Research
Research
Working Papers
Scale-Dependent Returns or Dynamics of the Interest Rate? (Job Market Paper, Draft Coming Soon)
Abstract:
Using historical U.S. data, I revisit the empirical evidence for scale-dependency of returns over a span of 70 years. Contrary to recent findings that suggest households, after controlling for portfolio shares, experience scale-dependent returns (i.e., higher returns as they become wealthier), I find that this has not always been the case. In fact, prior to 1980, we observed a negative scale-dependency of returns. I propose a potential explanation for this phenomenon: the observed scale-dependent returns are coming from within-asset class differences in the realization of interest rate risk that is not captured in the cross-sectional regressions. The changes in interest rates affect the returns of different households differently based on the duration of their assets, which is the interest rate risk they bear. Since wealthier people tend to have assets for an average longer duration compared to less wealthy individuals, an increase in the real interest rate (as it was before 1980) resulted in lower returns for the wealthier people. Conversely, a decrease in the risk-free interest rate (as seen after 1980) led to higher returns for the wealthy. Finally, I developed a quantitative model in which richer people hold assets with higher duration because of the higher correlation of their labor income with interest rate (which is compatible with the data) and use it to assess the extent to which this explanation accounts for the observed phenomenon.
Presentations:
CEPR Symposium 2024 @ Paris (Poster Session), Finance and Inequality Conference @ Bonn, SGF Conference 2025 @ Zurich (Poster), Fourth PhD Workshop in Money and Finance of Sveriges Riksbank @ Stockholm, SFI Research Days @ Gerzensee, SFI PhD Workshop @ Zurich, PhD Brown Bag @ Wharton, Macro Lunch @ Penn, Inter-Finance PhD Seminar, Finance Brown Bag @ Zurich. AFA 2026 @Philadelphia* (Poster)
* Scheduled
Work in Progress
A Preferred Habitat View of Term-Structure of Equity (joint with Mohamed Hamoud)
Asset Pricing with Passive Investors
I am always happy to chat about research. Just drop me an email.
Discussions
Asset Pricing with Complexity (Mads Nielsen), Discussed at SFI Research Days, Gerzensee 2022.
Intermediaries with Something to Lose: On the Origins and Consequences of Bank Failures (Goutham Gopalakrishna), Discussed at UZH-computational doctoral seminar, Zurich 2022
On the Determinants of Transaction-Based Discount Rates (Joël Vonlanthen), Discussed at SFI Research Days, Gerzensee 2023.
Not-So-Cleansing Recessions (Igli Bajo, Frederik H. Bennhoff, and Alessandro Ferrari), Discussed at SFI PhD Workshop, Zurich 2024.
Catching a falling knife: Global investment funds as shock absorbers in world asset markets (Nicola Benigni, Torsten Ehlers, Mathias Hoffmann, Boris Hofmann and Christian Schmieder), Discussed at SFI Research Days, Gerzensee 2025.