Date of Award
Spring 2023
Document Type
Dissertation
Degree Name
Doctor of Philosophy (PhD)
Department
Management
First Advisor
Giglio, Stefano
Abstract
This dissertation consists of three essays that explore topics of financial economics, in particular in the fields of macro-finance and asset pricing. In the first essay, co-authored with Marcelo Sena and Ruy Ribeiro, we examine how monetary policy can affect asset prices through different channels. We disentangle the effect of monetary policy shocks in the stock market into three different term structures: expected dividend growth, interest rates, and dividend risk-premium. While monetary policy can affect all term structures for maturities associated with the business cycle frequency, beyond that, only interest rates and dividend risk-premium are affected. On top of that, we show that dividend risk-premium for maturities beyond the business cycle accounts for most of the effect on the stock market. Next, we discuss how our findings relate to models of monetary policy and risk premium. Models, such as standard New-Keynesian, for which monetary policy operates primarily over the business cycle frequency, fail to match the new stylized moments documented. In the second essay, co-authored with Leland Bybee and João Paulo Valente, we propose a new empirical model that incorporates macroeconomic information, along with exposures to the dollar and carry factors, to explain the time series and cross-section of currency returns. The model, which we call Macro-IPCA, is formed by combining latent factors and time-varying exposures which are estimated using the macroeconomic variables. On a pure out-of-sample basis, this model can explain up to 78% of cross-sectional variation of a developed market panel of currencies excess returns, compared to only 28% for Dollar and Carry standard factor models and 52% for the static principal component analysis model. The most relevant macroeconomic variables are export exposures to commodities and US trade, credit over GDP, and interest rate differentials. This model, therefore, sheds light on how to incorporate macroeconomic fundamentals to understand currency returns. In the third essay, co-authored with Kaushik Vasudevan and João Paulo Valente, we explore the joint dynamics of survey-based cash-flow expectations and the term structure of dividend claims prices. First, we document that following macroeconomic output shocks, earnings growth expectations exhibit a pattern of initial underreaction and delayed overreaction. At the same time, returns on the dividend claims are initially positive for all maturities, but turn negative after a few quarters. Long-term dividend claims exhibit more negative returns, suggesting a higher degree of overreaction. We then build a theoretical model with private noisy information where investors have extrapolative beliefs that is calibrated using survey data to attempt to match the new stylized facts presented, but also standard asset pricing moments like time-series momentum, reversal, and the counter-cyclicality of slope of the equity risk premium term structure.
Recommended Citation
de Miranda Gomes, Leandro, "Essays in Financial Economics" (2023). Yale Graduate School of Arts and Sciences Dissertations. 923.
https://elischolar.library.yale.edu/gsas_dissertations/923
