Research

Publications

The “Privatization” of Municipal Debt with Ivan Ivanov
Journal of Public Economics, accepted
Municipal goverments have been increasing their reliance on private bank loans with relatively little disclosure requirements. These loans have high effective debt priority relative to municipal bonds and they are more likely to be used by local governments that experienced adverse income shocks.
Media Coverage at Bloomberg

The Algorithmic Assignment of Incentive Schemes with Saskia Opitz, Dirk Sliwka and Timo Vogelsang
Management Science, forthcoming
Workersperformance can be predicted by accurately measured personality traits, a machine learning algorithm can detect such heterogeneity in worker responses to different schemes, and a targeted assignment of schemes to individual workers increases performance.
Working paper version

Publication Bias in Asset Pricing Research with Andrew Y. Chen
Oxford Research Encyclopedia of Economics and Finance, 2023
We consolidate findings from recent meta-studies in cross-sectional asset pricing and find that publication bias is very small.
Working paper version

Predictive performance of multi-model ensemble forecasts of COVID-19 across European nations (contributing forecasts for Germany) with Katharine Sherratt et al
eLife, 2023, vol 12
We report on the performance of ensembles in predicting COVID-19 cases and deaths across Europe between 08 March 2021 and 07 March 2022.

Open Source Cross-Sectional Asset Pricing with Andrew Y. Chen
Critical Finance Review, 2022, vol 11(2), pp. 207-264
We provide data and code that successfully reproduces nearly all cross-sectional stock return predictors. The data consists of 315 characteristics and 945 “anomaly” portfolios, and successfully replicates statistical significance for 98% of predictors.
Dedicated website Online Appendix Code
Media Coverage at Institutional Money

Did QE Lead Banks to Relax their Lending Standards? Evidence from the Federal Reserve’s LSAPs  with Robert Kurtzman and Stephan Luck
Journal of Banking and Finance, 2022, vol 138
Banks more affected by the first and third round of quantitative easing relaxed their lending standards relative to other banks.
Working paper version

Can Government Demand Stimulate Private Investment? Evidence from U.S. Federal Procurement with Shafik Hebous
Journal of Monetary Economics, 2021, vol 118, pp. 178-194
1 dollar of federal purchases increases capital investment of financially constrained firms by 10 to 13 cents over a horizon of 4 quarters, but has no effect on investment of unconstrained firms.
Working paper version

Publication Bias and the Cross-Section of Stock Returns with Andrew Y. Chen
Review of Asset Pricing Studies, 2020, vol 10(2), pp. 249–289
In a sample of around 150 replicated cross-sectional stock return predictors, publication bias adjusted returns are only 13% smaller than in-sample returns. Among predictors that can survive journal review, a low t-stat hurdle of 1.8 controls for multiple testing using statistics recommended by Harvey, Liu, and Zhu (2015)
Working paper version

Employment Effects of Unconventional Monetary Policy: Evidence from QE with Stephan Luck
Journal of Financial Economics, 2020, vol 135(3), pp. 678-703
Employment in counties with stronger presence of banks more affected by QE grew more than employment in counties with weaker presence of such banks. This can be traced to credit supply effects in the mortgage and commercial & industrial lending markets.

Revisiting the Narrative Approach of Estimating Fiscal Multipliers with Shafik Hebous
Scandinavian Journal of Economics, 2018, vol.120(2), pp. 428-439
Using narrative tax shocks as (weak) instruments shows that uncertainty about the magnitude of tax multipliers is much higher than the literature suggests.
Working paper version

Fiscal consolidations and bank balance sheets with Jacopo Cimadomo and Sebastian Hauptmeier
Journal of International Money and Finance, 2014, vol. 45, pp. 74-90
Following fiscal consolidations, banks increase holdings of government bonds, thereby improving their capital ratios.
Working paper version

Estimating the Effects of Coordinated Fiscal Actions in the Euro Area with Shafik Hebous
European Economic Review, 2013, vol. 58, pp. 110-121
Due to spillovers, the effects of coordinated fiscal policy across countries are larger than the effects of domestic fiscal policy.
Working paper version

Working Papers

The Debt-Inflation Channel of the German Hyperinflation, R&R American Economic Review
with Markus Brunnermeier, Sergio Correia, Stephan Luck and Emil Verner
Using newly digitized firm-level data for Germany between 1919-1923, we show that firms that have more nominal liabilities at the onset of the inflation become more valuable in the stock market, face lower interest payments, and increase their overall employment once the inflation starts.
Coverage at VoxEU

City Hall Has Been Hacked! The Financial Costs of Lax Cybersecurity, R&R Review of Financial Studies
with Filippo Curti, Ivan Ivanov and Marco Macchiavelli
External data breaches translate to higher financing costs for governments, including negative abnormal bond returns in the secondary market and higher offering yields and bond pricing uncertainty in the primary market.

Peer-reviewed theory does not help predict the cross-section of stock returns
with Andrew Y. Chen and Alejandro Lopez-Lira
Stock return predictors that peer review attributes to risk underperform simple data-mined predictors out-of-sample questioning risk-based explanations for stock return predictability.
Winner of the Quoniam Innovation in Data-Driven Investing Prize at the 4th Frontiers of Factor Investing Conference
Coverage at Excess Returns Podcast

Deep Parametric Portfolio Policies
with Frederik Simon and Sebastian Weibels
We generalize the parametric portfolio policy framework to allow for non-linear functions of firm characteristics. Model performance is 30%-100% than for linear policies which can be traced to the efficient modeling of interactions between characteristics.

Limits of Disclosure Regulation in the Municipal Bond Market, conditionally accepted, Management Science
with Ivan Ivanov and Nathan Heinrich
We compare reportable private debt events (loan originations/renegotiations) to the universe of realized disclosures, and find that roughly 50-80% of reportable private debt events are not disclosed.
Media Coverage at bondbuyer.com, Bloomberg Law, bondbuyer.com again in Jan 2022, Wall Street Journal

Permanent Working Papers

Bottom-up leading macroeconomic indicators: An application to non-financial corporate defaults using machine learning
with Tyler Pike and Horacio Sapriza
We construct an indicator of non-financial corporate health aggregating default predictions from different machine learning models. The indicator predicts real economic outcomes such as GDP growth and employment for up to 8 quarters ahead.

Tree-based conditional portfolio sorts: The relation between past and future stock returns
with Benjamin Moritz
We introduce a regression tree approach to predict cross-sectional stock returns from many predictors. A trading strategy based on our method has an information ratio about twice as high as the information ratio from a standard Fama-MacBeth approach.
Best Paper Award – Annual Meeting 2015 of the German Finance Association (Deutsche Gesellschaft für Finanzwirtschaft)

Cross-Border Effects of Fiscal Consolidations: Estimates Based on Narrative Records
with Shafik Hebous
Foreign fiscal consolidations have a negative impact on domestic output. The transmission occurs via trade and not via an interest rate or an exchange rate channel.