Working Papers

„Recovering the Information Flow from Prices“ – with Julien Cujean. SSRN.
Abstract: We recover the private information flow to the market, from which we construct a direct measure of price informativeness. We exploit intraday returns around shocks incompletely observable to market. They cause prices to lag behind value, information to flow and prices to catch up. We estimate a rational-expectations model to infer from price convergence the quantity and speed of information prices reveal. Applying the method to mutual fund fire sales, prices have revealed less information more slowly since the late 1990s, upon crises the information flow drops eventually reversing sharply, informativeness across firms differs along size and liquidity, yet vanishingly so. The measure picks up informed trading, predicts inefficiencies, surprises on informational events and the value spread, helps time HML, and indicates markets have become distinctly inefficient since COVID-19.

„Asset Pricing on FOMC Announcements“ – with Julien Cujean. SSRN.
Abstract: Asset-pricing facts on FOMC announcements have changed strikingly in the last decade. The pre-announcement drift has disappeared, and other known facts—the announcement premium and a stronger CAPM—now concentrate on a subset of announcements. We propose these distinct patterns correspond to two equilibrium outcomes. The drift can be switched on and off across equilibria, which has implications for return informativeness, beta dispersion and premia, and how they are responsible for a stronger CAPM. The model reveals the key in understanding the facts is to condition on good and bad news, and market noise. High-frequency data shows the drift is mostly present and highly informative upon good news, and the equilibrium shift is likely unrelated to the Fed’s improved guidance but to the rise of market noise.

„Beta Ambiguity and State-Dependent Mispricing“ – coming soon.