Research

Presented at the Sveriges Riksbank Internal Seminar,  Collegio Carlo Alberto and University of Turin Seminar. 

We study the role of information heterogeneity in determining capital flows during the global financial cycle. When global uncertainty increases, investors retrench toward their home country and the United States. We build a model of portfolio choice and information acquisition with varying learning costs across countries. Our model replicates the global financial cycle’s stylized facts and has new predictions for forecasting accuracy, which we test using micro forecast data. Domestic forecasters better predict their own country’s economic outcomes, especially with increased global uncertainty. However, the US is an exception, where domestic forecasters do not outperform foreign institutions.

Presented at the Spring 2023 GLMM BC-BU, at the Federal Reserve Bank of Boston, at the IEA, at the Midwest Macro Meeting (Fall 2023) and at the Econometric Society Conference (Fall 2023).

Managers face continuous pressure to meet short-term forecasts and targets, which can potentially impact firms' investments in customer capital and pricing decisions.  Using data on U.S. public companies together with IBES analysts' forecasts, we find that firms that just meet analysts' profit forecasts have an average markup growth of 0.8% higher than firms that just miss targets, suggesting opportunistic markup manipulation. To assess the aggregate economic implications of short-termism, we develop and estimate a quantitative firm-heterogeneity model that incorporates short-term frictions and endogenous markups resulting from customer accumulation. In the model, short-termism arises optimally to offset manager's private incentives, resulting in higher markups and lower customer capital stock. We find that, on average, firms increase markups by 8% due to short-termism, generating $38 millions of additional annual profits. At the macro level, the distortion reduces consumers' welfare by 4% and lowers the annual total market capitalization by $3.1 trillions on average.