I'm a Assistant Professor of Finance at the Frankfurt School of Finance and Management. My research is in theoretical asset pricing where I focus on the decision to learn information and the consequences for financial markets. The tools I use to approach problems span: General Equilibrium, Continuous Time, Information Economics and Optimal Stopping Problems
“Explaining the Realized pre-Announcement Drift”
- Job Market Paper -
I propose a theoretical explanation for the puzzling positive pre-announcement drift that has been empirically documented to occur before scheduled announcements, using as main example the drift before the Federal Open Market Committee (FOMC) meetings. I construct a general equilibrium model of disagreement (diﬀerence-of-opinion) where two groups of investors react diﬀerently to the information released at the announcement and also to signals regarding this information available between two announcement dates. The model matches consistently key empirical facts such as (1) the upward drift in prices just before the announcement, (2) lower price volatility, before the announcement, followed by higher volatility after the announcement, and (3) low (high) trading volume before (after) the announcement.
Keywords: FOMC Announcements, Difference-of-Opinion, Scheduled Announcements, Sentiment Risk, Optimal Stopping Time.
“Active vs. Passive: Information Acquisition in the Presence of Corporate Governance” with Jinyuan Zhang
We provide a theoretical framework to understand the implications of corporate governance for the composition of the asset management industry. We allow investors to implement corporate governance in an otherwise standard information model. Our model generates new strategic complementarities in investors' decisions to acquire information due to a conflict of interest when implementing corporate governance. Such strategic complementarities contrast the traditional strategic substitution in information acquisition and increase the equilibrium proportion of passive investors. Our results are robust to the various corporate governance approaches that passive investors take, and we provide a policy discussion on such approaches. Moreover, in our model, a rise in passive investment can increase both payoff volatility and price informativeness in equilibrium. We conclude with two relevant extensions to critical passive funds' corporate governance issues: ESG policies and product market competition...Keywords: Mutual Funds, Passive Investment, Corporate Governance, Information Acquisition, Strategic Complementarities, Conflict of Interests
“A Theory of Momentum Crashes”
We offer an economic mechanism that rationalizes crashes in the momentum strategy. We propose a general equilibrium model of disagreement (difference-of-opinion) where two groups of investors, Speculators and Fundamentalists, trade in the financial market. Disagreement arises because speculators use a spurious signal to learn about fundamentals, whereas Fundamentalists regard it as pure noise. Furthermore, all investors can engage in costly, though infrequent, research to learn about the true fundamental of a firm. The different interpretation of information creates sentiment risk that drives return persistence, which resembles momentum at short-horizons and mean-reversion at long-horizons. Nevertheless, build-ups in disagreement and uncertainty make the fundamentalist investor willing to pay a cost to research a firm and take a glimpse of its true fundamental. The outcome of research on a firm is revealed in the market, generating sharp market-wide rebounds that cause momentum crashes. The model predictions match complementary empirical evidence on momentum crashes.
Keywords: Diﬀerence-of-Opinion, Momentum, Crashes, Behavioral Finance, Optimal Stopping Time
INSEADPhD in Finance - Expected graduation 2020
MIT Sloan School of ManagementMaster in Finance - Class 2014
Universidad de los AndesBSc Industrial Engineering, cum laude - Class 2013
Universität Karlsruhe (TH)Exchange student, Wirtschaftsingenieurwesen
Financial Markets and ValuationTutor for MBA core Finance - INSEAD
Math TutorialCo-instructor PhD course - INSEAD
Management Control SystemsUndergraduate tutor - Universidad de los Andes