Finance
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- December 2021
- Article
Trade Policy Uncertainty and Stock Returns
By: Marcelo Bianconi, Federico Esposito and Marco SammonA recent literature has documented large real effects of trade policy uncertainty (TPU) on trade, employment, and investment, but there is little evidence that investors are compensated for bearing such risk. To quantify the risk premium associated with TPU, we exploit quasi-experimental variation in exposure to TPU arising from Congressional votes to revoke China’s preferential tariff treatment between 1990 and 2001. A long-short portfolio designed to isolate exposure to TPU earns a risk-adjusted return of 3.6-6.2% per year. This effect is larger in sectors less protected from globalization, and more reliant on inputs from China. Industries more exposed to trade policy uncertainty also had a larger drop in stock prices when the uncertainty began, and more volatile returns around key policy dates. Our results are not explained by the effects of policy uncertainty on expected cash-flows, investors’ forecast errors, and import competition from China.
- December 2021
- Article
Trade Policy Uncertainty and Stock Returns
By: Marcelo Bianconi, Federico Esposito and Marco SammonA recent literature has documented large real effects of trade policy uncertainty (TPU) on trade, employment, and investment, but there is little evidence that investors are compensated for bearing such risk. To quantify the risk premium associated with TPU, we exploit quasi-experimental variation in exposure to TPU arising from Congressional...
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- November 2021
- Case
PE Secondaries: Blackstone Strategic Partners
- November 2021
- Case
PE Secondaries: Blackstone Strategic Partners
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- 2021
- Working Paper
Segmented Arbitrage
We use arbitrage activity in equity, fixed income, and foreign exchange markets to characterize the frictions and constraints facing intermediaries. The average pairwise correlation between the twenty-nine arbitrage spreads that we study is 22%. These low correlations are inconsistent with models in which an integrated intermediary sector faces a single constraint and sets all prices. We show that at least two types of segmentation drive arbitrage dynamics. First, funding is segmented—certain trades rely on specific funding sources so arbitrage spreads are sensitive to localized funding shocks. Second, balance sheets are segmented—intermediaries specialize in certain arbitrages so arbitrage spreads are sensitive to idiosyncratic balance sheet shocks. Our results suggest specialization on both the asset and liability sides of intermediary balance sheets is important for understanding their role in capital markets.
- 2021
- Working Paper
Segmented Arbitrage
We use arbitrage activity in equity, fixed income, and foreign exchange markets to characterize the frictions and constraints facing intermediaries. The average pairwise correlation between the twenty-nine arbitrage spreads that we study is 22%. These low correlations are inconsistent with models in which an integrated intermediary sector faces a...
About the Unit
Our strategy is to assemble and nurture a faculty whose interests and skills complement each other, and who work well together:
a) to produce a broad range of finance-related research that is published in top-tier scientific and practitioner journals, and that addresses issues of present and future importance to managers (including regulators and policy makers);
b) to develop highly-relevant and intellectually rigorous MBA and executive education courses; and
c) to mentor future academics through the Business Economics doctoral program.
Our applied focus and access to business organizations are major advantages which are reinforced by our students and our case-based approach. We have a faculty with broad expertise, and we have resources, field contacts, and institutional support, all of which we can leverage to do richer work and be more productive than we could at other institutions.
Recent Publications
Trade Policy Uncertainty and Stock Returns
- December 2021 |
- Article |
- Journal of International Money and Finance
PE Secondaries: Blackstone Strategic Partners
- November 2021 |
- Case |
- Faculty Research
Segmented Arbitrage
- 2021 |
- Working Paper |
- Faculty Research
Esusu: Solving Homelessness Backwards
- October 2021 |
- Case |
- Faculty Research
Coinbase: The Exchange of the Cryptos
- October 2021 |
- Case |
- Faculty Research
The Big Blue: Starting a Real Estate Firm
- October 2021 |
- Case |
- Faculty Research
DRSi
- October 2021 (Revised October 2021) |
- Case |
- Faculty Research
Invisible Primes: Fintech Lending with Alternative Data
- 2021 |
- Working Paper |
- Faculty Research
Harvard Business Publishing
Seminars & Conferences
- 01 Dec 2021