Førsteamanuensis - Institutt for finans
Førsteamanuensis - Institutt for finans
Andrews, Spencer; Colacito, Riccardo, Croce, Mariano Massimiliano & Gavazzoni, Federico (2020)
Social Science Research Network (SSRN) Doi: 10.2139/ssrn.3743205
The slope carry consists of taking a long (short) position in the long-term bonds of countries with steeper (flatter) yield curves. The traditional carry is a long (short) position in countries with high (low) short-term rates. We document that: (i) the slope carry risk premium is slightly negative (strongly positive) in the pre (post) 2008 period, whereas it is concealed over longer samples; (ii) the traditional carry risk premium is lower post-2008; and (iii) there has been a sharp decline in expected global growth and global inflation post-2008. We connect these empirical findings through an equilibrium model in which investors price news shocks, financial markets are complete, and countries feature heterogeneous exposure to news shocks about both global output expected growth and global inflation.
Gavazzoni, Federico & Santacreu, Ana Maria (2020)
Journal of Financial Economics, 136(2) Doi: 10.1016/j.jfineco.2019.09.009
We study the international propagation of long-run risk in the context of a general equilibrium model with endogenous growth. Innovation and international diffusion of technologies are the channels at the core of our mechanism. A calibrated version of the model matches several asset pricing and macroeconomic quantity moments, alleviating some of the puzzles highlighted in the international macro-finance literature. Our model predicts that country pairs that share more research and development (R&D) have less volatile exchange rates and more correlated stock market returns. Using data from a sample of 19 developed countries, we provide suggestive empirical evidence in favor of our model’s predictions.
Colacito, Riccardo; Croce, Mariano Massimiliano, Gavazzoni, Federico & Ready, Robert (2018)
Journal of Finance, 73(6) Doi: 10.1111/jofi.12720
Focusing on the 10 most traded currencies, we provide empirical evidence regarding a significant heterogeneous exposure to global growth news shocks. We incorporate this empirical fact in a frictionless risk-sharing model with recursive preferences, multiple countries, and multiple consumption goods whose supply features both global and local short- and long-run shocks. Since news shocks are priced, heterogeneous exposure to long-lasting global growth shocks results in a relevant reallocation of international resources and currency adjustments. Our unified framework replicates the properties of the HML-FX and HML-NFA carry-trade strategies studied by Lustig, Roussanov, and Verdelhan and Della Corte, Riddiough, and Sarno.
Backus, David K.; Gavazzoni, Federico, Telmer, Christopher I & Zin, Stanley E. (2010)
Social Science Research Network (SSRN) Doi: 10.2139/ssrn.1634825
High interest rate currencies tend to appreciate. This is the uncovered interest rate parity (UIP) puzzle. It is primarily a statement about short-term interest rates and how they are related to exchange rates. Short-term interest rates are strongly affected by monetary policy. The UIP puzzle, therefore, can be restated in terms of monetary policy. Do foreign and domestic monetary policies imply exchange rates that violate UIP? We represent monetary policy as foreign and domestic Taylor rules. Foreign and domestic pricing kernels determine the relationship between these Taylor rules and exchange rates. We examine different specifications for the Taylor rule and ask which can resolve the UIP puzzle. We find evidence in favor of a particular asymmetry. If the foreign Taylor rule responds to exchange rate variation but the domestic Taylor rule does not, the model performs better. A calibrated version of our model is consistent with many empirical observations on real and nominal exchange rates, including Fama-84 negative correlation between interest rate differentials and currency depreciation rates.
|2012||Tepper School of Business, Carnegie Mellon University||Ph.D.|
|2021 - Present||BI - Norwegian Business School||Associate Professor of Finance|
|2012 - 2021||INSEAD||Assistant Professor of Finance|