Topic: Finance Without (Exotic) Risk

Speaker: Nicola Gennaioli, Professor, Bocconi University

Time: 10:00am-11:30am, May 29

Location: 4-101

Abstract:

We address the joint hypothesis problem in cross-sectional asset pricing by using measured expectations about future earnings growth. We find that a price index built using growth expectations while keeping required returns constant across time and firms, accounts for the value and investment spreads and their time variation. This link reflects cross sectional co-movement in beliefs, not just aggregate beliefs changes. As a direct test of market inefficiency, we show that predictable portfolio forecast errors account for average return spreads, even after controlling for price-dividend and book to market. We also show that firm characteristics such as book to market and investment predict forecast errors and such predictability accounts for a significant share of these characteristics’ predictive power for future returns.

Speaker Biography:

Nicola Gennaioli is a Full Professor at Università Bocconi in the Finance Department since 2012. His research interests are in the financial markets and he has published papers on his research in many Journals as Quarterly Journal of Economics, Review of Financial Studies and Journal of Financial Economics, among others. He got an M.A. in Economics from Università Luigi Bocconi in 1999 and a PhD in Economics from Harvard University in 2004.