Research

Working papers

Growth vs. Value: The Role of Cash Flow Duration in Monetary Policy Transmission

Abstract: An open question in macro-finance concerns the differing reactions of growth and value stocks to monetary policy. I address this question using a high-frequency event study and find that growth stocks respond significantly more to policy surprises. This finding is consistent across individual stocks, portfolios, and stock indexes and persists for several days post-FOMC announcement. I show that cash flow duration drives these results, contradicting earlier studies that argue that financial constraints are the predominant driver. A decomposition of stock returns indicates that shocks to the risk premium are the predominant channel explaining this difference in sensitivity, aligning with cash flow duration as the primary driver of monetary policy transmission. A model with firm heterogeneity in cash flow duration can simultaneously explain both the stronger sensitivity of growth stocks and the existence of the value premium.

Corporate Green Pledges
with Michael D. Bauer, Daniel Huber, Marlene Renkel, and Ole Wilms
Revise-and-resubmit at Review of Financial Studies 

Abstract: The fight against climate change exposes businesses to major transition risks. To successfully navigate this challenge, businesses need to fundamentally rethink their carbon footprint, energy supplies and, in many cases, entire production chain. In a sign that they are taking this challenge seriously, many publicly traded companies in the U.S. have announced ambitious commitments to reduce future carbon emissions. In this paper we identify green pledges—decarbonization commitments—from newswires articles using AI (GPT-4). About 9% of U.S. firms have made green pledges, and these companies tend to be larger and browner than those without pledges. The announcement of a green pledge significantly raises the company’s stock price, and this stock market impact is stronger for larger and browner firms. Firms that make green pledges subsequently reduce their CO2 emissions by more than other firms, a result that alleviates concerns about “greenwashing”. Our evidence suggests that green pledges have material new information for investors, can reduce perceived climate transition risk, and may be the result of financial incentives for companies to reduce their carbon footprint.

Monetary Policy Transmission to Investment: Evidence from a Survey on Enterprise Finance

with Annalisa Ferrando and Sara Lamboglia

Abstract: We study how survey-based measures of funding needs and availability impact the transmission of euro area monetary policy to investment. We first provide evidence that firms’ funding needs are primarily driven by future investment opportunities, while their perceived funding availability is mainly related to financial conditions. Using these two variables, we analyze how the effectiveness of monetary policy depends on fundamentals and financial conditions. Our key findings reveal that monetary policy is most effective when fundamentals are strong. In contrast, firms with good financial conditions exhibit a weaker investment response to monetary policy. Our findings provide new insight into the transmission of monetary policy to investment, highlighting not only the role of financial conditions, but also the importance of structural factors, which are beyond the direct control of central banks.

Publications

Michael D. Bauer, Eric A. Offner, Glenn D. Rudebusch (2025). Green Stocks and Monetary Policy Shocks: Evidence from Europe. European Economic Review.

Michael D. Bauer, Eric A. Offner, Glenn D. Rudebusch (2024). The Effect of U.S. Climate Policy on Financial Markets: An Event Study of the Inflation Reduction Act. Advances in Econometrics.

Francesco Audrino and Eric A. Offner (2024). The Impact of Macroeconomic News Sentiment on Interest Rates. International Review of Financial Analysis.

Work in Progress

Crowding Out Corporate Bonds: Government Debt Supply and Currency Choice
with Filippo Busetto, Anna Carruthers, and Andras Lengyel