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Francesco Franzoni Assistant Professor of Finance University of Lugano Junior Chair, Swiss Finance Institute Ph.D. in Economics, 2002, Massachusetts
Institute of Technology Email:
francesco.franzoni@usi.ch Address:
Via G. Buffi 13 6904,
Lugano - Switzerland Tel.:
+41 58 666 4117 Fax:
+41 58 666 4734 |
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Research interests in empirical asset pricing and
corporate finance. Recent studies in: hedge fund trading in liquidity crises;
liquidity risk in private equity; market anomalies; the determinants of risk
sensitivities; the effect of financial frictions and corporate governance
onto asset prices. Teaching Material (Ph.d.) Published Research ·
Franzoni F. (2009). Under Underinvestment Vs. Overinvestment: Evidence
From Price Reactions To Pension Contributions. Journal of
Financial Economics., 92(3),
June, pp. 491-518 ·
Franzoni
F. (2009). Learning about
beta: Time-varying factor loadings, expected returns, and the conditional
CAPM. Journal of Empirical Finance,
16(4), September, pp. 537-556 ·
Franzoni F., Marin J. (2006). Pension Plan
Funding and Stock Market Efficiency. Journal
of Finance, April, 2006, pp. 921-956. ·
Franzoni F., Marin J. (2006). Portable Alphas
From Pension Mispricing. Journal of Portfolio Management,
Summer, 2006, pp. 44-53. Working
Papers ·
Franzoni
F. (2008). The changing nature
of market risk. Abstract: In the first three decades of CRSP data,
value stocks have higher betas than growth stocks. Later on, the ranking is
reversed and the gap in beta widens. What makes growth strategies nowadays
bear more market risk than value strategies? What are the causes of the
reversal in the ranking of betas? The paper argues that the negative link
between beta and BM is due to growth options. The shift of listed firms
towards more growth-oriented businesses has progressively changed the nature
of market risk. The ultimate determinant of this evolution is conjectured to
be financial market development, which has lowered the cost of capital. For
this reason, the facts described in this paper resonate with other long-run
phenomena, such as the rise in idiosyncratic risk and the R&D boom. ·
Franzoni
F. (2002). Where is beta going? The riskiness of value and small stocks
(cite as: Ph.d. Thesis, Massachusetts Institute of Technology) Abstract: This paper finds that the
market betas of value and small stocks have decreased by about 75% in the
second half of the twentieth century. The path of beta can be closely tracked
using variables that summarize the state of the economy. On the basis of this
analysis, the decline in beta can be related to a long-term improvement in
economic conditions that made these companies less risky. Decomposing beta
into the cash flow and expected return news components confirms that the
payoffs of these companies are less sensitive to market conditions. This
finding has implications for the debate on the CAPM anomalies. ·
Franzoni F., Nowak E., Phalippou L. (2009). Private equity performance and liquidity risk Abstract: This is the first study
that shows evidence of liquidity risk in private equity returns. We rely on
the cash flows of 4,403 liquidated investments, both successful and
unsuccessful, which reduces sample selection bias to a minimum. We find that
a one-standard deviation positive shock in aggregate liquidity raises returns
between 6% and 12% annually, depending on the liquidity measure. Larger
investments and investments from more mature private equity firms have
returns that are more sensitive to liquidity shocks. This is also the first
paper to provide a large-sample estimate of the cost of capital for private
equity. Using the Pastor and Stambaugh (2003) traded liquidity factor, the
liquidity risk premium in private equity is about 3% annually, the total risk
premium for private equity is about 18% annually, and alpha (before fees) is
close to zero ·
Ben-David I., Franzoni F., Moussawi R. (2010). The behavior of hedge funds during liquidity crises Abstract: To shed light on the
empirical relevance of the limits to arbitrage, we study hedge funds’ trading
patterns in the stock market during liquidity crises. Consistent with
arbitrageurs’ limited ability to provide liquidity, we find that at the time
of liquidity crises hedge funds reduce their equity holdings by 9% to 11% per
quarter (around 0.3% of total market capitalization). Dramatic selloffs took
place during the 2008 crisis: hedge funds sold about 30% of their stock holdings
and nearly every fourth hedge fund sold more than 40% of its equity portfolio.
We identify two main drivers of this behavior. First, in line with the limits-to-arbitrage
theory, we document that lender and investor funding withdrawals explain over
half of the equity selloffs. Second, it appears that hedge funds mobilize
capital to other (potentially less liquid) markets in pursuit of more profitable
investment opportunities. The latter finding suggests that liquidity
provision by arbitrageurs is not entirely hampered. ·
Ben-David I., Franzoni F., Moussawi R. (2010). A network analysis of hedge fund contagion |
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