Ella D.S. Patelli

PhD. Student in Finance at HEC Montréal

Contact Details

HEC Montréal, Department of Finance - Office 5.320

3000, ch. de la Côte-Sainte-Catherine

Montréal (Québec), Canada H3T 2A7

Tel: +41 (0) 78 201 26 56

Email: ella.patelli[at]hec.ca

Research Interests

Asset Pricing, Incomplete Information, International Finance


Uncertainty and Equity Valuation: Implications from Learning about Firm Profitability (job market paper)

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

Abstract : This paper explores how firm uncertainty affects equity returns. We develop a model in which investors learn about firm profitability based on analysts forecasts. The forecasts are affected by global and firm-specific information noise, which contribute to firm uncertainty. The model predicts that uncertainty induced by firm-specific information noise increases the equity risk premium whereas uncertainty induced by global information noise decreases the equity risk premium. We estimate our model-based measure of uncertainty for 1,357 US firms and validate our theoretical predictions in a cross-sectional analysis. The relative importance of firm-specific versus global information noise explains why the relation between uncertainty and the equity risk premium varies strongly across firms.

A Credit-Based Theory of the Currency Risk Premium (working paper), with Pasquale Della Corte and Alexandre Jeanneret

R&R at the Journal of Financial Economics

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 extends the work of Kremens and Martin (2019) and uncovers a novel component for exchange rate predictability. Our theory shows that currency returns compensate investors for the expected currency depreciation in the case of a severe but rare credit event. We compute this risk compensation - the credit-implied risk premium (CRP) - by exploiting the price di􏰠fference between sovereign credit default swaps denominated in diff􏰠erent currencies. Using data for 16 Eurozone countries over the period 2010-17, we 􏰡find that CRP positively forecasts the euro-dollar exchange rate return between one-week and six-month horizon, both in-sample and out-of-sample. We also show that currency trading strategies that exploit the informative content of CRP generate substantial out-of-sample economic value.