PhD Students

• Sergey Mazyavkin (start date: September 2022; expected completion date: 2026-2027).

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.

• Jiayu (Anna) Jin (start date: September 2019; expected completion date: 2022-2023).

Anna works on developing new parametric estimators and forecasts of the skewness of discrete asset returns over long horizons. While a rich and well-established theoretical literature links expected asset returns to those assets' expected (co-)skewness, empirical studies usually do not succeed in meaningfully testing that literature's predictions since they study (i) log returns; (ii) returns over short horizons; and/or (iii) historical realizations, and not forecasts. In her first Ph.D. chapter, Anna takes a stance on the stochastic process governing asset prices (e.g., the Heston (1993) model). As a next step, she uses a novel GMM approach to estimate the parameters and state-variable values of that process and then plugs those estimates into closed-form solutions for the realized or forecasted conditional or unconditional skewness of an asset's discrete return over various short or long horizons. In her second chapter, she applies the new estimator to the cross-section of stock returns, asking (i) if conditional and unconditional skewness are similar; (ii) how skewness over one horizon relates to skewness over another; (iii) how skewness relates to firm characteristics, like size, BM, etc.; and (iv) what the term structure of skewness premiums looks like.

• Kevin Schneider (start date: September 2019; expected completion date: 2022-2023).

Kevin works on real options asset pricing models. In his first Ph.D. chapter, he looks into 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 model, an all-equity firm exposed to seasonality in demand optimally makes production, inventory, and selling decisions, producing and building up inventory when seasonal demand is low and selling off its entire 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) if and only if it is easy for the firm to build up inventories. Empirical work supports Kevin's dynamic operating leverage and shows that it can help us to understand seasonal sales, same-calendar-month, momentum, and quarterly profitability anomalies in stock data. In his second chapter, Kevin comes up with a production based asset pricing model featuring negatively priced stochastic volatility. Using an SMM estimation to calibrate that model, he demonstrates that the model can not only capture the mean returns of BM portfolios, but, sensationally, also their volatilities.

• Adnan Gazi (start date: September 2016; completion date: 2020).

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.

• Shuwen (Sue) Yang (start date: September 2016; completion date: 2020).

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 now works as a postdoctoral research at Tsinghua University (in China).

• Oksana Pryshchepa (start date: September 2010; completion date: December 2013; Lancaster).

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.