My research focuses on various aspects of asset pricing, climate finance, household finance, and behavioral economics. Conducting both empirical and theoretical research, I am keen on better understanding how exogeneous shocks (e.g., energy price shocks, climate shocks, macroeconomic shocks) can shape investment decisions and asset prices. You can find my research statement here.
Working Papers (available for download from SSRN)
- Asset Pricing with Clustered, Controllable Disasters (with Holger Kraft, Claus Munk, and Farina Weiss)
Abstract We develop a representative agent asset pricing model with tractable self-exciting consumption disasters. Compared to models with a constant disaster probability, our model increases the risk of consecutive shocks causing a large consumption drop over several years, as observed empirically. We introduce the possibility of controlling the magnitude or the probability of disasters through costly interventions. When calibrated to OECD data, the model matches the dynamics of economic disasters, the first three unconditional moments of consumption growth, the riskfree rate, the equity premium, and the stock market’s price-dividend ratio using reasonable preference parameters and moderate jump sizes
Abstract We develop a continuous-time endowment economy model of the US with inflation and the central bank’s interest rate adjustments as observable risk factors. We show that they have predictive power for consumption growth and can explain many features of the aggregate stock and bond market. We derive the price-dividend ratio, the equity premium, the risk-free rate, and the term structure of interest rates. We show in a calibrated model that inflation and the federal funds rate adequately predict those key asset pricing moments. The model offers a novel mechanism to explain the variation in the aggregate price-dividend ratio and the risk-free rate as it relies on observable rather than latent risk factors.
- Energy-Efficiency Investments and Consumption-Portfolio Choice (with Christoph Hambel and Marlene Koch)
Abstract This paper analyzes the optimal portfolio, consumption, and energy-efficiency investment decisions of a Dutch household facing energy price risk during retirement using a continuous-time life-cycle model. The household can reduce its exposure to energy price risk through energy-efficiency home renovations, modeled as an impulse-control problem in which the household chooses whether and when to upgrade its home’s energy label. Energy prices follow a regime-switching jump-diffusion process calibrated to Dutch residential gas prices around the 2022 energy crisis. While a simple net present value calculation suggests label upgrades are beneficial for most households, our model shows that many households optimally delay or forgo renovation despite the positive NPV. We identify biometric risk and liquidity constraints as the main drivers of this reluctance. Our results show how energy price, house price, and biometric risk jointly shape household portfolio composition and energy-efficiency renovation timing, with implications for policy aimed at promoting residential energy efficiency.
- How Well Do Women Sell? New Evidence for Non-professionals (with Holger Kraft and Farina Weiss), conditionally accepted at Experimental Economics
Abstract This paper is the first to analyze the performance of non-professional individuals selling personal belongings. We study a novel hand-collected data set from a popular German TV show and find that women obtain on average about 7.3% less than men. This gap cannot fully be explained by known moderators for professionals. We document a novel relationship between age, education and negotiation outcomes of females. In particular, we find that midlife women working in the industry performs well as men, whereas most other women obtain much less than men. Remarkably, female teams perform significantly better than single females.
Abstract We review the literature on long-run risk and rare disaster risk models in asset pricing. Both frameworks have the ability to provide explanations for various asset pricing puzzles. However, both frameworks have been criticized for their lack of ability to match consumption and dividend dynamics. To address this criticism and to explain more stylized facts from the empirical asset pricing literature such as the impact of climate change on asset prices, new approaches have been developed in recent years. These approaches can be interpreted as combinations of long-run risk models and rare disaster risk blurring the lines between those classical asset pricing frameworks.
Work in Progress
- Asset Pricing with Inflation and Physical Climate Risk (with Christoph Hambel)
- Optimal Flood Insurance Demand under Climate Risk (with Christoph Hambel and Wiktor Grocholewski)
