Research

Working Papers

  1. Institutional Investors’ Subjective Risk Premia: Time Variation and Disagreement (with Spencer Couts, Andrei Gonçalves, and Johnathan Loudis)

    Abstract: In this paper, we study the role of subjective risk premia in explaining subjective expected return time variation and disagreement using the long-term Capital Market Assumptions of major asset managers and investment consultants from 1987 to 2022. We find that market risk premia explain most of the expected return time variation, with the rest explained by alphas. The risk premia effect is almost entirely driven by time variation in risk quantities as opposed to risk price. Nevertheless, risk price explains about half of the transitory effect of risk premia on expected returns. Market risk premia also explain most of the expected return disagreement, but in this case alphas have a quantitatively significant effect, and risk price and risk quantities are roughly equally responsible for the risk premia effect. Our results provide benchmark moments that asset pricing models should match to be consistent with institutional investors’ beliefs.

    • Conferences: 2025 Carey Finance Conference at Johns Hopkins, 2025 Helsinki Finance Summit on Investor Behavior; 2025 Ohio State Finance Alumni Conference; 2025 FSU Truist Beach Conference; 2025 MFA; 2025 Hedge Fund Research Conference; 2024 Annual Valuation Workshop at Wharton; 2024 Wabash River Conference at Purdue



Work in Progress

  • Intangibles, Market Power, and Firm Value (Job market paper)

    Abstract: Intangibles give rise to endogenous market power in the product market. This paper develops and estimates a dynamic firm model where firms invest in intangible capital to raise both production efficiency and pricing power. Using the estimated model, I decompose the firm-level market value to quantify the value of intangibles in production and market power. I find that intangible-driven market power accounts for more than 10% of total market valuation, which amounts to $4.5 trillion in 2024, and productive intangibles contribute to more than 25%. In the cross section, intangibles explain around 40% of firm value variation, with 16% coming from market power. On average, firms derive around 80% of their value of market power from intangible capital, while the contribution of exogenous market power has risen in recent decades, consistent with declining competition in the economy. This increase is primarily driven by a reallocation of sales toward high-markup firms.

    • Conferences: 21st Annual Olin Finance Conference PhD poster session


  • Investment-based Costs of Equity (with Andrei Gonçalves, Chen Xue, and Lu Zhang)

    Abstract: This paper develops the $q^5$-characteristics model for estimating costs of equity as out-of-sample forecasts from cross-sectional predictive regressions. The $q^5$-characteristics model is competitive in evaluation tests, outperforming the accounting-based implied cost of equity in predicting returns in the cross section but underperforming in the time series. The $q^5$ cost of equity is precise at the industry level and aligned with future realized factor premiums. Its firm-level distribution is weakly left-skewed, whereas the accounting cost of equity is weakly right-skewed. However, the accounting cost of equity substantially outperforms in time series predictability, especially for the equity premium.