Alexi Savov Assistant Professor of Finance asavov@stern.nyu.edu.edu
Research interests Asset pricing with asymmetric information; endogenous noise trading. Consumption-based asset pricing, especially non-market consumption. Empirical asset pricing.
Experience Curriculum Vitae
Papers Have Financial Markets Become More Informative? (With Jennie Bai and Thomas Philippon) The finance industry has grown. Financial markets have become more liquid. But have prices become more informative? We use stock and bond prices to forecast earnings and find that the information content of market prices has not increased since 1960. The magnitude of earnings surprises has increased. A baseline model predicts that as the efficiency of information production increases, prices become more disperse and covary more strongly with future earnings. The predictable component of earnings improves capital allocation and serves as a direct measure of welfare. We find that this measure has remained stable. A model with endogenous information acquisition predicts that an increase in fundamental uncertainty also increases informativeness as the incentive to produce information grows. We find that uncertainty has indeed increased outside of the S&P 500, but price informativeness has not. Prices have become stronger predictors of R&D investment. The Price of Skill: Performance Evaluation by Households Skilled traders make money off noise traders. When acting as intermediaries, they provide a hedge to the noise traders themselves. I present a general equilibrium model where households receive aggregate and idiosyncratic income shocks that are hard to disentangle. By optimally trading in response to these shocks, they act as noise traders who risk misallocating their portfolios. A skilled intermediary hedges this risk by investing according to more accurate knowledge of future dividends. In equilibrium, active funds pay off when households misjudge their future income. The high premium for this service makes them appear to underperform passive funds after fees. Asset Pricing with Garbage The Journal of Finance Smith Breeden Prize (Distinguished Paper) A new measure of consumption, garbage, is more volatile and more correlated with stocks than the standard measure, NIPA consumption expenditure. A garbage-based CCAPM matches the U.S. equity premium with relative risk aversion of 17 versus 81 and evades the joint equity premium-risk-free rate puzzle. These results carry through to European data. In a cross section of value, size and industry portfolios, garbage growth is priced and drives out NIPA expenditure growth. Wall Street Journal article Internet Appendix Slides The Puzzle of Index Option Returns (With George Constantinides and Jens Jackwerth) We document that leverage-adjusted returns on S&P 500 index call and put portfolios are decreasing in their strike-to-price ratio over 1986-2010, contrary to the prediction of the Black-Scholes-Merton model. We test a large number of plausible unconditional factor models and find that only factors which capture jumps in the market index and jumps in the market volatility and, to a lesser extent, volatility and liquidity reasonably explain the cross-section of index options. The principal finding is that these factors require economically and statistically different factor premia on subsamples split across type (calls and puts), maturity, and moneyness, pointing towards market segmentation.