“A note on the relationship between electricity and natural gas prices across European markets in times of distress“(with Stephania Mosquera-López).
We study the transmission of natural gas price shocks to electricity prices across different
scenarios of electricity generation for thirteen European electricity markets. To this end, we
propose a statistic based on the estimation of conditional quantile regression models, which
allows us to identify the most vulnerable countries in the region to variations in the global
price of natural gas, under scenarios of generation distress. We point out to market integration
and different electricity generation mixes as likely factors underlying our results. Our main
contribution is the analysis of the proposed static for the case of European markets from a
comparative perspective, which helps to guide and support timely policy responses in
European countries, aiming to isolate the most vulnerable consumers and firms from dramatic
electricity price increments as those observed in the first three quarters of 2021. The most
vulnerable countries according to our indicator are Portugal and Spain, while the most resilient
are Italy and Finland.
“Vulnerable Funding in the Global Economy” (with Helena Chuliá and Ignacio Garrón). IREA-University of Barcelona, 2021.
Presented at the annual meeting of the European Economic Association 2021.
We study the international propagation of financial conditions from the United States to global financial markets. The impact is highly heterogeneous alongside the quantiles of the distribution of the two major funding sources, credit and equity. Analogous to vulnerable growth episodes, there exist vulnerable funding periods of a global scale, originated from financial weakness in the US. Our estimates differentiate between first and second moment (i.e. uncertainty) shocks to financial conditions. This distinction proves to be relevant as it uncovers a complex propagation of shocks via different economic channels. We also document a heterogeneous impact across countries. In the case of credit growth this heterogeneity is better explained by the size or depth of the markets, while in the case of stock markets, the explanation is rooted in the strength of the financial connectedness with the US.
“Rethinking Asset Pricing with Quantile Factor Models“ (with Xenxo Vidal and Montserrat Guillén) IREA-University of Barcelona, 2021
Traditional empirical asset pricing focuses on the average cases. We propose a new approach to analyze the cross-section of the returns. We test the predictive power of market-beta, size, book-to-market ratio, profitability, investment, momentum, and liquidity, across the whole conditional distribution of market returns. We show that the practice of adding characteristics to our pricing equation should be clearly informed by our particular interests regarding the cross-sectional distribution of the returns, that is, whether we are more interested in a certain fragment of the distribution than in other parts. Our results emphasize the need to consider carefully what factors to include in the pricing equation, which depends on the dynamics that one wants to understand and even on one attitude towards risk. In short, not all factors serve all purposes.