Amir Yaron

• Leonid Kogan, Dmitry Livdan, Amir Yaron (Forthcoming), Oil Futures Prices in a Production Economy with Investment Constraints, Journal of Finance, 2009, 64 (3), 1345-1375.
• Hongye Guo, Hengjie Ai, Ravi Bansal, Amir Yaron (Working), Identifying preference for early resolution from asset prices.
• Di (Andrew) Wu, Amir Yaron, Ravi Bansal (Draft), Socially Responsible Investing: Good is Good, Bad is Bad.
• Gill Segal, Ivan Shaliastovich, Amir Yaron (2015), Good and Bad Uncertainty: Macroeconomic and Financial Market Implications, Journal of Financial Economics, 117 (2), pp. 369-397. 10.1016/j.jfineco.2015.05.004 Abstract
  We decompose aggregate uncertainty into `good’ and `bad’ volatility components, associated with positive and negative innovations to macroeconomic growth. We document that in line with our theoretical framework, these two uncertainties have opposite impact on aggregate growth and asset prices. Good uncertainty predicts an increase in future economic activity, such as consumption, output, and investment, and is positively related to valuation ratios, while bad uncertainty forecasts a decline in economic growth and depresses asset prices. Further, the market price of risk and equity beta of good uncertainty are positive, while negative for bad uncertainty. Hence, both uncertainty risks contribute positively to risk premia, and help explain the cross-section of expected returns beyond cash flow risk.
• Ravi Bansal, Dana Kiku, Ivan Shaliastovich, Amir Yaron (2014), Volatility, the Macroeconomy, and Asset Prices, Journal of Finance, 69 (6), pp. 2471-2511.
• Itamar Drechsler and Amir Yaron (2011), What’s Vol Got to Do With It, Review of Financial Studies, 24(1), 1-45. Abstract

  Uncertainty plays a key role in economics, finance, and decision sciences. Financial markets, in particular derivative markets, provide fertile ground for understanding how perceptions of economic uncertainty and cashflow risk manifest themselves in asset prices. We demonstrate that the variance premium, defined as the difference between the squared VIX index and expected realized variance, captures attitudes toward uncertainty. We show conditions under which the variance premium displays significant time variation and return predictability. A calibrated, generalized Long-Run Risks model generates a variance premium with time variation and return predictability that is consistent with the data, while simultaneously matching the levels and volatilities of the market return and risk free rate. Our evidence indicates an important role for transient non-Gaussian shocks to fundamentals that affect agents’ views of economic uncertainty and prices.

• Itamar Drechsler and Amir Yaron (2011), What’s Vol Got To Do With It, Review of Financial Studies.
• Kjetil Storesletten, Chris Telmer, Amir Yaron (2007), Asset Pricing with Idiosyncratic Risk and Overlapping Generations, Review of Economic Dynamics, 2007, vol-10(4), 519-548. Abstract

  What is the effect of non-tradeable idiosyncratic risk on asset-market risk premiums? Constantinides and Duffie (1996) and Mankiw (1986) have shown that risk premiums will increase if the idiosyncratic shocks become more volatile during economic contractions. We add two important ingredients to this relationship: (i) the life cycle, and (ii) capital accumulation. We show that in a realistically calibrated life-cycle economy with production these ingredients mitigate the ability of idiosyncratic risk to account for the observed Sharpe ratio on U.S. equity. While the Constantinides-Duffie model can account for the U.S. value of 41% with a risk-aversion coefficient of 8, our model generates a Sharpe ratio of 33%, which is roughly half-way to the complete-markets value of 25%. Almost all of this reduction is due to capital accumulation. Life-cycle effects are important in our model — we demonstrate that idiosyncratic risk matters for asset pricing because it inhibits the intergenerational sharing of aggregate risk — but their
  net effect on the Sharpe ratio is small.

• Joao F. Gomes, Amir Yaron, Lu Zhang (2006), Asset Pricing Implications of Firms’ Financing Constraints, Review of Financial Studies, Vol. 19 (No. 4), pp. 1321-1356. Abstract

  We use a production-based asset pricing model to investigate whether financing constraints are quantitatively important for the cross-section of returns. Specifically, we use GMM to explore the stochastic Euler equation imposed on returns by optimal investment. Our methods can identify the impact of financial frictions on the stochastic discount factor with cyclical variations in cost of external funds. We find that financing frictions provide a common factor that improves the pricing of cross-sectional returns. Moreover, the shadow cost of external funds exhibits strong procyclical variation, so that financial frictions are more important in relatively good economic conditions.

• Kjetil Storesletten, Chris Telmer, Amir Yaron (2006), Asset Prices and Intergenerational Risk Sharing: The Role of Idiosyncratic Earnings Shocks, In Handbook of Investments, Volume 1; Equity Risk Premium, edited by Rajnish Mehra, North-Holland, 2007. Abstract

  In their seminal paper, Mehra and Prescott (1985), Rajnish Mehra and Edward Prescott were the first among many subsequent authors to suggest that non-traded labor-market risk may provide a resolution to the equity-premium puzzle. The most direct demonstration of this was Constantinides and Duffie (1996), who showed that, under certain conditions, cross-sectionally uncorrelated unit-root shocks which become more volatile during economic contractions can resolve the puzzle. We examine the robustness of this to life-cycle effects. Retired people, for instance, do not face labor-market risk. If we incorporate them, to what extent will the equity premium be resurrected? Our answer is “not very much.” Our model, with realistic life cycle features, can still account for about 75% of the average equity premium and the Sharpe ratio observed on the U.S. stock market.

Past Courses

• FNCE2190 - Intl Financial Markets/Crypto

  Major topics include foreign exchange rates, international money markets, currency and interest rate derivatives, international stock and bond portfolios, and cryptocurrencies. Students learn about the features of financial instruments and the motivations of market participants. The class focuses on risk management, investing, and arbitrage in these markets. In addition to course prerequisites, FNCE 1010 is recommended but not required.

• FNCE7190 - Intl Financial Markets/Crypto

  Major topics include foreign exchange rates, international money markets, currency and interest rate derivatives, international stock and bond portfolios, and cryptocurrencies. Students learn about the features of financial instruments and the motivations of market participants. The class focuses on risk management, investing, and arbitrage in these markets. In addition to course prerequisites, FNCE 6130 is 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.

• Best Paper 2009 Utah Winter Finance Conference, 2009
• First Prize Terker Family Prizes in Investment Research, 2008
• Winner Smith Breeden Award - Journal of Finance, 2004

Knowledge @ Wharton

• Overwhelmed by Too Many Choices When Shopping? Wharton Retail Expert Weighs In, Knowledge @ Wharton - 12/19/2024
• Michael Lee, Oatly North America’s EVP & Executive Creative Director, Knowledge @ Wharton - 12/19/2024
• Why Anchor Institutions Are Vital to Local Economies, Knowledge @ Wharton - 12/17/2024
• Is the American Dream of Homeownership Still Within Reach?, Knowledge @ Wharton - 12/17/2024
• Even Under Trump, AI Governance Is Here to Stay, Knowledge @ Wharton - 12/17/2024
• 2024 Ripple Rewind (Part 2), Knowledge @ Wharton - 12/17/2024
• What Are the Best Countries of 2024?, Knowledge @ Wharton - 12/16/2024
• Your Pride Could Affect Your Workplace Reputation, Knowledge @ Wharton - 12/12/2024
• Samantha Baker, VP of Commerce at theSkimm, Knowledge @ Wharton - 12/12/2024
• NFL Stats & Analysis with Ben Solak, Knowledge @ Wharton - 12/11/2024