12/18/2023 0 Comments Ifinance nyu![]() Our analyses show signatures of natural selection on regulatory networks that both constrain and facilitate rapid evolution of gene expression level towards new optima. Here, we model the adaptation of regulatory networks and gene expression levels to a shift in the environment that alters the optimal expression level of a single gene. Regulatory networks could constrain or facilitate evolutionary adaptation in gene expression levels. Regulatory networks play a central role in the modulation of gene expression, the control of cellular differentiation, and the emergence of complex phenotypes. Journal of Evolutionary Biology, August 2016. Genes under weaker stabilizing selection increase network evolvability and rapid regulatory adaptation to an environmental shift, with Pedro Bordalo and Bernardo Lemos. National Banking Era suggests that the LCR is unlikely to reduce financial fragility and may increase it. We evaluate this immobile capital system with reference to a previous structurally identical regime which also required that short-term bank debt be backed by Treasury debt one-for-one: the U.S. repo) be backed one-for-one with high-quality bonds. Since the financial crisis, regulatory changes to the financial architecture have aimed to make collateral immobile, most notably with the BIS liquidity coverage ratio (LCR) for banks which requires that (net) short-term (uninsured) bank debt (e.g. Safe debt, whether government bonds or privately-produced bonds, i.e., asset-backed securities, could be traded, posted as collateral, and rehypothecated, moving to their highest value use. The financial architecture prior to the recent financial crisis was a system of mobile collateral. Mobile Collateral versus Immobile Collateral, with Gary Gorton and Tyler Muir. Overall, the results provide a theoretical framework under which such timing strategies can persist in equilibrium and underline the importance of capturing long-horizon risk exposures. Motivated by the new empirical regularity, I show that such seasonal patterns in returns obtain in a model with predictable time-varying conditional volatility of underlying state variables. The timing strategies are therefore much less appealing to long-term investors than might at first appear. While the aggregate market shows mean reversion over holding periods longer than five years, such timing strategies typically exhibit variance ratios that increase markedly in the length of the holding period. I document a novel fact regarding such timing strategies: the associated risk-return tradeoff tends to deteriorate as the holding period increases. The finance literature has documented a number of strategies that obtain superior Sharpe ratios and alphas relative to underlying buy-and-hold portfolios by employing simple calendar- or indicator-based weighting schemes. The calibrated model underlines the systematic nature of high-frequency changes in the stock-bond covariance and the first-order effect of risk compensation on safe rates.ĭiscounting Market Timing Strategies, November 2021. Empirically, I show that the stock-bond covariance co-moves with credit spreads and can predict excess returns on corporate bonds and on bond-like stocks. I demonstrate that a model of time-varying price of risk, calibrated to fit equity moments, matches well the evidence regarding both the nominal and real stock-bond covariance, even in the absence of inflation news. Consequently, times when the price of risk is volatile see a more negative stock-bond covariance. An increase in the price of risk lowers risky asset prices on account of an increase in risk premia it lowers bond yields on account of the precautionary savings component. ![]() I show that the precautionary savings motive can account for the high-frequency variation in the stock-bond covariance. Precautionary Savings and the Stock-Bond Covariance, November 2022.
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