Research
Research
Regulating ESG Disclosure, joint with Marina Emiris and François Koulischer
Yiran Fan Memorial Fellowship for the best 3rd year paper
We use new data on the ownership of mutual funds in Europe to estimate how investors respond to regulations on the disclosure of Environmental, Social and Governance (ESG) performance. We find that the introduction of ESG disclosure rules for mutual funds led to strong flows into funds categorized as green. We show that investor rebalancing takes place through two channels: an uncertainty channel where investors value the lower uncertainty, and a greenness channel where funds respond to disclosure rules by increasing their greenness to attract flows. We find empirical support for both channels: green funds for which investors had little information before the regulation experience the strongest flows, and green funds that had a low ESG rating before the regulation decrease their emissions most under the new rules.
Fed Implied Market Prices and Risk Premia, joint with Charles W. Calomiris, Harry Mamaysky and Cristina Tessari
We introduce FDIF, a measure of Fed communication surprise based on the text of FOMC statements. FDIF measures the difference between text-implied and actual values of key market variables. Positive FDIF of countercyclical variables (e.g., credit spreads) is associated with negative macroeconomic forecast revisions; the opposite holds for procyclical variables. Industries that hedge bad FDIF news earn low returns on FOMC announcement days, but high returns on non-FOMC days. The opposite holds for FDIF-exposed industries, and the return differences are large. Controlling for FDIF exposure, rate-based policy surprise measures are not priced in the cross-section of industry returns.