I am a 2nd-year economics PhD student at the University of Cambridge. My research interests include macroeconomic risk and uncertainty, monetary economics, and time series econometrics.
I am supervised by Chryssi Giannitsarou and Elisa Faraglia.
This paper proposes a new transmission channel of monetary policy shocks to equity premia: Monetary shocks can affect the probability of bad outcomes for future macroeconomic growth and hence support equity prices beyond any effect on expected mean growth rates. To document this channel, I estimate a monthly index of downside risks to consumption growth. Downside consumption risk rises during recessions and contains information distinct from measures of risk aversion, uncertainty, or financial stress. A loosening in the monetary policy stance can significantly affect consumption downside risks in crisis times but has weak effects during normal times. Increases in downside risk predict higher future equity returns, in line with the disaster risk hypothesis. Consumption downside risk predicts stock markets in the aggregate and across a wide range of industry portfolios. More procyclical industries have a higher sensitivity to changes in downside risk.
Coverage: Faculty of Economics