Subjective Risk Premia and Intermediary Asset Pricing: Evidence From Commodity Markets.
June 2025. R&R at the Review of Asset Pricing Studies
Abstract: Can financial intermediaries explain the dynamics of subjective risk premia in sophisticated asset classes? Using commodity markets as a laboratory, I show that the financial health of intermediaries, particularly primary dealers, plays a crucial role in driving subjective risk premia. However, as the composition of institutional investors shifted during the "financialization" of commodity markets, the importance of primary dealers declined, while that of non-primary dealers increased. These findings, in line with prominent intermediary asset pricing theories, reveal financial intermediaries as a novel source of variation in subjective risk premia and emphasize the importance of intermediary heterogeneity in asset pricing.
Presentations: AEFIN Finance Forum (2025); Monash Business School (2024); Bank of Italy (2024); CSEF Naples (2024); CUNEF University (2024); WU Vienna (2024); EEA (2024); EFMA (2024); IRMC (2024); PEJ (2024); Nova Finance Browbag (2023); HEC Paris Finance PhD Workshop (2023); Nova Finance PhD Workshop (2023); Kelley Finance PhD Brownbag (2023).
Commodity Returns: Lost in Financialization.
with Fahiz Baba-Yara (Indiana University); March 2026.
Abstract: Commodity futures strategies exhibit a sharp decline in performance around 2004, when large institutional capital entered these markets. We show that this decline reflects systematic compression of commodity risk premia beyond post-publication decay. Strategies more exposed to major commodity indices suffer larger return reductions. We link this pattern to benchmark-tracking capital that broadens risk sharing and shifts the marginal investor from return-sensitive specialists to index-constrained allocators. These findings provide a framework for assessing whether financializing asset classes, such as private credit and tokenized real-world assets, could face analogous premium compression under suitable institutional conditions.
Best Paper Award at the 2025 J.P. Morgan Commodities Symposium* (CU Denver Business School).
Presentations: Catholic University of Milan (2026,Scheduled); ESCP Turin Finance Brownbag (2026,Scheduled); J.P. Morgan Commodities Symposium* (2025); EEA (2025); AFFI (2025); IRMC (2025); Commodity Markets Winter Workshop (2025); CUNEF Finance Brownbag (2024); CEMA* (2024); AEFIN Finance Forum (2023); EFMA (2023); FMCG (2023); Kelley Finance Brownbag* (2023); Eastern FA* (2023); Southwestern FA* (2023); AFBC* (2022); Nova Finance PhD Pitch Perfect (2022).
In Search of Sparsity: Bayesian Sparse Factor Models and the Factor Zoo.
with Fahiz Baba-Yara (Indiana University) and Robert Hill (Bank of Canada); March 2026.
Abstract: We develop a Bayesian Sparse Factor Model for asset pricing in factor zoo environments with correlated and weak factors. Observed factors are modeled as noisy measurements of latent priced risks, with hierarchical spike-and-slab priors on loadings to induce sparsity and quantify uncertainty about the factor structure. We embed the extracted factors in a Bayesian two-pass pricing framework that delivers inference on risk premia, pricing errors, and the implied stochastic discount factor (SDF). Empirically, three sparse latent factors summarize the zoo, remain competitive on the [Bryzgalova, Huang, and Julliard, 2023] benchmark test sets, and produce tighter posteriors and a more stable SDF.
Presentations: CUNEF Finance Brownbag* (2025), Bank of Portugal Econometrics Workshop* (2024), Bank of Canada* (2023), Nova Finance Browbag* (2023), Heavy Tails and Robust Estimation* (2022), IAAE* (2022), Zaragoza Time Series Workshop* (2022), Canadian Economic Association* (2022).
*Indicates presentation by coauthor.
Commodity Shocks and Heterogeneity in Inflation Expectations.
with Diego Bonelli (Banco de España) and Giorgio Ottonello (WU Vienna).
*Indicates presentation by coauthor.
(Peer-Reviewed).
Commodity Tail-Risk and Exchange Rates.
with Giovanni Rillo (LUISS University); Finance Research Letters^, June 2022.
^ “Class A” journal according to the 2022 ABDC Journal Quality List and the 2022 Italian Ranking of Economics Journals (ANVUR).
[PhD Publication: Spin-off of the 2nd year PhD summer paper].
Abstract: This paper studies the downside tail-risk relationship between currencies and commodities. In order to do so, we use the novel MCoVaR with Elastic-Net of Bonaccolto et al. (2021) to simultaneously account for the potential ties among a large set of commodities. We show that exchange rates are significantly exposed to downside tail-risk with respect to several commodities, including, but not limited to, oil and gold. Additionally, we find that different exchange rates are vulnerable to tail-risk in different commodities. Lastly, the results with respect to gold indicate that the Japanese yen and the Swiss franc can be considered safe-haven assets.