NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Robert C. Ready

University of Rochester
533 University Ave #3
Rochester, NY, 14607

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NBER Working Papers and Publications

December 2016Fracking, Drilling, and Asset Pricing: Estimating the Economic Benefits of the Shale Revolution
with Erik Gilje, Nikolai Roussanov: w22914
We quantify the effect of a significant technological innovation, shale oil development, on asset prices. Using stock returns on major news announcement days allows us to link aggregate stock price fluctuations to shale technology innovations. We exploit cross-sectional variation in industry portfolio returns on days of major shale oil-related news announcements to construct a shale mimicking portfolio. This portfolio can explain a significant amount of variation in aggregate stock market returns, but only during the time period of shale oil development, which begins in 2012. Our estimates imply that $3.5 trillion of the increase in aggregate U.S. equity market capitalization since 2012 can be explained by this mimicking portfolio. Similar portfolios based on major monetary policy announce...
August 2013Commodity Trade and the Carry Trade: a Tale of Two Countries
with Nikolai Roussanov, Colin Ward: w19371
Persistent differences in interest rates across countries account for much of the profitability of currency carry trade strategies. "Commodity currencies'' tend to have high interest rates while low interest rate currencies belong to exporters of finished goods. This pattern arises in a complete-markets model with trade specialization and limited shipping capacity, whereby commodity-producing countries are insulated from global productivity shocks, which are absorbed by the final goods producers. Empirically, a commodity-based strategy explains a substantial portion of the carry-trade risk premia, and all of their pro-cyclical predictability with commodity prices and shipping costs, as predicted by the model.
 
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