Welcome to my website! I am a finance Ph.D. student at Emory University's Goizueta Business School. I will be on the academic job market this year. This page contains information about me.
1300 Clifton Road NE
Atlanta, GA 30307
After graduating with a B.S. in Applied Mathematics from Northwestern University, I spent about ten years trading interest rate options for Bank of America and Wachovia in Charlotte, NC. I then returned to academics, earning a M.S. in Economics from the University of North Carolina at Charlotte. I entered Emory's Finance Ph.D. program in 2008 and expect to finish this academic year.
Research Papers (titles linked to SSRN)
Stocks with increases in idiosyncratic risk tend to earn low subsequent returns for a few months. However, high idiosyncratic risk stocks eventually earn persistently high returns. These results are consistent with positively priced idiosyncratic risk and temporary underreaction to idiosyncratic risk innovations. Because risk levels and innovations are correlated, the relation between historical idiosyncratic risk and returns may reflect both risk premia and underreaction and yield misleading inference regarding the price of risk. The results reconcile previous work, which offers conflicting evidence on the price of idiosyncratic risk, and help to discriminate among explanations of the idiosyncratic risk-return relation.
The stock wealth-consumption ratio reflects expected stock returns and consumption growth. Because consumption growth is mostly unpredictable, much of the variation in this ratio likely reflects changing expected stock returns. In contrast, isolating expected stock return information from other variables may be difficult (in addition to stock returns, the dividend yield may predict dividend growth, while the consumption-wealth ratio may predict non-stock wealth returns). Empirically, a detrended version of this ratio strongly predicts U.S. and international stock returns. In contrast to other predictive variables, predictability does not deteriorate after 1980 and out-of-sample performance is impressive.
Bond returns predict consumption growth after controlling for equity returns, which suggests that bonds capture important information about aggregate wealth. Consistent with this, bond risk is priced in the cross section of stocks. Bond risk partially explains momentum profits and the flat cross-sectional relation between stock index beta and returns. The results suggest that stock indices are an insufficient proxy for aggregate wealth and that bond risk is an important component of consumption risk. Also, term structure-based return predictability often declines with risk, suggesting that time-variation in risk premia is not the sole driver of such predictability.
We empirically estimate the price of financial distress risk while allowing for investor underreaction. Our results support a positive price of distress risk and underreaction to distress risk innovations. The distress risk-return relation is dynamic; this explains the surprising negative distress risk-return relation found in previous empirical work. Distress risk can explain the anomalous returns of size-sorted portfolios. However, we find no evidence that distress risk can explain the value premium.
Momentum profits can be explained by exposure to risks omitted from common factor models (distress risk, idiosyncratic risk, and covariance with corporate bonds) and underreaction to innovations in these risks. Momentum strategies tend to go long risky stocks with high expected returns. Consistent with risk as a partial explanation of momentum profits, long formation period momentum strategies earn higher returns and are more highly correlated with risk factors than short formation period momentum strategies. Momentum strategies also tend to go short stocks with recent increases in risk; these stocks have low expected returns because investors underreact to risk innovations.
Work in Progress
Monetary Policy and Expected Returns
Empirically, variables known to predict returns are largely uncorrelated with risk, which suggests that predictability is attributable to variation in the price of risk. I develop an investment-based theory of monetary policy where the risk-free rate influences the quantity of risky assets and risk premia. The model shows that monetary policy can affect risk premia even if asset risk is constant. Also, monetary policy shocks lead to comovement in risk premia. Finally, the model suggests that, when conducting monetary policy, central banks face a conflict between asset price volatility and the appropriate economy-wide level of leverage.