Research
Working Papers
Kalshi and the Rise of Macro Markets [Link]
with Anthony Diercks and Jonathan Wright
Abstract: Prediction markets offer a new market-based approach to measuring macroeconomic expectations in real-time. We evaluate the accuracy of prediction market-implied forecasts from Kalshi, the largest federally regulated prediction market overseen by the CFTC. We compare Kalshi with more traditional survey and market-implied forecasts, examine how expectations respond to macroeconomic and financial news, and how policy signals are interpreted by market participants. Our results suggest that Kalshi markets provide a high-frequency, continuously updated, distributionally rich benchmark that is valuable to both researchers and policymakers.
Works in progress…
What Drives the Changing Stock-Bond Correlation Post-Covid?
with Canlin Li and Marius Rodriguez
When bonds prices and stock prices move in opposite directions, it signals that investors can hedge for growth-focused assets (stocks) with inflation-focused assets (bonds). While the stock-bond correlation was negative for virtually the entire 21st century, it shifts positive during Covid, and remains there today. This indicates a changing correlation between investor perceptions of growth and inflation news. We document structural shifts in the underlying factors of the stock-bond correlation that help explain why: changing investor sensitivity to incoming news data, and changes in perception of monetary policy.
Short- and Long-run Uncertainty and Growth
with Marcelo Ochoa
Do short-run and long-run uncertainty affect macroeconomic growth in different ways? Exploiting the horizon-dimension of treasuries, we note that treasury market volatility at different horizons are associated with future output and employment in different ways. We construct an endowment economy model with both persistent and transitory shocks to volatility of consumption. We calibrate our model to the data to understand the different relationships between uncertainty horizons and the economy.