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 equity market reactions to these surprises. To that end, the paper uses data from dividend futures markets to directly estimate maturity-specific equity premia. I find that monetary policy surprises have a significant impact on the term structure of equity premia; the effect on the short end is approximately twice as large as that on the long end. Specifically, I find that a surprise rate cut that lowers the 1-year yield by 1 basis point results in a 4- to 6-basis-point decrease in short-term equity premia and a 2- to 3-basis-point decrease in long-term equity premia. I further provide evidence that this response pattern is primarily attributable to the impact of monetary policy surprises on short-term interest rates, rather than to their impact on long-term interest rates or risk sentiment, and is predominantly driven by yield-seeking behavior rather than a change in risk aversion.

Presentations and poster sessions (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), University of Lausanne PhD Macro Workshop (May 2025), University of Zurich (June 2024), SFI Research days (June 2025), HEC PARIS Finance PhD Workshop (August 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 poster sessions: University of Zurich (May, November 2023)