About

Fousseni Chabi-Yo is the Berthiaume Endowed Professor in Business Administration at the Isenberg School of Management, University of Massachusetts Amherst, where he also serves as Associate Dean of Research and PhD Programs and Chair of the Finance Department. He holds a PhD in Economics from the University of Montreal, along with master's degrees in Applied Economics and Statistics from ENSAE in Dakar, Senegal, and in Applied Mathematics from the University Cheikh Anta Diop of Dakar, Senegal. His academic career includes positions as Assistant Professor of Finance at the Fisher College of Business, Ohio State University, and subsequent roles at UMass Amherst, where he has been a faculty member since 2016. His research interests focus on asset pricing theory, empirical asset pricing, financial econometrics, and behavioral finance. He has contributed to the field through numerous publications in leading journals, exploring topics such as risk premia, market returns, and asset return skewness.

Research topics

• Mathematics
• Econometrics
• Economics
• Financial economics
• Statistics

Selected publications

• Distorting Arrow-Debreu Securities: New Entropy Restrictions Implied by the Option Cross Section 

  SSRN Electronic Journal · 2025-01-01

  preprintOpen access
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• Option-Implied Risk Premia with Intertemporal Hedging 

  SSRN Electronic Journal · 2025-01-01

  preprintOpen access1st authorCorresponding
  PublisherDOI

• Option-Implied Risk Premia with Intertemporal Hedging 

  SSRN Electronic Journal · 2025-01-01

  preprintOpen access1st authorCorresponding
  PublisherDOI

• Maxing Out Entropy: A Conditioning Approach ⋆

  SSRN Electronic Journal · 2024-01-01 · 1 citations

  preprintOpen access1st authorCorresponding
  PublisherDOI

• An Intertemporal Risk Factor Model

  Management Science · 2024-11-08 · 3 citations

  article1st authorCorresponding

  Prominent factor models are based on tradable factors that do not represent theoretically relevant risks. To address this issue, we develop a factor model that captures the risks to long-term investors present in the intertemporal capital asset pricing model (ICAPM). Empirically, we construct intertemporal risk factors as long-short portfolios based on stock exposures to dividend yield and realized variance. These tradable factors mimic news to long-term expected returns and volatility, and they offset part of the marginal utility increase in recessions induced by wealth declines. Our intertemporal factor model estimation implies significant risk prices that are consistent with the ICAPM restrictions under moderate risk aversion. Moreover, our model performs well relative to previous factor models in terms of its tangency Sharpe ratio and its pricing of key test assets, including single stocks, industry portfolios, and portfolios sorted on risk exposures and lagged anomalies. This paper was accepted by Will Cong, finance. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.00261 .

  PublisherDOI

• A Decomposition of Conditional Risk Premia and Implications for Representative Agent Models

  Management Science · 2023-11-22 · 13 citations

  article1st authorCorresponding

  We develop a methodology to decompose the conditional market risk premium and risk premia on higher-order moments of excess market returns into risk premia related to contingent claims on down, up, and moderate market returns. The decomposition exploits information about the risk-neutral market return distribution embedded in option prices, but does not depend on assumptions about the functional form of investor preferences or about the market return distribution. The total market risk premium is highly time-varying, as are the contributions from downside, upside, and central risk. Time-series variation in risk premia associated with each region is primarily driven by variation in risk prices associated with the probability of entering each region at short horizons, but it is primarily driven by variation in risk quantities at longer horizons. Analogous decompositions implied by prominent representative agent models generally fail to match the dynamic risk premium behavior implied by the data. Our results provide a set of new empirical facts regarding the drivers of conditional risk premia and identify new challenges for representative agent models. This paper was accepted by Lukas Schmid, finance. Supplemental Material: The internet appendix and data files are available at https://doi.org/10.1287/mnsc.2022.01663 .

  PublisherDOI

• Never a Dull Moment: Entropy Risk in Commodity Markets

  The Review of Asset Pricing Studies · 2023-05-04 · 1 citations

  article1st authorCorresponding

  Abstract We develop a new approach to determine investors’ risk compensations for all distributional moments of a security. Using the concept of entropy, which is a summary of all moments of a risky security, we derive the relationship between expected returns and their compensation for entropy risk. Entropy risk premium (ERP), which is entropy under the physical minus the risk-neutral measure, indicates the hedging cost against changes in risks associated with all moments of the return’s distribution. Applying our model to the commodity markets, we find that ERP carries economically significant information for the cross-section of returns that is different from individual or combined moments. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

  PublisherDOI

• Conditional Leverage and the Term Structure of Option-Implied Equity Risk Premia

  SSRN Electronic Journal · 2022-01-01

  articleOpen access1st authorCorresponding
  PublisherDOI

• Generalized Bounds on the Conditional Expected Excess Return on Individual Stocks

  Management Science · 2022 · 48 citations

  1st authorCorresponding
  • Econometrics
  • Economics
  • Mathematics

  We derive generalized bounds on conditional expected excess returns that can be computed from option prices. The generalized lower bound may serve as an expected excess return proxy for individual and basket-type assets, is conditionally tight, accounts for the entire risk-neutral distribution of returns, and outperforms existing variance-based models in out-of-sample predictions. Bounds calibrated to realized returns correspond to reasonable risk aversion and prudence. On average, expected stock returns given by the bounds decrease on even weeks of the Federal Open Market Committee cycle. Cross-sectional tests deliver a reasonable market risk premium. This paper was accepted by Haoxiang Zhu, finance. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2022.4367 .

  PublisherDOI

• A Factor Model for Stock Options

  SSRN Electronic Journal · 2022-01-01 · 3 citations

  articleOpen access
  PublisherDOI

Frequent coauthors

• Gurdip Bakshi

  14 shared

• Johnathan Loudis

  University of Notre Dame

  9 shared

• Florian Weigert

  8 shared

• Turan G. Bali

  Georgetown University

  8 shared

• Éric Renault

  7 shared

• Nusret Cakici

  6 shared

• Jun Yang

  5 shared

• Stefan Ruenzi

  University of Neuchâtel

  4 shared

Education

• Ph.D., Business Administration

  University of Massachusetts Amherst

  1997

• M.S., Business Administration

  University of Massachusetts Amherst

  1993

• B.S., Economics

  University of Abomey-Calavi

  1988

Awards & honors

• Berthiaume Endowed Professor in Business Administration