Essays in asset pricing / Marco Grotteria.

Format:

Book

Manuscript

Thesis/Dissertation

Author/Creator:

Grotteria, Marco, author.

Contributor:

Wachter, Jessica A., degree supervisor.

Gomes, João, degree committee member.

Binsbergen, Jules H. van, degree committee member.

University of Pennsylvania. Department of Finance, degree granting institution.

Language:

English

Subjects (All):

Penn dissertations--Finance.

Finance--Penn dissertations.

Local Subjects:

Penn dissertations--Finance.

Finance--Penn dissertations.

Physical Description:

xii, 173 leaves : illustrations ; 29 cm

Production:

[Philadelphia, Pennsylvania] : University of Pennsylvania, 2019.

Summary:

In the first chapter, Cyclical Dispersion in Expected defaults with Joao Gomes and Jessica Wachter, we show how credit cycles can appear to drive asset prices and real outcomes, when in fact it is only investment opportunities that matter. A growing literature shows that credit indicators forecast aggregate real outcomes. While researchers have proposed various explanations, the economic mechanism behind these results remains an open question. We show that a simple, frictionless, model explains empirical findings commonly attributed to credit cycles. Our key assumption is that firms have heterogeneous exposures to underlying economy-wide shocks. This leads to endogenous dispersion in credit quality that varies over time and predicts future excess returns and real outcomes.

In the second chapter, Foreseen Risks with Joao Gomes and Jessica Wachter, we question the causality in the observation that financial crises tend to follow rapid credit expansions. We show how this pattern arises naturally when financial intermediaries optimally exploit economic rents that drive their franchise value. As banks' franchise value fluctuates over the business cycle, so too do the incentives to engage in risky lending. The model leads to novel insights on the effects of unconventional monetary policies in developed economies. We argue that bank lending might have responded less than expected to these interventions because they enhanced franchise value, inadvertently encouraging banks to pursue safer investments in low-risk government securities.

In the third chapter, Follow the money, I study the effect of firm lobbying on risk and expected returns. I develop a game-theoretic asset pricing model in which firms lobby to gain or preserve monopolistic rents. The model has four key predictions. First, differences in expected returns are the equilibrium outcome of the strategic interaction among firms, and returns are higher for firms that lobby more. Second, firms that lobby more exhibit larger return volatility. Third, lobbying is less intense in more competitive industries. Fourth, and finally, firms in these industries tend to lobby in coalitions. Congressional data on lobbying spending support the model's implications.

Notes:

Ph. D. University of Pennsylvania 2019.

Department: Finance.

Supervisor: Jessica A. Wachter.

Includes bibliographical references.

Other Format:

Online version: Grotteria, Marco. Essays in asset pricing.

OCLC:

1128276397