Max Miller

• Maxwell Miller, James Paron, Jessica Wachter (Working), Sovereign default and the decline in interest rates. Abstract

  Sovereign debt yields have declined dramatically over the last half-century. Standard explanations, including aging populations and increases in asset demand from abroad, encounter difficulties when confronted with the full range of evidence. We propose an explanation based on a decline in inflation and default risk, which we argue is more consistent with the long-run nature of the interest rate decline. We show that a model with investment, inventory storage, and sovereign default captures the decline in interest rates, the stability of equity valuation ratios, and the recent reduction in investment and output growth coinciding with the binding zero lower bound.

• Maxwell Miller (Working), Democratization, Inequality, and Risk Premia. Abstract

  Risk premia are significantly elevated during periods of democratization in a cross-country panel of equity data covering 85 countries over 200 years, despite little evidence of a negative effect on either realized or expected GDP and dividends. This result is explained in an asset pricing model in which wealthy asset market participants face higher taxes when democratizations succeed. Finally, using a shift in Catholic church doctrine in support of democracy, majority Catholic autocracies display significantly higher average excess returns relative to other countries in a difference-in-differences framework. These results shed light on how redistribution risk shapes asset prices.

• Sylvain Catherine, Maxwell Miller, Natasha Sarin (2020), Relaxing Household Liquidity Constraints through Social Security, Journal of Public Economics. Abstract

  More than a quarter of working-age households in the United States do not have sufficient savings to cover their expenditures after a month of unemployment. Recent proposals suggest giving workers early access to a small portion of their future Social Security benefits to finance their consumption during the COVID-19 pandemic. We empirically analyze their impact. Relying on data from the Survey of Consumer Finances, we build a measure of households’ expected time to cash shortfall based on the incidence of COVID-induced unemployment. We show that access to 1% of future benefits allows 75% of households to maintain their current consumption for three months in case of unemployment. We then compare the efficacy of access to Social Security benefits to already legislated approaches, including early access to retirement accounts, stimulus relief checks, and expanded unemployment insurance.
• Jonathan Berk, Jules van Binsbergen, Maxwell Miller (2020), Mutual Funds: Skill and Performance, The Journal of Portfolio Management. https://doi.org/10.3905/jpm.2020.1.143 Abstract

  The authors summarize the recent literature on mutual fund manager skill and performance. They discuss the latest contributions in the field and reinterpret them through the lens of the rational expectations framework (efficient market hypothesis). They further discuss the importance of (1) the choice of benchmark model and (2) the time-series and cross-sectional sample selected in performance studies. The article has three main conclusions. First, although net alpha is a measure of the abnormal return of an extra dollar invested in a particular fund (i.e., performance), it does not measure mutual fund manager skill. To measure the latter, the product of gross alpha and the size of the fund—value added—is needed. Second, the set of real-time available index funds is the relevant counterfactual to use when assessing the skill and performance of investment managers. Nontradable factors that are constructed with the benefit of hindsight are not a realistic benchmark. Third, the authors can think of no good reason to exclude high-quality mutual fund data either in the cross section or time series when making inferences regarding skill and performance.

Teaching Assistant

FNCE 921 – Empirical Methods in Finance (PhD) – Spring 2019, Spring 2020

FNCE 205/720 – Investment Management – Fall 2018, Spring 2019, Fall 2019

FNCE 393/893 – Policy Decisions by Central Banks (Monetary Policy) – Fall 2018

FNCE 385/885 – Financial Technology (FinTech) – Spring 2019