Mailing Address
CEMFI
Casado del Alisal, 5
Madrid 28014 Spain

Mobile
+ 34 661 784 067

Email
galvez@cemfi.edu.es


Curriculum Vitae pdf



My research covers topics in the fields of
financial economics, applied econometrics and macroeconomics. I will be available for interviews at the 2017 Symposium of the Spanish Economic Association in Barcelona, and the 2018 ASSA Meetings in Philadelphia.

Job Market Paper

Household portfolio choices and nonlinear income risk pdf

Awarded Best PhD Student Paper, 2017 CEPR European Conference in Household Finance (Sardinia)

Recent evidence on earnings dynamics shows that the income risk that households face is highly nonlinear. This paper empirically examines the role of uninsurable, asymmetric earnings risk on household portfolio decisions over the life cycle. I motivate the analysis by studying the implications of nonlinear earnings dynamics in a portfolio choice model with participation costs. I then develop a flexible semi-structural framework to empirically quantify the transmission of persistent, time-varying income shocks to household stock market participation and portfolio choice decisions. Portfolio and participation rules are modelled as age-dependent functions of the latent earnings components, wealth, and unobserved taste or cost shifters. I provide conditions that guarantee nonparametric identification, and propose a tractable, simulation-based estimation algorithm. Using recent waves of PSID data, I find that variations in income uncertainty drive heterogeneous extensive and intensive margin responses to an income shock across households. My results underscore the importance of past earnings histories and the size and durability of current income shocks as drivers for household stock market participation and portfolio choices, and suggest the presence of per-period participation costs.

Working Papers

Distributional linkages between European sovereign bond and bank asset returns pdf
joint with Javier Mencía, Bank of Spain

We analyse the dependence between sovereign bonds' and banks' asset return distributions with a large panel of European data from 2001 to 2013. Using quantile regressions, we identify nonlinear contemporaneous and lagged dependence. As a result, shocks to crisis-hit sovereign bonds have contemporaneous effects on the whole distribution of banks' returns,  as well as a persistent impact in the tails. Our results offer relevant insights about  the relationship between banking and sovereign crises. In particular, during the recent  financial crisis, banks' asset return distributions have lower means and fatter tails  than in the absence of a simultaneous sovereign crisis.

Cyclical dependence and timing in market neutral hedge funds
pdf  [Supplemental Material]
joint with Julio A. Crego, Tilburg University

We explore a new dimension of dependence of hedge fund returns with the market portfolio by examining linear correlation and tail dependence conditional on the financial cycle. Using a large sample of hedge funds that are considered “market neutral”, we document that the low correlation of market neutral hedge funds with the market is composed of a negative correlation during bear periods and a positive one during bull periods. In contrast, the remaining styles present a positive correlation throughout the cycle. We also find that while they present tail dependence during bull periods, we cannot reject tail neutrality in times of financial turmoil. Consistent with these results, we show that market neutral hedge funds present state timing ability that cannot be explained by other forms of timing ability. Using individual hedge fund data, we find that funds that implement share restrictions are more likely to time the state.
References
Manuel Arellano
CEMFI
Calle Casado del Alisal, 5
Madrid 28014 Spain
+ 34 914 290 551
arellano@cemfi.es
Nezih Guner
CEMFI
Calle Casado del Alisal, 5
Madrid 28014 Spain
+ 34 914 290 551
nezih.guner@cemfi.es
Javier Mencía
Bank of Spain
Calle Alcala, 48
Madrid 28014 Spain
+ 34 913 385 414
javier.mencia@bde.es
Enrique Sentana
CEMFI
Calle Casado del Alisal, 5
Madrid 28014 Spain
+ 34 914 290 551
sentana@cemfi.es


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