RESEARCH

Monetary Policy Surprises and the Term Structure of Equity Premia

Job Market Paper

Abstract: This paper analyzes the impact of monetary policy surprises on the term structure of equity premia in order to better understand the channels driving stock market reactions to monetary policy surprises. To achieve this, this paper introduces a direct method to estimate equity premia for specific maturities using data from dividend futures markets. I find that a surprise short rate cut decreases equity premia both at the short end and the long end of the term structure and that the impact is twice as strong at the short end while still being significant at the long end. Specifically, a surprise rate cut that lowers the 1-year yield by 1 basis point results in a 4to 6-basis-point decrease in short-term equity premia and a 2-to 3-basispoint decrease in long-term equity premia, on average. The results provide evidence that the risk premium channel plays a significant role in monetary policy transmission and that monetary policy surprises significantly impact real rates even beyond horizons over which nominal rigidities are thought to be resolved.

Presentations and postersessions (including forthcoming): SFI PhD Workshop (September 2024), University of Zurich (November 2024), Tri-City Bridge PhD Workshop 2025 (April 2025), Swiss Society for Financial Market Research Conference - SGF (April 2025)

Pent Up Demand: Consumer Spending on Durables & Memorables (with Jan Toczynski and Martin Brown)

Asset Prices in a GE Model with Endogenous Collateral Requirements and Cyclical Haircuts (Draft available upon request)

Abstract: I study asset prices in the context of a general equilibrium macroeconomic model with production and aggregate shocks. One key innovation of the proposed model is the fully endogenous rational expectations collateral requirements, which ensure a default-free equilibrium. I use this framework to investigate how variations in haircuts throughout different phases of the business cycle affect asset prices. I study both counter-cyclical and pro-cyclical haircut processes and find that both types of haircut processes have very limited effect on both economic aggregates and asset prices.

Presentations and postersessions: University of Zurich (May, November 2023)