Massimiliano Affinito, Raffaele Santioni, 15 November 2021

Covid-19 had a substantial impact on financial markets around the world. This column uses granular worldwide data to assess mutual fund portfolio responses to the crisis. The authors find that mutual funds divested from assets considered in most trouble at the time – i.e. those issued in countries and by industries most affected by the pandemic – but with several dimensions of heterogeneity according to asset type, investment policy, and performance. The findings corroborate the existence of an unconventional monetary policy channel acting through mutual funds that could be used to stabilise the funds themselves.


The Cambridge Endowment for Research in Finance (CERF) welcomes submissions for its 2016 Corporate Finance Theory Symposium to be held in Cambridge UK, Cambridge Judge Business School,  16-17 September 2016.

The symposium covers all areas of theoretical corporate finance, including theory papers that combine corporate finance theory with a related area such as banking, market micro-structure, asset pricing, and financial accounting.

We expect to have about 9 papers (each with a discussant) and one keynote speech. This year’s keynote speaker will be Anjan Thakor, John E. Simon Professor of Finance,Director of the PhD Programme, and Director of the WFA Center for Finance and Accounting Research.

Stefano Giglio, Matteo Maggiori, Johannes Stroebel, Andreas Weber, 29 November 2015

The optimal investment to mitigate climate change crucially depends on the discount rate used to evaluate the investment’s uncertain future benefits. The appropriate discount rate is a function of the horizon over which these benefits accrue and the riskiness of the investment. In this paper, we estimate the term structure of discount rates for an important risky asset class, real estate, up to the very long horizons relevant for investments in climate change abatement. We show that this term structure is steeply downward-sloping, reaching 2.6% at horizons beyond 100 years. We explore the implications of these new data within both a general asset pricing framework that decomposes risks and returns by horizon and a structural model calibrated to match a variety of asset classes. Our analysis demonstrates that applying average rates of return that are observed for traded assets to investments in climate change abatement is misleading.

Gino Cenedese, Richard Payne, Lucio Sarno, Giorgio Valente, 17 July 2015

Various theories suggest that exchange rate fluctuations and stock returns are linked. In this column, the authors find little evidence of a relationship between the two. Thus, a simple trading strategy that invests in countries with the highest expected equity returns and shorts those with the lowest generates substantial risk-adjusted returns.

Maurizio Michael Habib, Livio Stracca, 28 February 2014

At the peak of the Global Crisis, the US dollar appreciated and US Treasury yields fell, suggesting that foreign investors were purchasing US assets in general. Actually, they were fleeing only into short-term Treasury bills. This column discusses recent research showing that there are indeed no securities which are consistently a safe haven across different crisis episodes – not even US assets. However, a peculiarity of the US securities is that foreign investors do not necessarily ‘run for the exit’, even when a crisis has its epicentre in the US.

Marianne Andries, Bruno Biais, 21 October 2013

The 2013 Nobel Prize in economics goes to Lars Hansen, Eugene Fama, and Robert Shiller. This column describes the significance of their contributions in the context of the broader literature. The prizes are well deserved. Their careful investigation of data – informed by deep understanding of theory – taught us much of what we know about asset pricing.

Ian Dew-Becker, Stefano Giglio, 20 October 2013

Stabilisation policy should focus on the frequencies consumers care most about. This column presents evidence from stock-market returns suggesting that consumers are willing to pay the most to avoid – and are therefore most concerned about – fluctuations that last tens or hundreds of years. Modern macroeconomic theory tends to view the role of monetary policy as smoothing out inflation and unemployment over the business cycle. The authors’ findings suggest that resources would be better spent on policies that smooth out longer-run fluctuations.

Dimitri Vayanos, Paul Woolley, 05 October 2009

Have capital market booms and crashes discredited the efficient market hypothesis? This column says yes and suggests a new model that explains asset pricing in terms of a battle between fair value and momentum driven by principal-agent issues. Investment agents’ rational profit seeking gives rise to mispricing and volatility.

Jian Wang, 05 September 2008

A random walk is (in)famously a better predictor of short-term exchange rates than models emphasising economic fundamentals. This column explains recent literature that has addressed the puzzle by considering an asset-pricing approach. Fundamentals (and expectations of them) are still relevant.


CEPR Policy Research