Dr. Alex Hsu received his Ph.D. from the Ross School of Business at the University of Michigan, Ann Arbor, in 2012. He holds the science bachelor's degree from Brown University and graduate degrees from Brown University as well as the University of Michigan, Ann Arbor. His teaching interests are in fixed income and asset pricing in general. Dr. Hsu's research focuses on the interface between macroeconomics and finance. More specifically, his work attempts to understand how monetary policy and fiscal policy impact prices in the financial markets. He has presented his papers at the FMA conference, at the Board of Governors of the Federal Reserve System in Washington D.C., and at the Federal Reserve Bank of Atlanta.
Areas of Expertise (3)
Theoretical and Empirical Asset Pricing
University of Michigan: Ph.D., Finance 2012
Brown University: B.S., Engineering 2001
Brown University: M.S., Engineering 2002
Event Appearances (2)
Default Risk and the Pricing of U.S. Sovereign Bonds
American Finance Association Atlanta, Georgia
The Impact of Right-to-Work Laws on Worker Wages: Evidence from Collective Bargaining Agreements
European Finance Association Warsaw, Poland
Selected Articles (4)
2018 Industries with higher historical business cycle regime Sharpe ratios have higher regime-dependent expected returns. An out-of-sample sector rotation strategy generates annualized alpha of 11.91% (14.02%) in Fama-French three-factor (five-factor) model during 1985--2014. The alpha doesn't stem from industry momentum, related anomalies, and is less likely to be driven by standard risk-based explanations. Firms in long portfolios have stronger fundamentals, more upward analyst forecast revisions, and more positive forecast errors. Our results suggest that investors don't fully incorporate business cycle variation in cash flow growth and highlight the importance of business cycle on the cross-section of industry returns.
2016 We estimate a New-Keynesian model with heterogeneous agents to study the impact of level and volatility shocks to fiscal policy on the term structure of interest rates and bond risk premia. We derive three key insights from the theoretical model. First, government spending level shocks generate positive covariance between marginal utility to consume and inflation, making nominal bonds poor hedges against consumption risk and result in positive risk premium. Second, variability in the nominal term premium is caused by variation in the real term premium while inflation risk premium is remarkably stable over time. Fluctuation of the real term premium is entirely driven by government spending volatility shocks. Third, at the zero lower bound (ZLB), impact of level and volatility shocks to government spending are amplified. This is especially pronounced for volatility shocks producing substantial bond risk premium when the ZLB is binding.
2015 This paper presents a general specification for dynamic equilibrium models where nonnegative variables follow the autoregressive gamma process in Jasiak and Gourieroux (2006). The model solution implies linear dynamics for endogenous variables, and provides conditional and unconditional moments in closed-form. Finding the solution is computationally inexpensive, requiring only to solve linear and quadratic equations. The specification can be applied to a wide variety of models in finance and economics. Two applications are presented. First, a time-varying volatility premium in a long-run risks asset pricing model. Second, time-varying volatility in policy shocks in a simple New Keynesian model. Accuracy in these models’ solutions is high and not significantly affected by time-varying volatility.
2015 We analyze the impact of unanticipated monetary policy changes on equity returns and document that financially constrained firms earn a significantly lower return following rate increases as compared to unconstrained firms. Trading volume is significantly lower for constrained firms on FOMC announcement days but the differential return response manifests with a delay. Further, unanticipated increases in Federal funds rate are associated with a larger decrease in expected cash flow news, but not of discount rate news, for constrained firms relative to unconstrained firms. Our results highlight how monetary policy shocks have a disproportionate real impact on financially constrained firms.