Research

Published or Accepted Papers

Heterogeneous Intermediary Asset Pricing
Journal of Financial Economics, Accepted for publication
Xavier Drèze Award for the most outstanding research paper at UCLA Anderson

Abstract: I show that the composition of the financial sector has important asset pricing implications beyond the health of the aggregate financial sector. To assess the impact of massive balance sheet adjustments within the intermediary sector during the Great Recession and resolve conflicting asset pricing evidence, I propose a dynamic asset pricing model with heterogeneous intermediaries facing financial frictions. Asset flows between intermediaries are quantitatively important for both level and variation of risk premia. An empirical measure of the composition of the intermediary sector negatively forecasts future excess returns and is priced in the cross-section with a positive price of risk.

Working Papers

Student Loans, Marginal Costs, and Markups: Estimates From the PLUS Program (with William Mann)
Review of Financial Studies, Revise and Resubmit
Coverage at Forbes.com

Abstract: We estimate small marginal costs and large markups at private colleges in the United States, and discuss implications for the design of financial aid. For identification, we exploit a tightening of credit standards in the PLUS loan program, which decreased enrollment, revenues, and expenditures at private colleges with low-income students. We estimate that markups represented more than half of charges for students disqualified by the change. Markups were higher at for-profit schools, and in states with fewer public schools and lower education spending. Our results complement prior evidence on the Bennett Hypothesis, and contrast prior estimates of small markups.

Corporate Bond Liquidity During the COVID-19 Crisis (with Benjamin Lester, David Lindsay, Shuo Liu, Pierre-Olivier Weill, and Diego Zúñiga)
A non-technical summary from the UCLA Anderson Review
Presentation Video at the SaMMF Workshop: Liquidity in Fixed Income Markets (from 1h10 to 1h40 in the YouTube video)

Abstract: We study liquidity conditions in the corporate bond market during the COVID-19 pandemic, and the effects of the unprecedented interventions by the Federal Reserve. We find that, at the height of the crisis, liquidity conditions deteriorated substantially, as dealers appeared unwilling to absorb corporate debt onto their balance sheets. In particular, we document that the cost of risky-principal trades increased by a factor of five, forcing traders to shift to slower, agency trades. The announcements of the Federal Reserve’s interventions coincided with substantial improvements in trading conditions: dealers began to “lean against the wind” and bid-ask spreads declined. To study the causal impact of the interventions on market liquidity, we exploit eligibility requirements for bonds to be purchased through the Fed’s corporate credit facilities. We find that, immediately after the facilities were announced, trading costs for eligible bonds improved significantly while those for ineligible bonds did not. Later, when the facilities were expanded, liquidity conditions improved for a wide range of bonds. We develop a simple theoretical framework to interpret our findings, and to estimate how the COVID-19 shock and subsequent interventions affected consumer surplus and dealer profits.

Work in Progress

Inventory, Market Making, and Liquidity: Theory and Application to the Corporate Bond Market (with Benjamin Lester and Pierre-Olivier Weill)
Presentation Video by Pierre-Olivier Weill at the SaMMF Virtual Seminar Series

Who Pays for Underfunded Pensions? Evidence From Homeowners (with Darren Aiello, Asaf Bernstein, Ryan Lewis, and Michael Schwert)

Funding Liquidity and the Valuation of Mortgage-Backed Securities (with Brett Dunn)

Teaching

University of Illinois

Instructor

  • MSF/Undergrad Fixed Income Portfolios (Spring 2020)

UCLA Anderson School of Management

Instructor

  • MFE R/MATLAB Programming Workshop (Fall 2017, 2018)

Teaching Assistant

  • MBA Behavioral Finance, Professor Avanidhar Subrahmanyam (Spring 2019)
  • MFE Empirical Asset Pricing, Professor Lars Lochstoer (Winter 2019)
  • MBA Foundations of Finance, Professor Bruce Carlin (Fall 2018)
  • MFE Data Analytics and Machine Learning, Professor Lars Lochstoer (Fall 2016)
  • MBA Corporate Finance, Professor William Mann (Winter 2015, 2016, 2017)
  • Executive Program Corporate Strategy, Professor David Wessels (May 2015)

Contact