NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Alexi Savov

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Working Papers and Chapters

May 2014A Model of Monetary Policy and Risk Premia
with Itamar Drechsler, Philipp Schnabl: w20141
We present a dynamic heterogeneous-agent asset pricing model in which monetary policy affects the risk premium component of the cost of capital. Risk tolerant agents (banks) borrow from risk averse agents (depositors) and invest in risky assets subject to a reserve requirement. By varying the nominal interest rate, the central bank affects the spread banks pay for external funding (i.e., leverage), a link that we show has strong empirical support. Lower nominal rates result in increased leverage, lower risk premia and overall cost of capital, and higher volatility. The effects of policy shocks are amplified via bank balance sheet effects. We use the model to implement dynamic interventions such as a ``Greenspan put'' and forward guidance, and analyze their impact on asset prices and volat...
December 2013Have Financial Markets Become More Informative?
with Jennie Bai, Thomas Philippon: w19728
The finance industry has grown, financial markets have become more liquid, and information technology allows arbitrageurs to trade faster than ever. But have market prices then become more informative? We use stock and bond prices to forecast earnings and find that the information content of market prices has not improved since 1960. We use a model with information acquisition and investment to link financial development, price informativeness, and allocational efficiency. As information costs fall, the predictable component of future earnings should rise and hence improve capital allocation and welfare. We find that this component has remained stable over the past 50 years. When we decompose price informativeness into real price efficiency and forecasting price efficiency, we find that bo...

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