Nikolai Roussanov

• Erik Gilje, Robert Ready, Nikolai Roussanov (Working), Fracking, Drilling, and Asset Pricing: Estimating the Economic Benefits of the Shale Revolution.
• Alejandro Lopez-Lira and Nikolai Roussanov, A machine learning-based canonical set of portfolios for testing factor models. Abstract

  We use machine learning to efficiently combine a broad set of signals and produce a testing set of portfolios sorted by ex-ante estimates of expected returns. None of the well-known factor models can explain the returns of the testing set, and we observe monotonically increasing realized risk-adjusted excess returns. A long-short value-weighted portfolio produces significant realized risk-adjusted excess returns above 1\%. We also provide an even more troublesome testing set: ex-ante covariance neutral portfolios sorted on ex-ante estimates of expected returns. A long-short covariance-neutral portfolio produces a Sharpe ratio well above one and no statistically significant covariation with any of the well-known factors, posing notable challenges to both reduced-form and consumption-based asset pricing models.

• Alexandr Kopytov, Nikolai Roussanov, Mathieu Taschereau-Dumouchel (2017), Short-Run Pain, Long-Run Gain? Recessions and Technological Transformation, Journal of Monetary Economics.
• Nikolai Roussanov, Hongxun Ruan, Yanhao Wei, Marketing Mutual Funds. Abstract

  Marketing and distribution expenses constitute a large fraction of the cost of active
  management in the mutual fund industry. We investigate their impact on the allocation
  of capital to funds and on returns earned by mutual fund investors
  by estimating a structural model of costly investor search and fund
  competition with endogenous marketing expenditures. We find that marketing
  is nearly as important as performance and fees for determining fund size.
  Restricting the amount that can be spent on marketing by funds substantially improves
  investor welfare, as more capital is invested with passive index funds and
  price competition drives down fees on actively managed funds. Average alpha
  increases as active fund size is reduced, and the relationship between fund
  size and fund manager skill net of fees is closer to that implied by a
  frictionless model.

• Robert Ready, Nikolai Roussanov, Colin Ward (2016), After the Tide: Commodity Currencies and Global Trade, Journal of Monetary Economics. Abstract

  The decade prior to the Great Recession saw a boom in global trade and rising transportation costs. High-yielding commodity exporters׳ currencies appreciated, boosting carry trade profits. The Global Recession sharply reversed these trends. We interpret these facts with a two-country general equilibrium model that features specialization in production and endogenous fluctuations in trade costs. Slow adjustment in the shipping sector generates boom–bust cycles in freight rates and, as a consequence, in currency risk premia. We validate these predictions using global shipping data. Our calibrated model explains about 57% of the narrowing of interest rate differentials post-crisis.

  Description
  Carnegie-Rochester-NYU Series on Public Policy
• Colin Ward, Nikolai Roussanov, Robert Ready (2016), Commodity Trade and the Carry Trade: a Tale of Two Countries, Journal of Finance. Abstract
  Persistent differences in interest rates across countries account for much of the profitability of currency carry trade strategies. The high-interest rate “investment” currencies tend to be “commodity currencies,” while low-interest rate “funding” currencies tend to belong to countries that export finished goods and import most of their commodities. We develop a general equilibrium model of commodity trade and currency pricing that generates this pattern via frictions in the shipping sector. The model predicts that commodity-producing countries are insulated from global productivity shocks by the limited shipping capacity, which forces the final goods producers to absorb the shocks. As a result, a commodity currency is risky as it tends to depreciate in bad times, yet has higher interest rates on average due to lower precautionary demand, compared to the final good producer. The model’s predictions are strongly supported in the data. The commodity-currency carry trade explains a substantial portion of the carry-trade risk premia, and all of their pro-cyclical predictability with commodity prices and shipping costs, as predicted by the model.
• Nikolai Roussanov (2013), Composition of Wealth, Conditioning Information, and the Cross-Section of Stock Returns, Journal of Financial Economics.
• Hanno Lustig, Nikolai Roussanov, Adrien Verdelhan (2013), Countercyclical Currency Risk Premia, Journal of Financial Economics, forthcoming ().
• Nikolai Roussanov, Hui Chen, Michael Michaux (Working), Houses as ATMs? Mortgage Refinancing and Macroeconomic Uncertainty.
• Nikolai Roussanov and Pavel G. Savor (Working), Status, Marriage, and Managers’ Attitudes To Risk. Abstract

  Relative wealth concerns can affect risk-taking behavior, as the payoff to a marginal dollar of wealth depends on the wealth of others. In particular, status concerns that arise endogenously due to competition in the marriage market can lead to greater risk- taking if the more desirable mates prefer wealthier suitors. We evaluate empirically the importance of this effect in a high-stakes setting by studying risk-taking of corporate CEOs. We find that single CEOs, who are more likely to exhibit status concerns, are associated with firms that exhibit higher stock return volatility and pursue more aggressive investment policies. This effect is weaker for older CEOs. Similarly to corporate CEOs, single mutual fund managers exhibit greater idiosyncratic risk in their portfolio returns. Similarly to the CEOs, mutual fund managers who are single exhibit greater idiosyncratic risk exposure than their married peers.

• All Research from Nikolai Roussanov »

Current Courses

• FNCE9210 - Introduction To Empirical Methods In Finance

  This course is an introduction to empirical methods commonly employed in finance. It provides the background for FNCE 934, Empirical Research in Finance. The course is organized around empirical papers with an emphasis on econometric methods. A heavy reliance will be placed on analysis of financial data.

  FNCE9210001 ( Syllabus )

• FNCE9330 - International Finance

  To provide an understanding of selected topics of current academic research in the areas of international finance and its intersection with international macroeconomics; to teach interested students the tools for conducting research in this field. Each topic will be developed beginning with early classic papers and then updated through the current status of the profession. The typical target audience comprises students in their second year or later. Prerequisite: Completion of first year course requirements

  FNCE9330001 ( Syllabus )

Past Courses

• BEPP2020 - Con Fin Decision Making

  Research shows that many individuals are profoundly underinformed about important financial facts and financial products, which frequently lead them to make mistakes and lose money. Moreover, consumer finance comprises an enormous sector of the economy, including products like credit cards, student loans, mortgages, retail banking, insurance, and a wide variety of retirement savings vehicles and investment alternatives. Additionally, recent breakthroughs in the FinTech arena are integrating innovative approaches to help consumers. Though virtually all people use these products, many find financial decisions to be confusing and complex, rendering them susceptible to fraud and deception. As a result, government regulation plays a major role in these markets. This course intended for Penn undergraduates considers economic models of household decisions and examines evidence on how consumers are managing (and mismanaging) their finances. Although academic research has historically placed more attention on corporate finance, household finance is receiving a brighter spotlight now-- partly due to its role in the recent financial crisis. Thus the course is geared toward those seeking to take charge of their own financial futures, anyone interested in policy debates over consumer financial decision making, and future FinTech entrepreneurs.

• FNCE0002 - Essentials of Finance

  This course introduces students to the key financial concepts through the lens of personal financial decisions, centering on financing one's education, culminating in a capstone project evaluating student loan offers.

• FNCE2020 - Con Fin Decision Making

  Research shows that many individuals are profoundly underinformed about important financial facts and financial products, which frequently lead them to make mistakes and lose money. Moreover, consumer finance comprises an enormous sector of the economy, including products like credit cards, student loans, mortgages, retail banking, insurance, and a wide variety of retirement savings vehicles and investment alternatives. Additionally, recent breakthroughs in the FinTech arena are integrating innovative approaches to help consumers. Though virtually all people use these products, many find financial decisions to be confusing and complex, rendering them susceptible to fraud and deception. As a result, government regulation plays a major role in these markets. This course intended for Penn undergraduates considers economic models of household decisions and examines evidence on how consumers are managing (and mismanaging) their finances. Although academic research has historically placed more attention on corporate finance, household finance is receiving a brighter spotlight now-- partly due to its role in the recent financial crisis. Thus the course is geared toward those seeking to take charge of their own financial futures, anyone interested in policy debates over consumer financial decision making, and future FinTech entrepreneurs.

• FNCE7390 - Behavioral Finance

  There is an abundance of evidence suggesting that the standard economic paradigm - rational agents in an efficient market - does not adequately describe behavior in financial markets. In this course, we will survey the evidence and use psychology to guide alternative theories of financial markets. Along the way, we will address the standard argument that smart, profit-seeing agents can correct any distortions caused by irrational investors. Further, we will examine more closely the preferences and trading decisions of individual investors. We will argue that their systematic biases can aggregate into observed market inefficiencies, thus giving rise to apparently profitable trading strategies. The latter part of the course extends the analysis to corporate decision making. We then explore the evidence for both views in the context of capital structure, investment, dividend, and merger decisions. In addition to prerequisites, FNCE 7050 is highly recommended but not required.

• FNCE8990 - Independent Study

  Independent Study Projects require extensive independent work and a considerable amount of writing. ISP in Finance are intended to give students the opportunity to study a particular topic in Finance in greater depth than is covered in the curriculum. The application for ISP's should outline a plan of study that requires at least as much work as a typical course in the Finance Department that meets twice a week. Applications for FNCE 8990 ISP's will not be accepted after the THIRD WEEK OF THE SEMESTER. ISP's must be supervised by a Standing Faculty member of the Finance Department.

• FNCE9210 - Intro Empir Methods Fin

  This course is an introduction to empirical methods commonly employed in finance. It provides the background for FNCE 934, Empirical Research in Finance. The course is organized around empirical papers with an emphasis on econometric methods. A heavy reliance will be placed on analysis of financial data.

• FNCE9330 - International Finance

  To provide an understanding of selected topics of current academic research in the areas of international finance and its intersection with international macroeconomics; to teach interested students the tools for conducting research in this field. Each topic will be developed beginning with early classic papers and then updated through the current status of the profession. The typical target audience comprises students in their second year or later. Prerequisite: Completion of first year course requirements

• AQR Insight Award, 2017
• Jacobs-Levy Equity Management Award, 2017
• Terker Family Prize in Investment Reseach, 2010

• Do You, CEO, Promise to Take Less Risk as Long as You're the Boss?, Wall Street Journal - 04/27/2014
• Companies headed by unmarried CEOs grow faster, Quartz - 04/27/2014
• Success and the Single Chief Executive, Bloomberg View - 08/17/2011

Knowledge @ Wharton

• College Football Playoffs with Bill Connelly, Knowledge @ Wharton - 01/08/2025
• The Real Estate Market Survived Until 2025. What’s Next?, Knowledge @ Wharton - 01/07/2025
• AI in 2025: What Challenges Lie Ahead?, Knowledge @ Wharton - 01/07/2025
• Jeremy Siegel: 2025 Outlook for Stocks and the Economy, Knowledge @ Wharton - 01/07/2025
• What’s Ahead for Real Estate in 2025?, Knowledge @ Wharton - 01/07/2025
• Confidence in Cryptocurrency | David Reibstein and John Zhang (Part 1), Knowledge @ Wharton - 01/07/2025
• What’s Ahead for the Economy in 2025, Knowledge @ Wharton - 01/06/2025
• How Did AI Grow in 2024 and What’s in Store for 2025?, Knowledge @ Wharton - 01/02/2025
• NFL Data Science with Tom Bliss, Knowledge @ Wharton - 12/25/2024
• Overwhelmed by Too Many Choices When Shopping? Wharton Retail Expert Weighs In, Knowledge @ Wharton - 12/19/2024