Focusing on US and UK, we document that both the Backus and Smith finding---concerning the low correlation between consumption differentials and exchange rates---and the forward-premium anomaly---concerning the tendency of high interest rate currencies to appreciate---have become more severe through time. After accounting for different capital mobility regimes, we show that these anomalies turn into general equilibrium regularities in a two-country and two-good economy with Epstein and Zin preferences, frictionless markets, and correlated long-run growth prospects. (with Max Croce)
While weather has been shown to affect financial markets and financial decision making, a still open question is the channel through which such influence is exerted. This paper provides direct experimental evidence of the effect of sunshine and good weather on individual risk taking. By employing the multiple price list method of Holt and Laury (2002), we show that, after controlling for other variables such as gender, religion and income, sunshine and good weather promote risk taking. This effect is present whether relying on objective measures of meteorological conditions or subjective weather assessments. We find that bad weather increases our risk aversion estimates by an average of 40%. (with Anna Bassi and Paolo Fulghieri)
The American Economic Review, Vol. 102(3), 152-155.
We characterize the equilibrium of a two-country, two-good economy in which agents have opposite bias toward one of the two consumption goods and fear model misspecication. We document that disagreement about endowments' growth prospects is a natural outcome of this class of economies. (with Max Croce)
Journal of Econometrics, 2011, 164(1), 45-59.
Journal of Political Economy, Vol. 119(1), February 2011, 153–181.
The American Economic Review, Vol. 100(2), May 2010, pp. 527-31
Journal of Money, Credit, and Banking, Vol. 40, No. 8, December 2008, pp. 1599-1623
In The Known, the Unknown and the Unknowable in Financial Risk Management, pp. 59-73. Princeton University Press
Journal of Money Credit and Banking, Volume 39, Iss. 2, February 2007, pp. 67-100.