Resumen de Essays on debt and speculation
My dissertation consists of three essays with the common theme of analyzing economic models of financial assets markets featuring heterogeneous market participants and testing the predictions of these models empirically. In the first essay, I present a simple model of heterogeneous traders and demonstrate that different sources of heterogeneity (discount factors vs. return expectations) imply opposite signs for the relationship of turnover and expected returns. This motivates me to analyze the correlational empirical relationship between asset turnover and measures of expected returns, both survey- and model-based, for the US stock and housing markets. I obtain mixed evidence on the sign of the turnover-expected return relationship in the stock market, while in the housing market the relationship is moderately positive.
In the second essay (authored jointly with Andrea Fabiani and Luigi Falasconi), I ask whether monetary policy influences the maturity structure of corporate debt. I answer this question by exploiting: i) time-series and firm-level data on debt maturity for the US corporate sector; ii) several proxies of FED monetary interest rate shocks. The results show that a loosening of the policy rate lengthens corporate debt maturity, an effect entirely driven by the adjustments of very large companies. I explain such findings through a model combining moral-hazard frictions and yield-seeking investors, who increase their demand of long-term debt-securities when the policy rate goes down. Only large and unconstrained companies can accommodate the demand shift. Empirical evidence on the response of corporate bond issuance by large companies and holdings by mutual funds validates the proposed mechanism.
In the third essay (authored jointly with Ilja Kantorovitch), I test the theoretical predictions of the differences-of-opinion literature by analyzing the extensive online discussion on Bitcoin by potential Bitcoin investors to build a time-varying sentiment distribution, defining disagreement as dispersion in sentiment. High disagreement is associated with negative subsequent returns, high turnover growth, and high volatility, confirming the theory’s predictions. However, I do not find that an increase in disagreement increases the price, which is seemingly at odds with the theoretical prediction of disagreement leading to overpricing. As the theory predicts, the effect of disagreement weakens significantly after shorting instruments were introduced at the end of 2017. The results are economically significant: at the monthly frequency, a one standard deviation increase in disagreement leads to a 9.2 percentage points lower cumulative return over the following eight months, and the adjusted R^2 of regressing contemporaneous returns on average sentiment and disagreement is 0.33.
