Nikolai Roussanov

Education

PhD, University of Chicago, 2008; AB, Harvard University, 2001

Academic Positions Held

Wharton: 2007present

Other Positions

National Bureau of Economic Research, Faculty Research Fellow 2010present

Robert Ready, Nikolai Roussanov, Colin Ward (2016), After the Tide: Commodity Currencies and Global Trade, Journal of Monetary Economics.

Abstract: The decade prior to the Great Recession saw a boom in global trade and rising transportation costs. Highyielding commodity exporters׳ currencies appreciated, boosting carry trade profits. The Global Recession sharply reversed these trends. We interpret these facts with a twocountry general equilibrium model that features specialization in production and endogenous fluctuations in trade costs. Slow adjustment in the shipping sector generates boom–bust cycles in freight rates and, as a consequence, in currency risk premia. We validate these predictions using global shipping data. Our calibrated model explains about 57% of the narrowing of interest rate differentials postcrisis.

Description: CarnegieRochesterNYU Series on Public Policy

Colin Ward, Nikolai Roussanov, Robert Ready (2016), Commodity Trade and the Carry Trade: a Tale of Two Countries, Journal of Finance.

Abstract: Persistent differences in interest rates across countries account for much of the profitability of currency carry trade strategies. The highinterest rate "investment" currencies tend to be "commodity currencies," while lowinterest rate "funding" currencies tend to belong to countries that export finished goods and import most of their commodities. We develop a general equilibrium model of commodity trade and currency pricing that generates this pattern via frictions in the shipping sector. The model predicts that commodityproducing countries are insulated from global productivity shocks by the limited shipping capacity, which forces the final goods producers to absorb the shocks. As a result, a commodity currency is risky as it tends to depreciate in bad times, yet has higher interest rates on average due to lower precautionary demand, compared to the final good producer. The model's predictions are strongly supported in the data. The commoditycurrency carry trade explains a substantial portion of the carrytrade risk premia, and all of their procyclical predictability with commodity prices and shipping costs, as predicted by the model.

Nikolai Roussanov (2013), Composition of Wealth, Conditioning Information, and the CrossSection of Stock Returns, Journal of Financial Economics.

Hanno Lustig, Nikolai Roussanov, Adrien Verdelhan (2013), Countercyclical Currency Risk Premia, Journal of Financial Economics, forthcoming.

Nikolai Roussanov, Hui Chen, Michael Michaux (Working), Houses as ATMs? Mortgage Refinancing and Macroeconomic Uncertainty.

Nikolai Roussanov and Pavel G. Savor (Working), Status, Marriage, and Managers' Attitudes To Risk.

Abstract: Relative wealth concerns can affect risktaking behavior, as the payoff to a marginal dollar of wealth depends on the wealth of others. In particular, status concerns that arise endogenously due to competition in the marriage market can lead to greater risk taking if the more desirable mates prefer wealthier suitors. We evaluate empirically the importance of this effect in a highstakes setting by studying risktaking of corporate CEOs. We find that single CEOs, who are more likely to exhibit status concerns, are associated with firms that exhibit higher stock return volatility and pursue more aggressive investment policies. This effect is weaker for older CEOs. Similarly to corporate CEOs, single mutual fund managers exhibit greater idiosyncratic risk in their portfolio returns. Similarly to the CEOs, mutual fund managers who are single exhibit greater idiosyncratic risk exposure than their married peers.

Hanno N. Lustig, Nikolai Roussanov, Adrien Verdelhan (2011), Common Risk Factors in Currency Markets, Review of Financial Studies.

Nikolai Roussanov (2010), Diversification and its Discontents: Idiosyncratic and Entrepreneurial Risk in the Quest for Social Status, Journal of Finance, October 2010.

Abstract: Social status concerns effect investors' decisions by driving a wedge in attitudes towards aggregate and idiosyncratic risks. I model such concerns by emphasizing the desire to "get ahead of the Joneses," which implies that investors' aversion to idiosyncratic risk is lower than their aversion to aggregate risk. The model predicts that investors hold concentrated portfolios in equilibrium, which helps rationalize the puzzlingly small premium for undiversified entrepreneurial risk. In the model, status concerns are more important for the wealthier households. Consequently, these households own a disproportionate share of risky assets, particularly private equity, and experience greater volatility of wealth and consumption growth, consistently with empirical evidence.

Kerwin Kofi Charles, Erik Hurst, Nikolai Roussanov (2009), Conspicuous Consumption and Race, Quarterly Journal of Economics, May 2009.

Abstract: Using nationally representative data on consumption, we show that Blacks and Hispanics devote larger shares of their expenditure bundles to visible goods (clothing, jewelry, and cars) than do comparable Whites. These differences exist among virtually all subpopulations, are relatively constant over time, and are economically large. While racial differences in utility preference parameters might account for a portion of these consumption differences, we emphasize instead a model of status seeking in which conspicuous consumption is used as a costly indicator of a household’s economic position. Using merged data on race and statelevel income, we demonstrate that a key prediction of the statussignaling model that visible consumption should be declining in reference group income is strongly borne out in the data for each racial group. Moreover, we show that accounting for differences in reference group income characteristics explains most of the racial difference in visible consumption.

Lars Hansen, John Heaton, Junghoon Lee, Nikolai Roussanov (2007), Intertemporal Substitution and Risk Aversion, Handbook of Econometrics, Volume 6, 2007.

Abstract: We study structural models of stochastic discount factors and explore alternative methods of estimating such models using data on macroeconomic risk and asset returns. Particular attention is devoted to recursive utility models in which risk aversion can be modified without altering intertemporal substitution. We characterize the impact of changing the intertemporal substitution and risk aversion parameters on equilibrium shortrun and longrun risk prices and on equilibrium wealth.

Past Courses

FNCE235 FIXED INCOME SECURITIES

This course covers fixed income securities (including fixed income derivatives) and provides an introduction to the markets in which they are traded, as well as to the tools that are used to value these securities and to assess and manage their risk. Quantitative models play a key role in the valuation and risk management of these securities. As a result, although every effort will be made to introduce the various pricing models and techniques as intuitively as possible and the technical requirements are limited to basic calculus and statistics, the class is by its nature quantitative and will require a steady amount of work. In addition, some computer proficiency will be required for the assignments, although familiarity with a spreadsheet program (such as Microsoft Excel) will suffice.

FNCE239 BEHAVIORAL FINANCE

There is an abundance of evidence suggesting that the standard economic paradigm rational agents in an efficient market does not adequately describe behavior in financial markets. In this course, we will survey the evidence and use psychology to guide alternative theories of financial markets. Along the way, we will address the standard argument that smart, profitseeing agents can correct any distortions caused by irrational investors. Further, we will examine more closely the preferences and trading decisions of individual investors. We will argue that their systematic biases can aggregate into observed market inefficiencies. The second half of the course extends the analysis to corporate decision making. We then explore the evidence for both views in the context of capital structure, investment, dividend, and merger decisions.

FNCE725 FIXED INCOME SECURITIES

This course covers fixed income securities (including fixed income derivatives) and provides an introduction to the markets in which they are traded, as well as to the tools that are used to value these securities and to assess and manage their risk. Quantitative models play a key role in the valuation and risk management of these securities. As a result, although every effort will be made to introduce the various pricing models and techniques as intuitively as possible and the technical requirements are limited to basic calculus and statistics, the class is by its nature quantitative and will require a steady amount of work. In addition, some computer proficiency will be required for the assignments, although familiarity with a spreadsheet program (such as Microsoft Excel) will suffice.

FNCE739 BEHAVIORAL FINANCE

There is an abundance of evidence suggesting that the standard economic paradigm rational agents in an efficient market does not adequately describe behavior in financial markets. In this course, we will survey the evidence and use psychology to guide alternative theories of financial markets. Along the way, we will address the standard argument that smart, profitseeing agents can correct any distortions caused by irrational investors. Further, we will examine more closely the preferences and trading decisions of individual investors. We will argue that their systematic biases can aggregate into observed market inefficiencies. The second half of the course extends the analysis to corporate decision making. We then explore the evidence for both views in the context of capital structure, investment, dividend, and merger decisions.

• AQR Insight Award, 2017
• JacobsLevy Equity Management Award, 2017

• Terker Family Prize in Investment Reseach, 2010

• Do You, CEO, Promise to Take Less Risk as Long as You’re the Boss?, Wall Street Journal 04/27/2014

• Companies headed by unmarried CEOs grow faster, Quartz 04/27/2014

• Success and the Single Chief Executive, Bloomberg View 08/17/2011

Knowledge @ Wharton

• What Money Managers Miss in Currency Carry Trades, Knowledge @ Wharton 07/11/2017
• Will the Fed and U.S. Monetary Policy Ever Get Back to ‘Normal’?, Knowledge @ Wharton 05/30/2017
• Can Infrastructure Spending Be a Silver Bullet?, Knowledge @ Wharton 10/11/2016
• What Are the Economic Benefits of the Shale Oil Boom?, Knowledge @ Wharton 07/08/2016
• Has the Hedge Fund Industry Lost Its Way?, Knowledge @ Wharton 11/06/2015
• Heads or Tails? What the Future Holds for Bitcoin and ‘Altcoins’, Knowledge @ Wharton 07/09/2014
• Risk and the Unmarried CEO, Knowledge @ Wharton 04/21/2014
• The LIBOR Mess: How Did It Happen — and What Lies Ahead?, Knowledge @ Wharton 07/18/2012
• Revisiting the American Dream: Is the U.S. Providing Fewer Opportunities to Get Ahead?, Knowledge @ Wharton 01/18/2012
• The Great Deleveraging: Will Consumer Spending Ever Recover?, Knowledge @ Wharton 10/12/2011
• Research Roundup: Fiscal Fatal Attraction, the Idiosyncrasies of Entrepreneurs and the Value of Luxury Hiding in Plain Sight, Knowledge @ Wharton 04/27/2011
• Conspicuous Consumption and Race: Who Spends More on What, Knowledge @ Wharton 05/14/2008
• The Economic Stimulus Package: Will It Work, and for Whom?, Knowledge @ Wharton 02/20/2008