Firm Foreign Activity and the Geography of Exchange Rate Risk, (with Francesca Carrieri)

Abstract: Globally-focused firms, more than domestic ones, are the key drivers of foreign exchange rate (FX) risk. They explain a larger fraction of the factors’ variation and have higher FX exposure, specifically during the home currency depreciation. Their exposure is higher in countries more dependent on the export sector and to neighbors’ currencies, in line with gravity effects. Consistent with the geography of FX risk, those in the core of the global trade network are less exposed, especially to relatively close currencies, reflecting diversification benefits. Overall, we find the economic origins of FX risk pricing in the trade channel over investment. 

Accepted for presentation in: Northern Finance Association annual meeting (NFA), Montreal, Canada, 2024, Global Finance Conference, Treviso, Italy; China International Conference in Finance (CICF), Shanghai, China, 2023; Conference of the French Finance Association (AFFI), Bordeaux, France, 2023; Southern Finance Association (SFA), Key West, US, 2022; International Risk Management Conference (IRMC), Bari, Italy, 2022; Asia FA, Hong Kong, 2022; US. Midwest Finance Association (MFA), Chicago, US, 2022


Cyclicality in the Prices of Risk:  What More Can We Learn from Explainable AI?, (with Francesca Carrieri)

Abstract: We uncover the temporal patterns of the prices of risk through industry portfolios with varying sensitivities to the economic and financial cycles. Conditioning on the highs and lows of the cycles is key for statistical significance of the intertemporal component. Unlike market risk, its price decreases during an economic downturn but increases under tight funding conditions. Predictive machine learning models and their SHAP values suggest that a limited number of firm characteristics convey the most informative signals about asset risk premia. Valuation ratios are more important determinants for Cyclical relative to Defensive industries, whereas Return characteristics become crucial during recessions. 

Accepted for presentation in: Financial Management Association (FMA), Grapevine, US 2024


The Real Effects of Protecting Biodiversity (with Lilian Ng, Man Duy Pham, and Jing Yu) 

Abstract: As protected areas become a key policy tool for biodiversity conservation, their broader economic and corporate impacts remain underexplored. This study examines how proximity to newly designated protected areas affects corporate operations, environmental performance, and financial outcomes. Using data from 1990 to 2021, we show that industrial facilities near these areas significantly reduce toxic emissions,  primarily through scaled-back production and workforce contraction rather than proactive investments in pollution control. Heightened regulatory scrutiny imposes operational constraints, leading to financial burdens for parent companies and measurable declines in profitability and stock market valuations. Further analysis identifies environmental enforcement actions near protected areas as the primary channel through which exposure to biodiversity conservation initiatives shapes corporate behavior. As global efforts to protect ecosystems expand, our findings highlight the substantial operational and financial risks firms face from biodiversity-related regulatory exposure, carrying important implications for policymakers, businesses, and investors.

Accepted for presentation in: Special Issue on Biodiversity and Natural Resource Finance Workshop, Cambridge, UK 2024