Research

Working Papers

Foreign Demand for Treasuries: Evidence from the Largest Pension Fund in the World

This paper examines how forced rebalancing by large foreign investors affects U.S. Treasury yields. Using monthly flow data and exogenous shocks, I show a one standard deviation change in pension fund flows, approximately 3.6 billion dollars, lower 5–20 year yields by 3–5 bps. Security-level estimates reveal the pension fund ownership cuts 5–10 year yields by 12 bps. I confirm this in the UK Gilt market. Local projections around the Fed surprises uncover divergent behaviors: unhedged pension funds ramp up demand as yields climb, while hedged insurers pull back. These findings position foreign pension funds as key marginal investors in global safe-asset markets

Presentation: Brownbag, Federal Reserve Board

Mind Thy Neighbor's Portfolio: A Network Approach to Contagion in the ETF Market

The exchange-traded fund (ETF) market is one of the most significant recent developments in financial markets. I show that the ETF network – the linkages between ETFs based on portfolio weights – catalyzes the propagation of price dislocations, the gaps between prices and fundamental values. Arbitrage activity induces price dislocations in connected ETFs, followed by responses in returns and subsequent reversals with an effect of 4-10% per year. While own fund flows create price pressure, bundled flows from neighboring funds can exert stronger price pressure in the opposite direction. This mechanism helps explain how price dislocations naturally arise in the ETF market.

Presentation: LSE, NSF/UChicago Annual Conference on Network Science and Economics, WFA 2021, SMU, Baruch College, Bank of England, NY Fed, Federal Reserve Board, Bank of Canada, PIMCO, BlackRock
BlackRock Applied Research Award Finalist, 2020
WFA PhD Candidate Awards for Outstanding Research, 2021

Global Production Linkages and Stock Market Comovement

with Raphael Auer (BIS), Andreas Schrimpf (BIS), and Alexander Wagner (UZurich)

Although real integration conceptually plays an important role for the comovement of international equity markets, documenting this link empirically has proven challenging. We construct a new dataset of theory-guided, relevant measures of bilateral trade in final and intermediate goods and services. With these measures, we provide evidence of a strong link between changes in real integration – in particular global value chains – and equity market comovement. This also holds when controlling for financial openness and other factors that could confound the role of real openness. These results suggest that supply chain disruptions, for instance due to political tensions and the COVID-19 crisis, might also affect the interconnections between stock markets via rippling through the global production network.

Presentation: Annual Meeting of the Central Bank Research Association, BIS, European Commission*, Banque de France*
*: by coauthor

Work in Progress

"Exchange Rates and Monetary Policy Meetings" with Ingomar Krohn (Bank of Canada)

"FOMC and Investor Duration" with Mai Hakamada (IMF)

Discussions

"The Asymmetric and Persistent Effects of Fed Policy on Global Bond Yields" by Tobias Adrian (IMF), Gaston Gelos (BIS), Nora Lamersdorf (FS), Emanuel Moench (FS and CEPR) at the 10th International Conference on Sovereign Bond Markets, 2024

"Two APs are Better Than One: ETF Mispricing and Primary Market Participation" by Evgenii Gorbatikov (LBS) and Taisiya Sikorskaya (LBS) at FMA, 2021

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