Default Risk Premium and Asset Prices
(Jointly with Gianluca Fusai)
The default risk premium expresses the difference between the actual default risk of a company and the default risk implied by the securities issued by the company. In this paper, we study the simultaneous relationship between the dynamics of the default risk premium and both the dynamics of the stock price and the CDS (Credit Default Swap) spread of a company. We show that an increase in the default...
The Relative Pricing of Sovereign Credit Risk After the Eurozone Crisis
(Jointly with Francesco Ruggiero)
The paper investigates the relative pricing of the sovereign credit risk, for European countries, during and after the sovereign debt crisis of 2010-2012. We investigate empirically the theoretical relationship between CDS spreads and bond yields before and after the announcement of the Outright Monetary Transaction (OMT) Programme, by the European Central Bank, and we show that the relative mispricing of the sovereign...
Dynamic Ownership, Private Benefits, and Stock Prices
I quantify private benefits of control, and their impact on stock prices, by estimating a structural model of optimal shareholding using data on the ownership dynamics of Italian public companies. The results show that controlling shareholders generally have positive and persistent impact on stock prices, and the impact is larger during the last Eurozone debt crisis. The results imply that controlling shareholders are particularly beneficial for the rest of the company shareholders during negative economic cycles...
Hedging Labor Income Risk over the Life-Cycle
(Jointly with F. Bagliano, C. Fugazza, G. Nicodano)
We show that the decision to participate in the stock market depends on the ability of equi- ties to hedge the individual permanent earnings shocks, consistent with implications of life-cycle models. Those households who refrain from stock investing display positive correlation between their own permanent income innovations and market returns. These results owe to a two-step empirical strategy. First, a minimum distance estimation disentangles the aggregate from the idiosyncratic permanent component of labor income risks.