Working Papers

“Cash-flow Risk or Discount-rate Risk? Evidence from the Cross Section of Present Values” (Job Market Paper)

Internet Appendix

Realized returns comprise (ex-ante) expected returns plus (ex-post) innovations, and consequently both expected returns and returns innovations can be broken down into components reflecting fluctuations in cash flow (CF) and discount rate (DR). I use a present-value model to identify the CF and DR risk factors which are latent from the time series and cross sections of price¡§Cdividend ratios. This setup accommodates models where CF risk dominates, like Bansal and Yaron (2004), and models where DR risk dominates, like Campbell and Cochrane (1999). I estimate the model on portfolios, which capture several of the most common cross-sectional anomalies, and decompose the expected and unexpected returns into CF and DR components along both time-series and cross-sectional dimensions. I find that (1) the DR risk is more likely to explain the variations of expected returns, (2) the CF risk drives the variations of unexpected returns, and (3)together they account for over 80% of the cross-sectional variance of the average stock returns.

“Estimating Private Equity Returns from Limited Partner Cash Flows” with Andrew Ang,Will Goetzmann and Ludovic Phalippou

We introduce a methodology that estimates the historical time-series of returns to investment in private equity. The approach is quite general, requires only an unbalanced panel of cash contributions accruing to limited partners, and is robust to sparse data. We decompose private equity returns into a component due to traded factors and a time-varying private equity premium. We find strong cyclicality in the premium component that differs according to fund type. The time-series estimates allow us to directly test current theories about private equity cyclicality. We find evidence in favor of the Kaplan Stromberg capital market segmentation hypothesis.

Work in Progress

“Liquidity Risk in Real Estate Returns,”

I propose a Gibbs estimate of the time-varying effective cost, as a measure of liquidity in commercial real estate market. This estimate is based on repeat sales data. With this estimate, I can study the liquidity's pricing impact on the real estate returns: are the covariance of returns and illiquidity, and the covariance between liquidities are priced as systematic risks?