I am a Ph.D. student in Financial Economics at the Yale School of Management. My research interests lie in macrofinance, asset pricing, and financial intermediation. I also work with the Yale Program on Financial Stability.
Safe Asset Migration, March 2019.
Basel III, the U.S. money-market reforms, and the conservatorship of Fannie and Freddie have changed the sources of safe asset production and the landscape of agency debt issuance since the financial crisis, especially since safe asset issuers often benefit from an implicit or explicit government backstop. This paper documents that agency issuance both (1) responds to day-to-day fluctuations in demand for safe assets—measured via the convenience yield—and (2) is an important determinant in the subsequent price of safe assets. Agencies issue more the day after an unexpected increase in the convenience yield, and an unexpectedly large agency issue decreases the convenience yield the next day, and vice versa. This paper measures the convenience yield three ways: the GCF Repo-Tbill spread, OIS-Tbill spread, and a measure of tails derived from Treasury auctions and the when-issued market. I show that these measures of the convenience yield behave according to a priori predictions. Federal Home Loan Banks are a particularly crucial component of the safe asset production ecosystem: post-crisis financial reforms made FHLBs important producers of safe assets alongside Freddie Mac.
Common Stock Returns Are Not Equity Returns, with Landon J. Ross and Sharon Y. Ross, March 2019.
U.S. companies hold cash on their balance sheets, and the share of assets held in cash varies across companies and over time. A firm’s cash holdings is an implicit holding in a low-return asset, which pushes down a firm’s common stock return, and investors should thus hedge out the cash on the balance sheets when calculating equity returns. Failing to do so has implications for portfolio formation and optimization, asset pricing models, and trading strategy performance. We show that neglecting to consider cash holdings results in biases in portfolio optimization, factor creation, and cross-sectional asset pricing. We decompose common stock market betas into components, which depend on the portfolio’s cash holding, the return on cash, and the portfolio’s cash-hedged equity return. We create a cash-hedged market factor and show this better explains the cross-sectional variation in portfolio returns than the standard market factor. Finally, we show the implications of creating and using cash-hedged factors and test assets. Cash-hedged factors and portfolios increase Sharpe ratios of factors across the board and motivate the creation of new factor based on cash-holdings of firms.
Fixed Income Pricing with Repo, August 2017.
I produce a factor pricing model based on the short-term and widely-used financing provided to securities broker/dealers (B/Ds) in the form of repurchase agreements (repo). The marginal value of wealth for risk-takers in particular asset classes should price those same assets. B/Ds use net repo to fund their fixed income inventories, which are economically equivalent to levered bond funds. Therefore, innovations to a net repo funding factor, RepoFac, should price fixed income securities. I find that RepoFac alone can price bonds, which occupy the largest share of B/Ds’ balance sheets. RepoFac prices a broader range of bond and equity portfolios when paired with a market factor.