Spring 2023

Spring 2023

SEM217: Ben Davis, Paraport: Tax Loss Harvesting Optionality

Tuesday, April 25th @ 11:00-12:30 PM, 639 Evans Hall (RECORDING)

The tax law confers upon the investor a timing option – to realize capital losses and defer capital gains. Investment managers offer tax loss harvesting strategies that systematically utilize this option to deliver after-tax returns in excess of tax oblivious strategies. The question of optimal exercise policy for this option was first taken up by Constantinides (1984) who showed that, when long- and short-term tax rates are equal, perfect substitute...

CANCELED: SEM217: Gary Kazantsev, Bloomberg

Tuesday, May 2nd @ 11:00-12:30 PM

SEM217: David Buckle: When a dearth of active management affects market performance either the Grossman-Stiglitz paradox is explained, or the asset management industry needs a levy

Tuesday, April 18th @ 11:00-12:30 PM, 639 Evans Hall (RECORDING)

We hypothesise that the market Sharpe ratio depends on price discovery. We adapt Treynor and Black’s model, making Sharpe ratio endogenous on the proportion of investment that is actively managed. If investors recognise this endogeneity and improve their utility by investing such that price discovery ensures an optimal market Sharpe ratio, they will allocate to active strategies – even if these strategies underperform the market – thereby explaining the...

SEM217: Youhong Lee, UC Santa Barbara: Regularized Estimators in High Dimensional PCA

Tuesday, April 11th @ 11:00-12:30 PM (RECORDING)

The idea of regularization that combines a simply structured target with classical estimators is popular in high-dimensional data analysis. We propose a new regularization method and its fast machine learning algorithm called direction-regularized principal component analysis (drPCA). The regularization method solves the PCA problem that seeks the direction of maximum variance of the data subject to some prior target direction. An asymptotic analysis of the solution by the...

SEM217: Marielle de Jong, Grenoble Ecole de Management: Portfolio Optimization in an Uncertain World

Tuesday, March 14th @ 11:00-12:30 PM (RECORDING)

Mean-variance efficient portfolios are optimal as Modern Portfolio Theory alleges, only if risk were foreseeable, which is under the hypothesis that price (co)variance is known with certainty. Admitting uncertainty changes the perception. If portfolios are presumed vulnerable to unforeseen price shocks as well, risk optimality is no longer obtained by minimizing variance but also pertains to the diversification in the portfolio, for that provides protection against unforeseen...

SEM217: Lea Tschan, University of St.Gallen: Green Finance and Top Income Inequality

Tuesday, March 21st @ 11:00-12:30 PM (Room 639, Evans Hall & Zoom)

This paper provides empirical evidence for a significant positive association between green finance and top income inequality from a broad panel of countries. This relationship is strongest for countries with low GDP or low levels of financial development. Moreover, we find evidence for a...

SEM217: Jordan Lekeufack, UC Berkeley: Volatility is (Mostly) Path-Dependent

Tuesday, March 7th @ 11:00-12:30 PM

We learn from data that volatility is mostly path-dependent: up to 90% of the variance of the implied volatility of equity indexes is explained endogenously by past index returns, and up to 65% for (noisy estimates of) future daily realized volatility. The path-dependency that we uncover is remarkably simple: a linear combination of a weighted sum of past daily returns and the square root of a weighted sum of past daily squared returns with different time-shifted power-law weights capturing both short and long memory. This simple model, which is...

SEM217: Gerald Garvey, BlackRock: Industry Winners and Losers in a Lower-Carbon Economy: A Structural Model

Tuesday, February 28th @ 11:00-12:30 PM (RECORDING)

This paper models a viable low-carbon economy using global Input-Output tables along with emissions data for 54 industries in 57 countries. Some high-emitting industries such as Air Transport and Retailing support a wide range of otherwise low-carbon goods and services and are predicted to fare well. Industries such as Health Care and Banks that appear green based on direct emissions are nonetheless vulnerable due to reliance on high emission sectors such as construction....

SEM217: Zachary Feinstein, Stevens Institute of Technology: Endogenous Network Valuation Adjustment and the Systemic Term Structure in a Dynamic Interbank Model

Tuesday, February 21st @ 11:00-12:30 PM (RECORDING)

In this talk we introduce an interbank network with stochastic dynamics in order to study the yield curve of bank debt under an endogenous network valuation adjustment. This entails a forward-backward approach in which the future probability of default is required to determine the present value of debt. As a consequence, the systemic model presented herein provides the network valuation adjustment to the term structure for free without additional steps required. Time...