Published Papers

"Commonality in Credit Spread Changes: Dealer Inventory and Intermediary Distress" with Zhiguo He and Zhaogang Song [Draft]  [Published] (Review of Financial Studies, 2022)

Two intermediary factors explain nearly 50% of the puzzling common variation of credit spread changes beyond canonical structural variables. Besides explanatory power, our core focus is on the cross-sectional patterns of bond and non-bond loadings our two factors, which help identify various mechanisms at play

Working Papers

"Rational Sentiment and Financial Frictions"  with Fernando Mendo [Draft]  [Presentation Video]

Very common financial frictions induce a two-way feedback loop between asset prices and the real economy. This loop alone can justify self-fulfilling fluctuations ("sentiment"). Sentiment can help with some puzzles, permitting: high volatility, sudden financial crises, and booms that predict busts. 

"Fear and Volatility at the Zero Lower Bound"  with Fernando Mendo [Draft]

Self-fulfilling asset price volatility is endemic at the ZLB. This volatility has nothing to do with inflation, and optimal discretionary monetary policy will not eliminate it. Unconventional policies can help, but they need to be well-designed (aggressive and credible).

"Segmentation and Beliefs: A Theory of Self-Fulfilling Idiosyncratic Risk"  with Alex Zentefis [Draft]

A segmented-markets model that permits self-fulfilling price volatility. Helps explain the factor structure in firm-level idiosyncratic risk; law of one price violations in financial markets; and exchange rate disconnect in international macro. 

"The Risk of Risk-Sharing: Diversification and Boom-Bust Cycles"  [Draft]

I model a shock whereby financial intermediaries can better diversify borrowers’ idiosyncratic risks. This improvement sets off a cycle: a fragile sectoral boom predictably ends in an economy-wide bust through excessive financier leverage, consistent with some past cycles like the 2000s US housing cycle.

"Entry and Slow-Moving Capital: Using asset markets to infer the costs of risk concentration" [Draft]

Asset prices encode costs of risk concentration, through the friction in capital mobility during crises. In models of slow-moving capital, such frictions must be enormous to match risk premia levels and variability. Among the possibilities considered, only extrapolative expectations can overturn this result.

"Human Capital in a Time of Low Interest Rates" with Jung Sakong [Draft]

Low interest rates can cause higher labor income inequality, lower intergenerational mobility, and the emergence of the working rich. The mechanism is human capital "tilting": in response to low rates, rich households increase investments into their children's human capital, moreso than poor households. 

"Comparative Valuation Dynamics in Models with Financing Restrictions" with Lars Hansen and Fabrice Tourre  [Slides]  [Model Comparisons Toolbox]

This paper develops a theoretical framework to nest many recent macroeconomic models with financial frictions. We study the macroeconomic and asset pricing properties of this class of models, identify common features, highlight areas where these models depart from each other, and offer new insights. 

"Financial Frictions and Aggregate Fluctuations"  [Draft]

Aggregate fluctuations emerge out of idiosyncratic shocks if and only if there are financial frictions. By modeling a weak (network-like) dependence structure across economic agents, this failure of the law of large numbers holds generically and does not require any assumptions about fat-tailed size distributions.