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Session Overview
Session
APE-12: Empirical macro-finance
Time:
Thursday, 22/Aug/2019:
13:30 - 15:00

Session Chair: Michael Weber, University of Chicago
Location: D -104

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Presentations

Demand Elasticities, Nominal Rigidities and Asset Prices

Nuno Clara

London Business School, United Kingdom

Discussant: Lukas Schmid (Duke University)

This paper examines the interactions between demand elasticity and nominal rigidities, and their implications for firm fundamentals and asset prices. In a multi-sector New-Keynesian model, I show how nominal rigidities increase the riskiness of firms facing more elastic demands. I develop a novel method to estimate demand elasticities at the firm level by using high-frequency Amazon product data. Consistent with the model, I find that firms facing more elastic demands have lower markups and earn an annual return premium of 6.2\% compared to firms facing more inelastic demands.

efa2019-APE-12-435-Demand Elasticities, Nominal Rigidities and Asset Prices.pdf


How Safe Are Safe Havens?

Sven Klingler1, Suresh Sundaresan2

1BI Oslo, Norway; 2Columbia University

Discussant: Angelo Ranaldo (University of St. Gallen)

Sovereign debt issued by developed economies enjoyed a "safe-haven" status with bond yields below other proxies of the risk-free rate. But since the financial crisis, U.S. Treasury yields regularly exceed the risk-free rate measured as the fixed rate in corresponding overnight index swaps (OIS), violating text book arbitrage restrictions. We use data from the primary auctions market to construct estimates of demand shocks and document a strong link between sovereign debt yield spreads for different maturities and countries that is robust to using other demand or risk-free rate proxies and to accounting for quantitative easing policies of monetary authorities. While U.S. Treasury securities appear to have lost their safe-haven status, German sovereign debt retains its status.

efa2019-APE-12-1011-How Safe Are Safe Havens.pdf


The Short Duration Premium

Andrei Goncalves

University of North Carolina at Chapel Hill, United States of America

Discussant: Otto Randl (WU Vienna University of Economics and Business)

Stocks of firms with cash flows concentrated in the short-term (i.e., short duration stocks) pay a large premium over long duration stocks. I empirically demonstrate this premium: (i) is long-lived and strong even among large firms; (ii) subsumes the value and profitability premia; and (iii) exposes investors to variation in expected returns, especially in times when the premium is high. These facts are consistent with an intertemporal model in which the marginal (long-term) investor dislikes expected return declines as they lead to lower expected wealth growth. The model also captures the positive relation between risk premia and bond duration.

efa2019-APE-12-1267-The Short Duration Premium.pdf


 
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