PhD Students

Current Ph.D. Students

Sergey investigates the asset pricing implications of "zombie firms" for healthy firms operating in the same product markets. A zombie firm is a distressed firm which is artificially kept alive by its bank (e.g., through subsidized credit), so that the bank does not need to write off loans to that firm and can speculate on survival. Zombies are well-known to have negative real effects on their healthy competitors. They, for example, tie up existing resources and depress output prices. Using a simple real options model in which healthy and zombie firms engage in Cournot competition, we demonstrate that zombie firms should also raise the financing costs of the healthy firms. Preliminary empirical evidence based on standard asset pricing tests supports our theoretical priors.

Anna works on developing new parametric estimators and forecasts of the skewness of discrete asset returns over short and long horizons. While there is a great interest in the skewness of single-stock/stock-market returns in the extant finance literature, we are still a long way off from estimating that skewness with some precision. In particular, existing skewness estimators typically do not focus on "proper discrete returns," do not consider well-known return dependencies, do not yield consistent estimates over time, do not distinguish between conditional (i.e., expected) and unconditional (i.e., historical) skewness, and/or posit ad-hoc relations between skewness and several exogenous variables. In her first Ph.D. chapter, Anna assumes that (i) asset returns can be accurately described using an affine stochastic process, and that (ii) the parameters of that process can be precisely estimated. In that case, she shows that we can then calculate conditional and unconditional skewness from the conditional and unconditional moment generating functions of the process. Using the Heston (1993) model as example in a simulation exercise, she shows that her new skewness estimator performs well. In her second chapter, Anna is currently applying her new skewness estimator based on the Heston (1993) model to U.S. single-stock return data.

Anna will be on the job market starting from September/October 2023.

Kevin works on real options asset pricing models. In his first Ph.D. chapter, he studies whether such models can offer a neoclassical foundation for seasonality in firms' stock market and accounting data and the ties between these types of seasonality. In the models that he currently looks into, an all-equity monopolistic firm exposed to seasonality in demand optimally makes production, inventory, and selling decisions, producing and building up inventory when demand is low and selling off its inventory close to or at the demand peak. Remarkably, Kevin shows that, as a result of those real options, the firm's expected return displays seasonal variations opposite to those in demand (i.e., a high demand season tends to be a low expected return season and vice versa if building up inventory is not too costly). Preliminary empirical research on monthly stock market data and quarterly accounting data strongly support the model's main asset pricing predictions.

Kevin will start a two-year postdoc at the Judge Business School of the University of Cambridge from mid 2023. 

Former Ph.D. Students

Adnan works on the cross-section of option returns. In his first Ph.D. chapter, which is the basis of a joint paper with Ian Garrett, he looks at the difference in expected returns between American and "equivalent" (i.e., same underlying, strike price, and maturity date) European put options, showing that the difference is both statistically and economically large and behaves as predicted by neoclassical finance theory. In his second chapter, he sets up a trading strategy involving American options and their replication portfolio exploiting the fact that most retail investors exercise their options too late.

Adnan now works as Lecturer in Finance at University of Liverpool Management School.

Sue works on the cross-section of corporate bond and option returns. In her first chapter, she tests the Boguth and Kuehn (2012) consumption-based general equilibrium model with states for mean consumption growth and consumption volatility, on delta-hedged options and straddles. Compared to tests of the model on stocks, she finds much stronger and far more convincing evidence that consumption volatility is negatively priced. In her second chapter, she jointly uses stock and bond data to test Garlappi et al.'s (2008) and Garlappi and Yan's (2011) shareholder-advantage based explanation for the distress anomaly. She finds that, while shareholder advantage goes some way towards explaining the anomaly, it cannot completely explain it.

Sue works as a postdoctoral research at Tsinghua University, but starts as tenure-track assistant professor at the School of Economics and Management at the University of Science and Technology in Beijing from mid-2023.  

Oksana works on empirical corporate finance topics, in particular, risk-shifting. In her first chapter, published in the Journal of Corporate Finance, she shows that creditors only restrict a firm's risk-shifting tendencies if they have correctly identified the firm as distressed. In her second chapter, forthcoming in the Review of Finance, she reveals that exogenous distress risk shocks lead moderately, but not highly, distressed firms to skew their operating asset portfolios towards riskier assets. More importantly, she also shows that the shifts toward riskier assets are facilitated through closing down profitable segments with a lot of growth opportunities, boosting the firm's ex-post failure probability and hurting its creditors. Thus, her evidence not only suggests risk-taking, but also risk-shifting. Please find more details about these projects on the "Publications" page.

Oksana started as Lecturer in Finance in Birmingham, but now works for Cardiff Business School.