I am an Assistant Professor of Finance at the Gatton College of Business and Economics of the University of Kentucky. My research spans two areas of finance: entrepreneurship and asset management. A unifying theme across my work is the identification of issues that calls for the action of policymakers in order to improve the conditions of the less empowered.
Prior to joining UK. I recived a PhD in Finance from UC Berkeley, a MASc in Economics from the University of São Paulo, and a BA in Mathematics from the University of São Paulo .
Can regions with prevalent violent and property crimes promote business by reducing crime rates through law enforcement? Using exogenous state-level police strikes in Brazil, I show that a short-term decrease in the police force leads to an increase in crime rates and a reduction in business activity. Taken together with the finding of the crime literature that lower business activity leads to more crimes, this implies a feedback loop between crime and business, suggesting the existence of multiple Pareto-ranked equilibria. I use the introduction of a law enforcement program called the Pacifying Police Units in the Rio de Janeiro city to provide evidence that a substantial (yet temporary) police shock can create a persistent reduction in crime and a persistent increase in entrepreneurship, consistent with a shift away from the undesirable high-crime low-business equilibrium.
with Igor Cunha
We study how politicians' compensation affects the real economy. Specifically, we investigate the effect of legislators' wages on business activity in Brazil. We identify our results using a constitutional amendment that established salary caps for legislators in a given municipality based on arbitrary population cutoffs. We find that higher politician wages are associated with stronger firm and job creations and increases in firms' revenues and investments. Better paid legislators increase the municipality's budget surplus while increasing expenditure in education and health care. Our evidence is consistent with local legislators affecting firms mainly through improvements in fiscal policy.
with Adair Morse and Alexander Dyck
R&R Review of Financial Studies
We model public pension funds that contract with investment managers and the resulting portfolio allocation and performance. Frictions in optimal contracting emerge from board members’ sensitivity to employee and public outrage over high compensation. In global data covering $5.4 trillion in assets, we estimate a system of compensation and returns equations. Relaxing outrage constraints by one standard deviation results in $81,000-$179,000 more compensation, and $13-32 million of incremental value-add annually for an average public pension fund (15-35 bps excess performance in alternatives and 8-18 bps in public equities). Outrage is orthogonal to distortions from underfunding and political payoffs to local investment.
with Martin Lettau and Sydney Ludvigson
This paper provides a comprehensive analysis of the cross-section of portfolios of active mutual funds, ETFs and hedge funds through the lens of risk (anomaly) factors that have been identified in the asset pricing literature. Mutual funds hold predominantly very large stocks and do not tilt their portfolios towards high momentum, high ROE or low investment growth stocks. In contrast, the distribution of mutual fund book-to-market (BM) ratios is strongly tilted towards low BM ratios. While there are many low-BM “growth” funds, there are virtually no high-BM funds. Even portfolios of “value” funds do not tilt towards high BM-stocks. In fact, “value” funds hold a higher proportion of their portfolios in low-BM (“growth”) stocks than in high-BM (“value”) stocks. These findings are robust with respect to different measures of “value/growth”, data construction methodologies, as well as across time. We conclude that U.S. investors cannot use mutual funds or ETFs to construct high-BM portfolios.