"Dissecting Bubble Detection and Contagion: A Segmented Analysis of the Real Estate, Credit, and Stock Markets " (with Daniel V. Santos and Manuel Duarte Rocha, R&R at the Journal of Real Estate Finance and Economics)
This paper examines the dynamics of financial bubbles and their potential transmission mechanisms across various segments of the US financial system from 1980 to 2019. In particular, we analyze stock, real estate, and credit markets, segmented into non-financial and bank stocks, residential and commercial properties, and credit to households and non-financial corporations. Our investigation aims to assess the relative significance of each market in contributing to financial stability and elucidate the pathways through which bubbles propagate. Our findings reveal heightened susceptibility to bubbles in the residential property market and credit segments, particularly during the lead-up to the Great Recession. We also show that bubbles in the residential property market spread to all the other markets. Specifically, we conclude that housing bubbles may be transmitted to the stock market through the credit market, highlighting the prominent role of the collateral channel. Finally, we detect two ongoing bubbles at the end of the sample period in which contagion is found.
"Cracking the Code: The Networking Matrix of Finance Academia" (with Kuntara Pukthuanthong)
This research delves into social networks among finance academics from 1980 to the present. Engagement in social networks positively correlates with productivity, with co-authors and student-advisor networks having the most significant impact, followed by post-Ph.D. and Ph.D. networks. Focusing on existing relationships rather than expanding connections and connecting with prominent researchers has proven more effective. Scholars with strong networks produce higher-quality research and receive better compensation. Our findings on editorial favoritism are complex. Co-authors of editors and Ph.D. colleagues are less likely to have their papers accepted, while student advisors are more likely. There is no evidence to support bias toward female scholars, but discrimination against Asian and Hispanic females and favoritism towards White females and Hispanic males is evident.
"Government Assistance, Bank Screening, and Firm Investment: Evidence from a Natural Disaster" (with José Jorge)
Natural disasters dramatically affect firms, but they also provide an opportunity to start anew. We exploit the 15-16 October 2017 Portuguese wildfires and the ensuing official assistance that subsidized 85% of the losses and entailed bank screening, applying a differences-in-differences approach. Firms that received government assistance subsequent to the wildfires increase output, the book value of fixed assets, employment, productivity, borrow long-term credit, and hoard cash. Overall, the evidence supports the "build back better" effect, the "broken window" fallacy at the one-year horizon, and a Keynesian multiplier effect in a two- to three-year window.
"Business as Usual?: Bank Lending under Credit Relief Programs" (with Ana Isabel Sá and Gilberto Loureiro), finalist of the GAPP 2024 Risk Management Award
This paper exploits target and blanket credit relief programs during the COVID-19 pandemic to study policy externalities. We ask whether policies designed to support credit flow in the targeted economy have spillover effects on the untargeted economy via the bank-lending channel. To answer this question, we explore the variation in bank’s pre-pandemic loan portfolios that are eligible for the COVID-19 government guarantee schemes. Using instrumental variable techniques to address endogeneity concerns and Portuguese credit register data, we find that banks decrease loan supply to firms with government guarantees using their own funds to preserve lending to firms outside the program. Banks with high prior exposure to moratoriums have tighter lending conditions on new loans, while those with greater exposure to public guarantee schemes (PGS) offer better lending conditions. Finally, our triple differences results suggest higher/lower risk-taking in banks exposed to moratoriums/public guarantee schemes.
"Physical Risk, Mortgage Lending, and Monetary Policy" (with Diana Bonfim), draft coming soon...
We document the existence of a climate risk premium related to exposure to wildfire risk on mortgages granted in Portugal. The premium is small but consistently estimated. For comparable mortgages, based on observables and saturated with granular fixed-effects, we find that mortgages granted in areas classified as at high risk of being subject to wildfires but not burnt display a 1 to 2 basis point higher interest rate. The results suggest that climate risk is managed more through prices rather than quantities. We also examine whether changes in monetary policy change this premium. We find that tighter monetary policy decreases the wildfire risk premium. When monetary policy tightens, the premium on mortgage rates subject to wildfire risk decreases consistently. This can reflect a decreased sensitivity to risk in a higher profitability environment.
"Monetary Policy Pass-Through with ARMs" (with Manuel Adelino and Miguel Ferreira), draft coming soon...