About

I am a senior economist at the Board of Governors of the Federal Reserve System. My research interests include asset pricing, financial intermediation, and macrofinance.

I received my Ph.D. in financial economics at the Yale School of Management. Previously, I worked at the U.S. Treasury’s Office of Financial Research and the global economics research group at Goldman Sachs in New York.

The contents of this website do not necessarily reflect the views of the Federal Reserve Board or its staff.

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Working Papers

Quantities and Covered-Interest Parity
with Tobias J. Moskowitz, Chase P. Ross, and Kaushik Vasudevan
Revise & Resubmit, Journal of Finance
Abstract · PDF · SSRN · NBER WP #32707 · FEDS WP #2024–061

Studies of intermediated arbitrage argue that bank balance sheets are an important consideration, yet little evidence exists on banks’ positioning in this context. Using confidential supervisory data (covering $25 trillion in daily notional exposures) we examine banks’ positions in connection with covered-interest parity (CIP) deviations. Exploiting cross-sectional variation in CIP deviations that have largely challenged existing theories, we document three novel forces that drive bases: 1) foreign safe asset scarcity, 2) market power and segmentation of banks specializing in different markets, and 3) concentration of demand. Our findings shed empirical light on the interplay of frictions influencing banks’ provision of dollar funding.

Making Money
with Gary B. Gorton and Chase P. Ross
Revise & Resubmit, Journal of Finance
Abstract · PDF · SSRN · NBER WP #29710

It is hard for private agents to produce money that circulates at par with no questions asked about its backing. The last circulating privately-produced money in the U.S. existed before the Civil War when thousands of private banknotes circulated. After that, the U.S. government taxed them out of existence in favor of money backed by U.S. Treasury bonds. The question of privately-produced money has arisen again in the form of stablecoins, digital assets purportedly backed one-for-one with collateral. Stablecoins are currently used to facilitate crypto trading, but could stablecoins eventually circulate as a hand-to-hand currency? To address this question, we first study pre-Civil War bank notes to determine what forces pushed these moneys from a negative convenience yield to a positive convenience yield. We then take these results and ask whether the same forces affect stablecoins, pushing them toward positive convenience yields.

Cash-Hedged Stock Returns
with Landon J. Ross and Chase P. Ross
Revise & Resubmit, Review of Asset Pricing Studies
2023 SWFA best paper award winner in investments
2022 FMA best paper semifinalist in investments
Abstract · PDF · SSRN · FEDS WP #22–055 · OFR WP #22–03

Corporate cash piles vary across companies and over time. A firm’s cash holding is an implicit position in a low-return asset that is correlated across firms. Cash generates variation in beta estimates. We show how investors can hedge out the cash on firms’ balance sheets when making portfolio choices. We decompose stock betas into components that depend on the firm’s cash holding, return on cash, and cash-hedged return. Common asset pricing premia — size, value, and momentum — have large implicit cash positions. Portfolios of cash-hedged premia often have higher Sharpe ratios because firms’ cash returns are correlated.

Leverage and Stablecoin Pegs
with Gary B. Gorton, Elizabeth C. Klee, Chase P. Ross, and Alexandros Vardoulakis
Revise & Resubmit, Journal of Financial and Quantitative Analysis
Abstract · PDF · SSRN · NBER WP #30796

Stablecoins are a new form of private money. They are fragile but largely trade at par. How? We present a model and empirical work to examine a novel source of demand for stablecoins contributing to their stability. Stablecoin owners are indirectly compensated for run risk by lending their coins to crypto speculators. The stablecoin can then support its $1 peg, but this arrangement links crypto speculation to traditional financial markets where stablecoins invest their reserves.

Zombie Asset Pricing
Abstract · PDF
Revise & Resubmit, Journal of Empirical Finance

Persistent credit distortions warp equity returns. Japan’s low momentum premium arises from banks providing subsided credit to “zombie firms.” Controlling for zombies revives the momentum effect in Japan. Zombie-adjusted momentum doubles the unadjusted momentum Sharpe ratio, commands a positive price of risk, and is unspanned by other factors. Value, too, conforms closer to international results. Zombies rely on their banking relationships, and zombie losers’ outsized bank betas push down momentum. Syndicated loan data confirm that companies with forbearance-inclined bank lenders drive low momentum.

Government Risk Distortions
Abstract · PDF

Market distortions caused by intermediaries and the government lead to persistent asset pricing implications because there is a lack of diversification of intermediary and government risk. In Japan, zombie firms borrow at below-market rates. Intermediary risk prices zombies but not overall Japanese equities. Zombies differ from other bank-dependent firms because zombies rely on the government to continue allowing forbearance. This is reflected in the pricing: a government risk factor prices only zombies, and a Japanese intermediary factor prices zombies because intermediary risk covaries with government risk. Government risk exposure also determines the returns of U.S. firms with large government dependence.

Where Collateral Sleeps
with Gary B. Gorton and Chase P. Ross
Abstract · PDF · SSRN

Banks can use the discount window to fend off a run by pre-positioning their assets with the Fed and borrowing against them. While pre-positioning to the Fed can be costly, it allows banks to buy insurance against a bank run. But most banks don't pre-position. We use a novel dataset to study the forces that drive the largest banks’ pre-positioning behavior. The quantity and composition of collateral placed at the Fed tell us about the relative value of that insurance. We show that banks pre-position more in bad times but pre-position less when collateral is desirable elsewhere and when stigma is higher. Even though pre-positioning is no panacea — banks still need good assets to borrow against — it can help on the margin. Regulators and bankers alike should worry about where collateral sleeps each night.

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Works in Progress

Convenience Stores
with Gary B. Gorton and Chase P. Ross

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Other Writing

Non-centrally Cleared Bilateral Repo Link
with Samuel J. Hempel, R. Jay Kahn, and Vy Nguyen
August 24, 2022, Office of Financial Research

Forecasting the Economy During COVID-19 Link · PDF
with Chase P. Ross
May 26, 2020, Yale Program on Financial Stability

Fed Actions Support Agency Mortgage REITs Link · PDF
with Chase P. Ross
April 22, 2020, Yale Program on Financial Stability

Flight from Maturity During the Coronavirus Crisis Link · PDF
with Chase P. Ross, Gary B. Gorton, and Andrew Metrick
March 26, 2020, Yale Program on Financial Stability

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