Kaushik Vasudevan
Beyond Basis Basics: Liquidity Demand and Deviations from the Law of One Price
(with Todd M. Hazelkorn and Tobias J. Moskowitz)
Forthcoming at the Journal of Finance
Abstract [+] | PDF | SSRN | NBER WP #26773 | Internet Appendix
We argue that deviations from the law of one price between futures and spot prices, known as futures-cash bases, capture important information about liquidity demand for equity market exposure in global markets. We show that bases (1) co-move with dealer and investor futures positions, (2) are contemporaneously positively correlated with spot and futures returns with the same sign, and (3) negatively predict futures and spot market returns with the same sign. These findings are consistent with a model where the futures-cash basis reflects liquidity demand that is common to futures and cash equity markets. We show persistent supply-demand imbalances for equity index exposure reflected in bases, where compensation for meeting that liquidity demand is large (5-6% annual premium).
The Role of Beliefs in Asset Prices: Evidence from Exchange Rates
(with Joao Paulo Valente and Tianhao Wu)
Abstract [+] | PDF | SSRN
A long-standing question is why asset prices sometimes underreact and sometimes overreact to news. We explore this question in currency markets. We use survey data to estimate a model featuring investors with noisy private information and extrapolative beliefs about interest rates, and find the estimated model quantitatively matches patterns of initial underreaction and delayed overreaction of currencies in response to interest rate news. The model also helps explain changes in the time-series predictability of currency returns by interest rates in recent years, the term structure of UIP deviations, and additional features of beliefs in survey data. Our results highlight the role of investors' beliefs in asset price behavior.
Betting Without Beta
(with Tobias J. Moskowitz)
Abstract [+] | PDF | SSRN
Sports betting markets offer a novel test distinguishing the roles of preferences and beliefs in asset prices. Analyzing two contracts on the same outcome – one where payoff risk varies with expected outcome (Moneyline) and one where it does not (Spread) – we find that preferences for lottery-like payoffs, rather than incorrect beliefs, drive the lower returns to betting on risky underdogs versus safe favorites. Drawing parallels to low-risk anomalies in financial markets, we find the magnitude of pricing effects matches those in options and equity markets, with a model of lottery preferences providing a unifying explanation.
Getting Schooled: The Role of Universities in Attracting Immigrant Entrepreneurs
(with Natee Amornsiripanitch, Paul Gompers, and George Hu)
Abstract [+] | PDF | SSRN | NBER WP #28773
HLS Governance Forum
We study immigrant founders of venture-capital backed firms using a new and detailed dataset that we assemble on the backgrounds of founders. Immigrant founders have been critical to the entrepreneurial ecosystem, accounting for roughly 20% of all venture capital-backed founders over the past 30 years. We document the channels through which immigrant founders arrive in the United States and how those channels have changed over time. Higher education has served as the primary entry channel for immigrant founders. The share of foreign-educated immigrant founders who initially arrive for work has decreased over time, while the share of immigrant founders with undergraduate education in the United States has increased over time. Immigrant founders are likely to start their companies in the state in which they were educated, leading to potentially large local economic benefits associated with attracting foreign students. The results of this paper have important policy implications for the supply of entrepreneurial talent and efforts to promote entrepreneurial ecosystems.
Email:
kaushik.vasudevan@yale.edu
Mailing:
Yale School of Management, PhD Suite
165 Whitney Avenue
New Haven, CT 06511