Job market candidate
Tel. +34 93 542 2688
Available for Interviews at :
Simposio de la Asociación Española de Economía (SAEe), December 14-16, Barcelona, Spain
Allied Social Science Associations (ASSA), January 5-7, Philadelphia, US
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Primary Fields: Empirical Banking, Financial Intermediation
Secondary Fields: Machine Learning and Natural Language Processing Applications
"Breaking the Word Bank: Effects of Verbal Uncertainty on Bank Behavior" (Job Market Paper)
Banks differ from non-financial firms as they must communicate to both regulators and shareholders, possess opaque and complex balance sheets, and are the main providers of credit to the real economy. In this paper, I propose a new index to detect the idiosyncratic uncertainty banks face at the bank-quarter level. The index uses a recent natural language processing technique, called Skip-gram Model, to discover a novel list of “uncertainty” words based on semantic and syntactic similarities. I use the frequencies of these words in banks quarterly conference calls as a proxy for bank-level uncertainty. The index spikes at the beginning of the 2007-2009 financial crisis and reveals which banks at a given quarter signal more uncertainty about their balance sheets. Higher uncertainty is associated with lower lending the next quarter and larger securities portfolios, suggesting active management of uncertainty by moving from lending to holding liquid assets. The active management of uncertainty is more pronounced during periods of higher aggregate volatility and for banks with more skin-in-the-game.
“Dressing up for the Regulators: Evidence from the Largest-Ever Supervisory Review”, with Puriya Abbassi, Rajkamal Iyer, José-Luis Peydró.
Government regulation requires effective supervision, but regulated entities may window-dress to supervisors. For empirical identification, we analyze banks exploiting a quasi-natural experiment — ECB’s 2014 asset quality review (AQR)— in conjunction with the security and credit registers. After the AQR announcement, reviewed banks decrease riskier securities and loans, and overall securities and credit supply. After AQR compliance, reviewed banks reload riskier securities, but not riskier credit. Effects are stronger for reviewed banks with higher trading expertise. Results suggest that banks window-dress in supervisory audits, especially on their liquid securities that are easier to trade, and hold important policy implications for supervision.
Research Papers in Progress
“Capital Controls and the Supply of Credit: Evidence from Colombia”, with Andrea Fabiani, Martha López Piñeros, José-Luis Peydró