Publications
25 results found
Buraschi A, Piatti I, Whelan P, 2022, Subjective bond risk premia and belief aggregation, The Review of Financial Studies, Vol: 35, Pages: 3710-3741, ISSN: 0893-9454
The forecasting literature has presented overwhelming evidence that the aggregation of heterogeneous expectations leads to improvements in forecast accuracy; however, outperforming a simple equal weight- ing scheme has proved challenging. This paper proposes an aggregation scheme of subjective bond return expectations based on the historical accuracy of professional interest rate forecasters. Our aggregate belief proxy outperforms equal weight and median weight combinations and is comparable to statistical projections even if its dynamics are quite different. With this measure at hand, we study the relationship between quantities of risk and compensation for risk and demonstrate a strong link to subjective expectations even if this is difficult to detect using realised returns.
Buraschi A, Tebaldi C, 2022, Financial contagion in network economies and asset prices, Management Science, ISSN: 0025-1909
This paper studies intertemporal asset pricing in network economies when distress shocks can propagate through the network, similarly to epidemic outbreaks. Two classes of equilibria exist. In the first, idiosyncratic shocks are diversifiable and don’t affect valuations: CCAPM applies. In the second, idiosyncratic shocks generate non-diversifiable long-run cascades of shocks (financial pandemics) that introduce a new risk premium component unexplained by traditional systematic factors. We derive closed-solutions for asset prices as a function of the network properties and discuss their properties. After a structural break (1984), we find evidence of a network risk premium that is statistically and economically significant.
Buraschi A, Whelan P, 2022, Speculation, sentiment and interest rates, Management Science, Vol: 68, Pages: 1591-2376, ISSN: 0025-1909
We compare the implications of speculation versus hedging channels for bond markets in heterogeneous agents’ economies. Treasuries command a significant risk premium when optimistic agents speculate by leveraging their positions using bonds. Disagreement drives a wedge between marginal agent versus econometrician beliefs (sentiment). When speculative demands dominate, the interaction between belief heterogeneity and sentiment helps rationalize several puzzling characteristics of Treasury markets. Empirically, we test model predictions and find that larger disagreement (i) lowers the risk-free rate, (ii) raises the slope of the yield curve, and (iii) with positive sentiment increases bond risk premia and makes its dynamics countercyclical.
Buraschi A, Menguturk M, Sener E, 2015, The geography of funding markets and limits to arbitrage, Review of Financial Studies, Vol: 28, Pages: 1103-1152, ISSN: 1465-7368
We use the relative pricing of pairs of emerging market (EM) sovereign bonds issued in both dollars and euros to study capital markets frictions during periods of financial distress. During the 2007–2008 crisis, we find the emergence of large pricing anomalies in EM sovereign bond markets. Neither liquidity nor short-selling constraints can explain these persistent events. We use both cross-sectional and time-series information on these pricing anomalies to learn about specific geographical frictions in funding markets. We find support for explanations based on the interaction of banking capital-structure frictions and the fragility of wholesale funding markets. We document the effects of nonconventional policy interventions on this mispricing.
Buraschi A, whelan P, 2015, BOND MARKETS AND UNCONVENTIONAL MONETARY POLICY, Handbook of Fixed Income, Editors: Veronesi, Publisher: John Wiley & Sons, Inc.
Buraschi A, Whelan P, 2015, Bond Markets and Monetary Policy, Handbook of Fixed-Income Securities, Editors: Veronesi, Publisher: John Wiley & Sons, Inc.
BURASCHI A, KOSOWSKI R, SRITRAKUL W, 2014, Incentives and Endogenous Risk Taking: A Structural View on Hedge Fund Alphas, The Journal of Finance, Vol: 69, Pages: 2819-2870, ISSN: 0022-1082
Buraschi A, Carnelli A, 2014, Understanding Short- versus Long-Run Risk Premia, EUROPEAN FINANCIAL MANAGEMENT, Vol: 20, Pages: 714-738, ISSN: 1354-7798
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- Citations: 1
Buraschi A, Buraschi A, Menguturk M, et al., 2014, The Geography of Risk Capital, Funding Markets and Limits to Arbitrage, Review of Financial Studies
We use the relative pricing of pairs of emerging market (EM) sovereign bonds issued in both dollars and euros to study capital markets frictions during periods of financial distress. While there is no evidence of mispricing before 2007, during the 2007–2008 crisis we document a persistent anomaly that resulted in segmented EM bond markets. The sign of mispricing varies cross-sectionally, depending on the domestic currency of funding banks, and its magnitude depends on the degree of fragility in wholesale funding markets. Neither liquidity nor short-selling constraints can account for this anomaly. We document the impact of non-conventional policy interventions.
Buraschi A, Trojani F, Vedolin A, 2014, Economic Uncertainty, Disagreement, and Credit Markets, MANAGEMENT SCIENCE, Vol: 60, Pages: 1281-1296, ISSN: 0025-1909
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- Citations: 26
Buraschi A, Kosowski R, Trojani F, 2014, When there is no place to hide: correlation risk and the cross-section of hedge funds returns, The Review of Financial Studies, Vol: 27, Pages: 581-616, ISSN: 0893-9454
Using a novel data set on correlation swaps, we study the relation between correlation risk, hedge fund characteristics, and their risk-return profile. We find that the ability of hedge funds to create market-neutral returns is often associated with a significant exposure to correlation risk, which helps to explain the large abnormal returns found in previous models. We also estimate a significant negative market price of correlation risk, which accounts for the cross-section of hedge fund excess returns. Finally, we detect a pronounced nonlinear relation between correlation risk exposure and the tail risk of hedge fund returns.
Buraschi A, Carnelli A, Whelan P, 2013, Taylor Rule Uncertainty: Believe it or not, New Developments in Macro-Finance Yield Curve Modelling, Editors: Chadha, Durre, Joyce, Sarno, Cambridge, UK, Publisher: Cambridge University Press
Buraschi A, Cornelli F, 2013, The Economics of Donations and Enlightened Self-interest, European Financial Management, Vol: n/a, ISSN: 1354-7798
Buraschi A, Carnelli A, 2013, The Economic Value of Predictability for Portfolio Management, The Journal of Financial Management, Markets and Institutions
Buraschi A, Trojani F, Vedolin A, 2013, When Uncertainty Blows in the Orchard: Comovement and Equilibrium Volatility Risk Premia, Journal of Finance, Vol: n/a, ISSN: 1540-6261
Buraschi A, Trojani F, Vedolin A, 2013, Economic Uncertainty, Differences in Beliefs and Credit Spreads, Management Science, ISSN: 0025-1909
Beber A, Breedon F, Buraschi A, 2010, Differences in beliefs and currency risk premiums, JOURNAL OF FINANCIAL ECONOMICS, Vol: 98, Pages: 415-438, ISSN: 0304-405X
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- Citations: 40
Buraschi A, Porchia P, Trojani F, 2010, Correlation Risk and Optimal Portfolio Choice, JOURNAL OF FINANCE, Vol: 65, Pages: 393-420, ISSN: 0022-1082
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- Citations: 97
Buraschi A, 2007, Habit Formation and the Term Structure of Interest Rates, Journal of Finance, Vol: December
Buraschi A, Corielli F, 2005, Risk management implications of time-inconsistency: model updating and recalibration of no-arbitrage models, JOURNAL OF BANKING AND FINANCE, Vol: 29, Pages: 2883-2907, ISSN: 0378-4266
Buraschi A, Jiltsov A, 2005, Inflation risk premia and the expectations hypothesis, JOURNAL OF FINANCIAL ECONOMICS, Vol: 75, Pages: 429-490, ISSN: 0304-405X
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- Citations: 78
Buraschi A, Jiltsov A, 2005, Model uncertainty and option markets with heterogeneous agents, Journal of Finance, ISSN: 0022-1082
Buraschi A, Menini D, 2002, Liquidity risk and specialness, JOURNAL OF FINANCIAL ECONOMICS, Vol: 64, Pages: 243-284, ISSN: 0304-405X
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- Citations: 29
Buraschi A, Dumas B, 2001, The forward valuation of compound options, JOURNAL OF DERIVATIVES, Vol: 9, Pages: 8-17, ISSN: 1074-1240
Buraschi A, Jackwerth J, 2001, The price of a smile: Hedging and spanning in option markets, REVIEW OF FINANCIAL STUDIES, Vol: 14, Pages: 495-527, ISSN: 0893-9454
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- Citations: 88
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