an image This is how I feel when I write a paper.

Skewness in Expected Macro Fundamentals and the Predictability of Equity Returns: Evidence and Theory
Abstract

We document that the first and third cross-sectional moments of the distribution of GDP growth rates made by professional forecasters can predict equity excess returns. We propose two consumption based asset pricing models that can rationalize this empirical finding. We show that introducing skewness in the distribution of expected growth prospects in otherwise standard endowment economies can up to double the model implied equity Sharpe ratios. (with E. Ghysels, J. Meng, and H. Ru)

International Asset Pricing with Recursive Agents
Abstract Paper

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)

Recursive allocations and wealth distribution with multiple goods: existence, survivorship, and dynamics.
Abstract Paper

We characterize the equilibrium of a complete markets economy with multiple agents displaying a preference for the timing of the resolution of uncertainty. Utilities are defined over an aggregate of two goods. We provide conditions under which the solution of the planner’s problem exists and it features a non-degenerate invariant distribution of Pareto weights. We show that a first order Taylor expansion about the unconditional mean of the economy is not only highly inaccurate, but it also implies that one of the two agents receives no wealth in the long-run positive probability. (with Max Croce)

’O Sole Mio. An Experimental Analysis of Weather and Risk Attitudes in Financial Decisions
Abstract Paper

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)

Six Anomalies looking for a model. A consumption based explanation of International Finance Puzzles
Abstract Paper Slides

When agents have a preference for the timing of the resolution of uncertainty the presence of a low frequency component in the dynamics of consumption growth can account for a number of anomalies including the Backus and Smith puzzle and the high correlation of stock markets given the almost absence of correlation in the fundamentals. The introduction of stochastic volatility allows also to resolve the forward rate premium anomaly, providing a unified framework to study international finance puzzles.

On the existence of the exchange rate when agents have complete home bias and non-time separable preferences

Abstract Paper

Colacito and Croce (2006) study the dynamics of the growth rate of the real exchange rate, when the preferences of the representative consumers in the two countries are defined only over the domestic good and characterized by non-time separability a la Epstein and Zin (1989). This paper shows that an equilibrium of this economy exists in which exchange rates are well defined and it can be interpreted as the limiting case of an economy in which preferences are defined over both domestic and foreign goods. This note was originated as a response to a number of people that questioned the existence of an exchange rate in the absence of trade.