Faculty & Research

Stefano Giglio

Assistant Professor of Finance

Phone :
1-773-834-1957
Address :
5807 South Woodlawn Avenue
Chicago, IL 60637

Stefano Giglio joined Chicago Booth in 2011 as an Assistant Professor of Finance, after earning his Ph.D. and A.M. in Economics from Harvard University. His research interests span several topics, including asset pricing, macroeconomics, and real estate, with a particular focus on the role of frictions. His work has been published on the American Economic Review , the Journal of Monetary Economics and the Review of Asset Pricing Studies. For his work at Harvard, he has received the Martin Cornerstone Grant and the Douglas Dillon Fellowship from the University.

Recently, Giglio has been a visiting scholar at the Federal Reserve Bank of Boston, where he pursued research in real estate. Prior to his doctoral studies, he has worked at the Wharton Research Data Services of the University of Pennsylvania. He holds a B.A. in Economics (with honors) and an M.S. in Economics (with honors) from Bocconi University in Milano.

Outside of academia, Giglio enjoys playing the violin (he was a member of the Dudley Orchestra at Harvard during his PhD), skiing, and reading.

 

2014 - 2015 Course Schedule

Number Name Quarter
35000 Investments 2014 (Fall)
35600 Seminar: Finance 2014 (Fall)

Research Activities

Financial economics, macroeconomics.

With Tiago Severo, “Intangible Capital, Relative Asset Shortages, and Bubbles,” Journal of Monetary Economics (April 2012).

With John Campbell and Parag Pathak, "Forced sales and house prices," American Economic Review (August 2011).

For a listing of research publications please visit ’s university library listing page.

REVISION: The Price of Variance Risk
Date Posted: Aug  25, 2014
The average investor in the variance swap market is indifferent to news about future variance at horizons ranging from 1 month to 14 years. It is only purely transitory and unexpected realized variance that is priced. These results present a challenge to most structural models of the variance risk premium, such as the intertemporal CAPM, recent models with Epstein–Zin preferences and long-run risks, and models where institutional investors have value-at-risk constraints. A rare disaster model with constant disaster probability and time-varying exposure of equities to the disaster can match the stylized facts, suggesting that investors use the variance swap market to hedge against disasters. Finally, our results also have strong implications for macro models where volatility affects investment decisions, suggesting that investors are not willing to pay to hedge shocks in expected economic uncertainty.

REVISION: Very Long-Run Discount Rates
Date Posted: Jun  05, 2014
We provide direct estimates of how agents trade off immediate costs and uncertain future benefits that occur in the very long run, 100 or more years away. We exploit a unique feature of housing markets in the U.K. and Singapore, where residential property ownership takes the form of either leaseholds or freeholds. Leaseholds are temporary, pre-paid, and tradable ownership contracts with maturities between 99 and 999 years, while freeholds are perpetual ownership contracts. The difference between leasehold and freehold prices reflects the present value of perpetual rental income starting at leasehold expiry, and is thus informative about very long-run discount rates. We estimate the price discounts for varying leasehold maturities compared to freeholds and extremely long-run leaseholds via hedonic regressions using proprietary datasets of the universe of transactions in each country. Agents discount very long-run cash flows at low rates, assigning high present values to cash flows ...

REVISION: No-Bubble Condition: Model-Free Tests in Housing Markets
Date Posted: May  19, 2014
We test for the existence of infinitely-lived bubbles in housing markets by directly measuring failures of the pricing condition requiring the present value of infinite-maturity payments to be zero. This condition is central to workhorse models of bubbles. In the U.K. and Singapore, property ownership takes the form of either leaseholds or freeholds. Leaseholds are finite-maturity ownership contracts with maturities often exceeding 700 years; freeholds are perpetual contracts. The price difference between long-maturity leaseholds and freeholds reflects the present value of the freehold after leasehold expiry, thus directly measuring the no-bubble condition. We find no evidence of infinitely-lived bubbles.

REVISION: Systemic Risk and the Macroeconomy: An Empirical Evaluation
Date Posted: Nov  15, 2013
We propose an empirical criterion for evaluating systemic risk measures based on their ability to predict quantiles of future macroeconomic shocks. We construct 17 measures of systemic risk in the US and Europe spanning several decades. We propose dimension reduction estimators for constructing systemic risk indexes from the cross section of measures and prove their consistency in a factor model setting. Empirically, systemic risk indexes provide significant predictive information for the lower tail of future macroeconomic shocks, even out-of-sample.

REVISION: An Intertemporal CAPM with Stochastic Volatility
Date Posted: Jun  24, 2013
This paper extends the approximate closed-form intertemporal capital asset pricing model of Campbell (1993) to allow for stochastic volatility. The return on the aggregate stock market is modeled as one element of a vector autoregressive (VAR) system, and the volatility of all shocks to the VAR is another element of the system. Our estimates of this VAR reveal novel low-frequency movements in market volatility tied to the default spread. We show that growth stocks underperform value stocks becau

REVISION: No News is News: Do Markets Underreact to Nothing?
Date Posted: Apr  03, 2013
As illustrated in the tale of “the dog that did not bark,” the absence of news and the passage of time often contain information. We test whether markets fully incorporate this information using the empirical context of mergers. During the year after merger announcement, the passage of time is informative about the probability that the merger will ultimately complete. We show that the variation in hazard rates of completion after announcement strongly predicts returns. This pattern is consis

New: Hard Times
Date Posted: Sep  13, 2012
We show that the stock market downturns of 2'0022002 and 2007-2009 have very different proximate causes. The early 2000’s saw a large increase in the discount rates applied to profits by rational investors, while the late 2000’s saw a decrease in rational expectations of future profits. We reach these conclusions by using a VAR model of aggregate stock returns and valuations, estimated both without restrictions and imposing the cross-sectional restrictions of the ICAPM. Our findings imply th

New: Credit Default Swap Spreads and Systemic Financial Risk
Date Posted: Sep  13, 2012
This paper measures the joint default risk of financial institutions by exploiting information about counterparty risk in credit default swaps (CDS). A CDS contract written by a bank to insure against the default of another bank is exposed to the risk that both default together. From CDS spreads we can then learn about the joint default risk of pairs of banks. From bond prices, instead, we can learn the individual default probabilities. Since knowing individual and pairwise probabilities is not

REVISION: Hard Times
Date Posted: Dec  24, 2011
We show that the stock market downturns of 2000-2002 and 2007-2009 have very different proximate causes. The early 2000’s saw a large increase in the discount rates applied to profits by rational investors, while the late 2000’s saw a decrease in rational expectations of future profits. We reach these conclusions using a VAR model of aggregate stock returns and valuations, estimated both freely and imposing the cross-sectional restrictions of the ICAPM. Our findings imply that the 2007-2009 dow

New: Intangible Capital, Relative Asset Shortages and Bubbles
Date Posted: Apr  09, 2011
We analyze an OLG economy with financial frictions and accumulation of both physical and intangible capital. The key difference between these two types of capital is that intangible capital cannot be used as collateral for borrowing. As intangibles become more important relative to physical capital in production, interest rates decline, creating the conditions for the emergence of rational bubbles in equilibrium. The model predicts that the dynamics of capital accumulation in developed economies

New: Forced Sales and House Prices
Date Posted: Apr  17, 2009
This paper uses data on house transactions in the state of Massachusetts over the last 20 years to show that houses sold after foreclosure, or close in time to the death or bankruptcy of at least one seller, are sold at lower prices than other houses. Foreclosure discounts are particularly large on average at 28% of the value of a house. The pattern of death-related discounts suggests that they may result from poor home maintenance by older sellers, while foreclosure discounts appear to be relat

New: Fiscal Policy and the Term Structure: Evidence from the Case of Italy in the EMS and the EMU Periods
Date Posted: Oct  10, 2006
We study the relationship between the term structure of interest rates and fiscal policy by considering the Italian case. Empirical analysis has been so far rather inconclusive on this important topic. We abscribe such evidence to three problems: identification, regime-switching and maturity effects. All these aspects are particularly relevant to the Italian case. We propose a parsimonious model with three factors to represent the whole yield curve, and we consider yield differentials between It

New: The Performance of Italian Family Firms
Date Posted: Sep  27, 2006
In this paper, we study the performance of Italian listed family firms in the period 1998-2003. We measure their performance by using both accounting and market data. We first study the relative performance of family firms compared to widely held firms. Then we investigate whether performance is affected by the type of family firm (i.e., whether the CEO is a member of the family or is an outsider). We find that the data and the methodology used to measure performance strongly affect the results.

New: The Performance of Italian Family Firms
Date Posted: Jul  21, 2006
In this paper, we study the performance of Italian listed family firms in the period 1998-2003. We measure their performance by using both accounting and market data. We first study the relative performance of family firms compared to widely held firms. Then we investigate whether performance is affected by the type of family firm (i.e., whether the CEO is a member of the family or is an outsider). We find that the data and the methodology used to measure performance strongly affect the results.