Ella Patelli

Research

Long-Run Risk Unwrapped: An Analytical Expression of the Wealth-Consumption Ratio, with Gabrielle Trudeau 

Abstract: We derive an analytical expression for the wealth-consumption ratio (wcr) in a representative agent model with recursive utility over consumption. Our expression assumes that the wcr is exponential affine in expected consumption growth and sets constraints on the mean-reversion of consumption growth. Our analytical expression for the wcr is nearly identical to the exact numerical solution.

Earnings growth uncertainty and the cross-section of equity valuation  (2022)

Presented or scheduled at the NFA Conference (2022), SGF Conference (2022), World Finance Conference (2021), Midwest Finance Association (2021), EFMA Annual Meeting - Doctoral Workshop (2019), and at the Bank of Canada Graduate Student Paper Award (2019).

Abstract:  I develop an equity valuation model where investor learns about the unobservable expected earnings growth. Expected earnings growth can be more challenging to assess for some firms than others, depending on the available information. This implies cross-sectional differences in growth uncertainty. I provide a theoretically founded measure of growth uncertainty, which we structurally estimate at the firm level. I provide the first direct empirical evidence that higher growth uncertainty is associated with lower equity valuation in the cross-section. This paper thus contributes to a better understanding of the cross- section in equity valuation.

A Credit-Based Theory of the Currency Risk Premium, with Pasquale Della Corte and Alexandre Jeanneret (Journal of Financial Economics, 2023)

Presented at the AEA (2021), EFA (2020), AFA (2020),  ECB Exchange Rate Workshop (2019), NFA (2019), Vienna Symposium on Foreign Exchange Markets (2019), Risk Management Conference in the University of Singapore (2019), Asset Pricing Workshop in the University of York (2019), QES European Quantitative and Macro Investing Conference (2019),  Swiss Society for Financial Market Research (2019), CDI-Conference on Derivatives (2019). 

Abstract:  This paper uncovers a novel component for exchange rate predictability based on the price difference between sovereign credit default swaps denominated in different currencies. This new forecasting variable – the credit-implied risk premium – captures the expected currency depreciation conditional on a severe but rare credit event. Using data for 16 Eurozone countries, we find that the credit-implied risk premium positively forecasts the dollar-euro exchange rate return at various horizons. Moreover, a currency strategy that exploits the informative content of our predictor generates substantial out-of-sample economic value against the naïve random walk benchmark.

Local and Foreign Currency Corporate Debt, with Patrick  Augustin, Alexandre Jeanneret, and Manuel Sanchez-Martinez  (available upon request)