Nikolai Roussanov

Nikolai Roussanov
  • Moise Y. Safra Associate Professor of Finance

Contact Information

  • office Address:

    2326 Steinberg-Dietrich Hall
    3620 Locust Walk
    Philadelphia, PA 19104

Research Interests: asset pricing, econometrics., household finance, macroeconomics

Links: Personal Website, CV

Overview

Education

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

Academic Positions Held

Wharton: 2007-present

Other Positions

National Bureau of Economic Research, Faculty Research Fellow 2010-present

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Research

  • Alexandr Kopytov, Nikolai Roussanov, Mathieu Taschereau-Dumouchel, Short-Run Pain, Long-Run Gain? Recessions and Technological Transformation.

  • Nikolai Roussanov, Hongxun Ruan, Yanhao Wei, Marketing Mutual Funds.

    Abstract: Marketing and distribution expenses constitute a large fraction of the cost of active management in the mutual fund industry. We investigate their impact on the allocation of capital to funds and on returns earned by mutual fund investors by estimating a structural model of costly investor search and fund competition with endogenous marketing expenditures. We find that marketing is nearly as important as performance and fees for determining fund size. Restricting the amount that can be spent on marketing by funds substantially improves investor welfare, as more capital is invested with passive index funds and price competition drives down fees on actively managed funds. Average alpha increases as active fund size is reduced, and the relationship between fund size and fund manager skill net of fees is closer to that implied by a frictionless model.

  • 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. High-yielding commodity exporters׳ currencies appreciated, boosting carry trade profits. The Global Recession sharply reversed these trends. We interpret these facts with a two-country 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 post-crisis.

    Description: Carnegie-Rochester-NYU 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 high-interest rate "investment" currencies tend to be "commodity currencies," while low-interest 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 commodity-producing 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 commodity-currency carry trade explains a substantial portion of the carry-trade risk premia, and all of their pro-cyclical predictability with commodity prices and shipping costs, as predicted by the model.

  • Nikolai Roussanov (2013), Composition of Wealth, Conditioning Information, and the Cross-Section 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 risk-taking 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 high-stakes setting by studying risk-taking 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.

Teaching

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, profit-seeing 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, profit-seeing 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.

  • FNCE921 - Introduction to Empirical Methods in Finance

    This course is an introduction to empirical methods commonly employed in finance. It provides the background for FNCE 934, Empirical Research in Finance. The course is organized around empirical papers with an emphasis on econometric methods. A heavy reliance will be placed on analysis of financial data.

Awards and Honors

  • AQR Insight Award, 2017
  • Jacobs-Levy Equity Management Award, 2017
  • Terker Family Prize in Investment Reseach, 2010

In the News

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Activity

In the News

Why Some Jobs Disappear Forever Following Recessions

After recessions, there is one type of job that does not bounce back, according to research by Wharton finance professor Nikolai Roussanov.

Knowledge @ Wharton - 2018/08/8
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Awards and Honors

AQR Insight Award 2017
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