A New Decomposition of U.S. Recessions and Crises into Aggregate Supply and Demand Components

SSRN Electronic Journal · 2025-01-01 · 1 citations

Listing Location Matters! A Tale of Two Betas

SSRN Electronic Journal · 2025-01-01

Expected idiosyncratic volatility

Journal of Financial Economics · 2025-02-20 · 9 citations

Uncertainty and the Economy: The Evolving Distributions of Aggregate Supply and Demand Shocks

American Economic Journal Macroeconomics · 2025-12-30

We estimate the time-varying distribution of aggregate supply (AS) and aggregate demand (AD) shocks. We distinguish between traditional Gaussian uncertainty and “bad” uncertainty, associated with negative skewness. The Great Moderation is driven by a reduction in the volatility of AS shocks and the Gaussian component of AD shocks. The increased role of “bad” demand uncertainty implies that the conditional skewness of GDP growth and inflation has decreased over time. The correlation between AS/AD shocks and shocks to their conditional volatilities is generally strongly negative. The correlation between inflation and growth shocks has increased due to a decrease in AS volatility. (JEL C52, D81, E12, E23, E31, E32)

Currency Basket Co-movements

SSRN Electronic Journal · 2025-01-01

The International Commonality of Idiosyncratic Variances

Management Science · 2024-05-30 · 5 citations

We document strong global commonality in country idiosyncratic return variances across 23 developed markets, which is stronger than international return commonality. The global common factor of idiosyncratic return variances is highly correlated with that of idiosyncratic cash flow variances and is also significantly related to variables capturing aggregate discount rate variation and the conditional market variance. Furthermore, aggregate idiosyncratic return and cash flow variances are mostly but not always countercyclical. This paper was accepted by Kay Giesecke, finance. Funding: X. Zhang acknowledges financial support from the National Natural Science Foundation of China [Grant 72350710220] and the Beijing Natural Science Foundation [Grant IS23127]. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.01398 .

Forecasting International Stock Market Variances

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

The Global Cross-Section of Corporate Bonds: Market, Maturity and Liquidity

SSRN Electronic Journal · 2024-01-01 · 3 citations

Sustainable investment – Exploring the linkage between alpha,<scp>ESG</scp>, and<scp>SDGs</scp>

Sustainable Development · 2023-06-13 · 57 citations

Abstract Environmental, Social and Governance (ESG) investing has attracted much attention in asset management this past decade. Asset managers who consider ESG issues when making investment decisions potentially face a trade off with their fiduciary duty to attempt to outperform investment benchmarks (“generate alpha”). We first analyze the relationship between alpha generation and ESG metrics. However, because there are no well‐accepted ESG standards, we also measure the impact companies have on the U.N.'s Sustainable Development Goals (SDG's). Our research consists of three steps. First, we construct a sector‐neutral portfolio using MSCI ESG momentum scores from 2013 to 2018, and determine that it is feasible to generate positive alpha vis‐à‐vis the MSCI US index and other risk benchmarks. Second, we utilize structured and unstructured data to determine a company's net influence on the SDGs, which we call its SDG “footprint.” We show that an ESG momentum portfolio both outperforms the MSCI US index and has a relatively better SDG footprint than that of the index. Third, we establish a positive contemporaneous connection between the portfolio's ESG ratings momentum and its SDG footprint. Thus, a positive linkage exists between ESG, alpha, and the SDGs for our sample.

Risk, Monetary Policy and Asset Prices in a Global World

SSRN Electronic Journal · 2023-01-01 · 34 citations