Ph.D. candidate in Financial Economics and Economics,
at the Tepper School of Business, Carnegie Mellon University.
Available for interviews at AEA/ASSA 2014 Annual Meeting in Philadelphia in January.
Abstract: Past research has largely ignored the effects that politicians and political parties have on the risk of default of state and federal governments. The objective of this paper is to address this important policy question using data from Credit Default Swaps (CDS), a derivative contract designed to protect from risk of default. I use polls and prediction market outcomes to measure the likely outcome of future state and federal elections. The findings of the paper suggest that state Republican governors have a significant positive effect on CDS spreads. On average, Republican governors reduce credit spreads by around six basis points, half of CDS standard deviation during the period of analysis. Ex-ante, Republican candidates are good news for debt holders. At the federal level, I find that the prospects of an Obama administration had ambiguous effects on the bond market. I find an adverse effect on credit risks in 2008 and a positive effect in 2012. An Obama victory versus Romney implied a decrease in credit spreads by more than 20 basis points.Published Papers:
- "Tax-Subsidized Underpricing: The Market for Build America Bonds" with Richard C. Green and Norman Schurhoff, Journal of Monetary Economics (2013)
- "Why Governments Choose Different Debt Maturity Structures?", Revista de FCEE, 2011