Altan Pazarbaşı
I am an Assistant Professor of Finance at Bilkent University.
I obtained my PhD in Finance from Frankfurt School of Finance & Management in 2022.
Research areas: Asset Pricing, Macro-Finance, and Derivatives.
Publications
Management Science, Forthcoming, 2024, DOI: https://doi.org/10.1287/mnsc.2022.01587
Abstract: We present a non-parametric method to recover a bound on ex-ante dispersion of beliefs (DBB) from asset prices with minimal assumptions. DBB constrains the dispersion among all possible distributions in an economy, consistent with observed prices and subject to a good-deal bound. In model-based economies, DBB effectively tracks belief heterogeneity and serves as a diagnostic tool for evaluating model calibrations. Empirically, DBB relates to common proxies of belief dispersion, offering a real-time market-implied disagreement measure. Our versatile approach applies to both complete and incomplete markets represented by any asset class.
Working Papers
Revise and Resubmit at the Journal of Finance
Abstract: This paper provides novel empirical evidence that cash-rich firms have higher equity payouts and higher stock prices in response to expansionary monetary policy surprises. Stock prices rise despite weak cash flow, investment, and credit responses to monetary policy. I rationalize the empirical evidence in a heterogenous firm New Keynesian model where firms finance investment with cash and equity issuance. Monetary easing weakens precautionary cash demand, leading cash-rich firms to optimally allocate excess funds to shareholders. Since payouts are procyclical, cash-rich firms earn higher returns in expansionary periods. My findings highlight a payout channel through which monetary policy impacts asset prices.
Presentations: WSIR 2022, Banque de France, ASSA-IBEFA 2022, 4th LTI Asset Pricing Conference 2022, Day-Ahead Workshop on Financial Regulation 2022, AEFIN Finance Forum 2021, AEFIN Ph.D. Mentoring Day 2021, AFFI 2021.
2021 European Investment Forum Research Prize Finalist
Abstract: I propose a new daily measure of time-varying systematic credit risk that is directly estimable from the cross-section of CDS returns. I find that exposure to systematic credit risk, i.e. credit beta, has a strong relation with expected stock returns, while it is distinct from exposures to other equity, bond, and derivatives market risks. Consistent with theory, credit beta subsumes the abnormal returns of stocks with higher firm-level measures of observable default proxies such as credit risk premium and the distance-to-default. Credit betas also predict cash flows of high default risk firms, emphasizing a strong role of cash flow dynamics in a risk-based view of abnormal returns. The paper lends credence to the conjecture that the pricing in credit markets matters for investors on the equity risk premium they demand.
Presentations: AFA PhD Poster Session 2019.
Work in Progress
Abstract: Using data on mutual fund flows and mutual fund securities holdings, we show that contractionary monetary policy surprises lead to a significantly higher demand for risky stocks. In response to tighter monetary policy, mutual funds with high beta receive inflows while funds with low beta experience outflows. The high beta funds reinvest the proceeds in line with their existing portfolio holdings, thus driving up the prices of high-beta stocks. The findings of "reaching-for-beta" are consistent with theories of asset pricing in which tightened leverage constraints lead investors to hold a portfolio of riskier assets. Our results highlight a role for mutual funds in the transmission of monetary policy to the cross-section of stock returns via retail investor demand.