Working Papers
„Recovering the Information Flow from Prices“ – with Julien Cujean.
We propose a novel method that recovers the flow of private information to the market based on which it constructs a direct measure of price informativeness. This measure captures informed trading, predicts inefficiencies and return surprises ahead of informational events, helps time HML, and indicates that, since the late 1990s, markets have become markedly more inefficient in the post-pandemic period.
„Asset Pricing on FOMC Announcements“ – with Julien Cujean.
Examining asset-pricing facts around FOMC announcements requires conditioning on good and bad news, and market noise. The pre-announcement drift is mostly present and highly informative upon good news, and the striking way in which facts have changed in the last decade corresponds to an equilibrium shift related to the rise of market noise despite the Fed’s improved guidance.
„Beta Ambiguity and Asymmetric Mispricing“
After bad market news, the empirical Security Market Line (SML) is steep and closely aligned with the Capital Asset Pricing Model (CAPM); after good news, however, it slopes downward. This mispricing asymmetry is sharply at odds with canonical explanations for a flat SML. I show that beta ambiguity resolves the puzzle: ambiguity-averse investors act as if betas are inflated when news is bad and deflated when news is sufficiently good, generating the observed asymmetry. The mechanism further predicts that betting-against-beta (BAB) strategies crash after strongly negative news. A simple dynamic BAB strategy exploiting this prediction raises the Sharpe ratio by 0.48 on average across U.S. and international equity markets.
Samuel Jaeger 