Research projects 2023

1. «Limited attention and option prices» 
We examine how inattention to the underlying stock prices generates demand pressure for options on low - priced stocks, resulting in the overpricing of such options . We start our analysis by building a theoretical model that features three types of option traders: investors with only partial attention to underlying stock prices, fully rational investors (those with full attention), and market makers. In our empirical results, we start by constructing delta - hedged call s and put s decile portfolios sorted on the underlying stock price.

2. «A mbiguity - seeking behavior in finance models with smooth ambiguity» 

We study three main rationales for excluding ambiguity - seeking behav ior. First, the absence of ambiguity - seeking can be viewed as a technical condition for models to be well - posed. Second, when one builds a representative - investor model, one may posit that a representative investor cannot be ambiguity - seeking given that an average person is ambiguity - averse. Third, flipping the argument around, because a representative investor is ambiguity - averse according to some model calibrations, one may surmise that ambiguity - seeking cannot be prevalent among individual traders.

3. «Impact of mutual funds within a fund family during default» 

In this project, we investigate fund families for the presence of positive spillover effects from star funds without defaults in their portfolio on other funds in the family. W e find positive spillov er effects of well - performing star funds to other funds within a family. Due to increased attention towards mutual fund investing, families could likely advertise themselves and increase visibility to investors through well - performing star funds. This atte ntion results in additional flows to conventional funds in the family of open - end ed mutual funds

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