Working papers

• Fundamental Stock Price Cycles

  • Abstract. News shocks about higher future capital returns can explain stock price-booms and subsequent -busts in a two-asset, heterogeneous agent New Keynesian model. The portfolio choice between liquid assets (like stocks) and illiquid capital is key, as it allows for a time-varying illiquidity premium. Upon the news, capital-rich households accept to hold more illiquid capital at a lower premium, in anticipation of higher future returns on it. This increases their consumption risk, and causes stock prices to rise. After the boom, capital-rich households trade capital for liquid assets in order to self-insure against idiosyncratic income shocks, which increases the illiquidity premium, and causes stock prices to fall. Novel evidence from survey data on portfolio choices of capital-wealthy households during stock price boom-bust cycles supports the key mechanism of the model.

  • Newest version: pdf

Work in progress

• Understanding the Rise in Inflation: Demand or Supply? (with Thomas Kohler, independent scholar, Jean-Paul L’Huillier, Brandeis University, and Gregory Phelan, Williams College)
• An Endogenous Gridpoint Method for Distributional Dynamics (with Christian Bayer, University of Bonn, Ralph Luetticke, and Yannis Winkelmann, both University of Tuebingen)
• The liquidity premium in heterogeneous agent models: an analytical framework

CV

You can find my CV here.