS Cavalcade (2024), EFA (2024), EWFC (2024), FIRS (2023), Vienna University (2023), Finance Theory Group (2022), Junior European Finance (2022), Norwegian School of Economics (2022), FSU SunTrust Beach Conference (2021), FMCG conference (2021), RSM Corporate Finance Day (2021), Aalto University (2021), New Zealand Finance Meeting (2021), 34th Australasian Finance and Banking Conference (2021)  University of Amsterdam (2021).

"Achieving Safety: Personal, Private, and Private Provision"  with Enrico Perotti, Journal of Economic Theory (2025)

We study how a primary need for minimum safety affects investment choices. In addition to risky projects, agents may choose to invest in personal assets they can control. Investing in personal assets serves as self-insurance, as they ensure a higher minimum return but offer a lower expected return than the risky project offers. In autarky, investors ensure a minimum return by personal assets, besides investing in the risky project. Private intermediaries and a safe rate arise endogenously to limit inefficient self-insurance, with self-insured investors holding bank equity to safeguard private safe debt. The endogenous conflict over interim risk choices is resolved by demandable debt, forcing early liquidation in states in which the ability of banks to repay debt holders remains uncertain. Our work highlights the unintended consequences of public provision of safety for private provision of safety and aggregate investment, demonstrating that these effects depend critically on whether public provision takes the form of public debt or deposit insurance.

Presented at:  European Summer Symposium in Financial Markets (2024), UvA-Wharton Safety vs Liquidity Workshop 2023, Bonn, BU, CEPR Conference on Modelling Credit Cycles, Chicago Financial Institutions Conference 2017, Columbia, EFA 2016 (Oslo), FTG Summer School 2017, Frankfurt School, Goethe, HBS, HEC Paris, Mannheim, MIT, NY Fed, NYU, Queen's, Toronto, and Yale

 "The Impact of Credit Ratings on Capital Markets"  Journal of Financial Intermediation (2021)

I develop a model of investment financing which is characterized by the interaction of information asymmetry regarding the project's productivity and lack of commitment about the allocation of productive resources. This environment gives rise to a feedback effect between the decision to default and creditors' beliefs about it. I find that informative credit ratings alleviate the information asymmetry between the manager of a firm and its creditors, but strengthen (on average) the incentive to default. I characterize the conditions under which informative credit ratings worsen financing opportunities and lead to a higher expected probability of default. Finally, I study the implications for the regulation of credit rating agencies.

Presented at: European Finance Association Annual Meeting (2016), Annual Conference of the Midwest Finance Association (2016), Annual Conference of the Royal Economic Society (2015), University of Warwick (2015), European Winter Meeting of the Econometric Society (2014),  University of Amsterdam (2018)

"Capitalizing on Crowd Capital"  (Revise & Resubmit, Review of Finance)

We explore how an entrepreneur can capitalize on information produced by investors and improve her financing terms, when information acquisition is costly and subject to complementarities. Under the optimal contract, investors decide sequentially whether to back the project, which is financed only if it receives enough financial support; otherwise, the entrepreneur does not raise capital. We testable insights for security-based crowdfunding (CF) that help us understand the optimal capital raising process, the channels through which it can create value, the types of projects and economic agents that would benefit from CF, and how CF relates to other sources of financing.

Presented at: Finance Theory Group, Summer Meeting (2019), Cambridge Alternative Finance Annual Conference (2019), KWC Conference on Entrepreneurial Finance (2019), European Economic Association Annual Meeting (2019), Crowdinvesting Symposium, Humboldt Berlin (2019) , Corporate Finance Day, University of Groningen (2019), University of Amsterdam (2019)

"Motivating Information Acquisition Under Delegation" (Revise & Resubmit in the Review of Corporate Finance Studies)

We study a model in which a principal delegates a choice between different actions to an agent. The return from each action is unknown but the agent can invest in acquiring (noisy) information before making his choice. The principal would like the agent to invest in information but this investment is unobservable and only the chosen action and its resulting payoff  is contractible.   We solve for the optimal contract and show that it induces a contrarian bias. As the main application, we explore a setting where an analyst in a brokerage house issues financial recommendations, and argue that our findings are supported by empirical evidence on the behaviour of financial analysts.

Presented at: European Economic Association Annual Meeting (2018) , Annual Conference of the Royal Economic Society (2017), University of Amsterdam (2017), University of Oslo (2017), Goethe University Frankfurt (2017), University of Lancaster (2017), European Winter Meeting of the Econometric Society (2016), ESSEC Business School (2016), Warwick Business School (2016), CRETA Theory Conference (2016), University of Warwick (2017)

"Bank Fragility Under Quantitative Monetary Policy" with Thomas Eisenbach, Rafael Matta and Enrico Perotti

We study how quantitative monetary policy affects banks’ funding choices in a global-games framework with heterogeneous liquidity preferences and endogenous run frequency. Banks choose between a runnable structure based on demand deposits and a stable structure including costlier time deposits, where the sequential timing of withdrawals reduce the risk of excess runs. QE influences fragility through the interest rate channel (cheaper time deposits) and two distinct liquidity channels: by increasing the liquidation value of assets (conditional liquidity) and by raising banks’ reserve holdings (unconditional liquidity). If the conditional-liquidity effect dominates, QE strengthens run incentives at fragile banks and can induce them to switch toward more stable funding. Otherwise, QE reduces both run incentives and long-term profitability, eventually making  runnable funding optimal again. As banks adjust their funding balancing these opposing effects, the fragility impact of quantitative policy critically depends on which liquidity channel prevails

Presented at: OxFIT (2025), ABS-Wharton "Liquidity vs Safety Demand" workshop (2023),   BSE "Safety, Liquidity, and Macroeconomics" (2024), and the PSB "Banks and Financial Markets" (2024)

"Callable Debt as Investors' Insurance Mechanism"

We study a model where a cashless entrepreneur who is privately informed about her project’s type, seeks capital to undertake the project. We show that once we consider the entrepreneur's limited resources and experience, the optimal security is callable debt. Allowing for a call provision implies that the project is undertaken only if it is socially valuable. Thus, callable debt acts as an insurance mechanism for investors against the event of financing an entrepreneur whose project has negative NPV. Callable debt eliminates underfinancing and guarantees that projects of positive NPV are undertaken. Compared to standard debt, callable debt, strengthens the entrepreneur’s incentive to invest in the productivity of her project. 

Presented at: Goethe university Frankfurt (2017), University of Warwick (2017).

"Heterogeneity and Clustering of Defaults" with Galanis G., Karlis A., and Turner M. 

This paper studies an economy where privately informed hedge funds (HFs) trade a risky asset in order to exploit potential mispricings. HFs have access to credit, by using their assets as collateral. We analyse the role of the degree of heterogeneity among HFs’ demand for the risky asset in the emergence of clustering of defaults. We show that when the degree of heterogeneity is sufficiently high, poorly performing HFs are able to obtain a higher than usual market share at the end of the leverage cycle, which leads to an improvement of their performance. Consequently, their survival time is prolonged, increasing the probability of them remaining in operation until the downturn of the next leverage cycle. This leads to the increase of the probability of poorly and high-performing hedge funds to default in sync at a later time,and thus the probability of collective defaults.

Presented at: Computing in Economics and Finance (2014) , Tinbergen Institute (2014)  University of Warwick (2015), University College London (2015)