FRIC/Finance Seminar with Aytek Malkhozov, Bank for International Settlements

FRIC Center for Financial Frictions and the Department of Finance are proud to announce the upcoming seminar with Aytek Malkhozov, Bank for International Settlements.

Aytek Malkhozov will present:

ABSTRACT
We build a parsimonious international asset pricing model in which deviations of government bond yields from a fitted yield curve of a country measure the tightness of investors’ capital constraints. We compute these measures at daily frequency for six major markets and use them to test the model-predicted effect of funding conditions on asset prices internationally. Global illiquidity lowers the slope and increases the intercept of the international security market line. Local illiquidity helps explain the variation in alphas, Sharpe ratios, and the performance of betting-against-beta (BAB) strategies across countries.