Publications
1) Price of Regulations: Regulatory Costs and the Cross-section of Stock Returns with Han Ozsoylev, at the Review of Asset Pricing Studies(2024), Editor's Choice/Lead Article
2) How Do Regulatory Costs Affect M&A Decisions and Outcomes? at the Journal of Banking and Finance(2024)
3) Liquidity Components: Commonality in Liquidity, Underreaction, and Equity Returns at the Journal of Financial Markets(2022)
Working Papers
1) Automation Flexibility and Firm Value with Cansu Iskenderoglu (2025), R&R at the Journal of Corporate Finance (2025)
This paper documents that industrial robots enhance firms' ability to reduce operating costs and increase operating cost flexibility. Building on this, we propose a firm-level measure of automation flexibility, which quantifies a firm's capability to decrease operating costs. Using this measure, we present evidence that firms with greater automation flexibility exhibit higher firm values. By exploiting the 2011 Thailand hard drive crisis as an exogenous shock to automation costs, we provide causal evidence that automation cost flexibility positively impacts firm value. Furthermore, the paper shows that the positive impact of automation cost flexibility is more pronounced on firms within highly competitive industries, those facing significant competitive threats in product markets, in industries with higher strategic interactions, and smaller firms. This suggests that cost flexibility encompasses a strategic dimension.
2) More Robots Less Cost of Equity with Thomas Conlon and John Cotter, R&R at the Journal of Corporate Finance (2025)
This paper utilizes operational robotics stock as a measure of robotics usage and investigates its impact for firms' cost of equity. We find robotics decrease firms' operating leverage and exposure to systematic risk factors, hence, decreasing their cost of equity. The results are robust to various firm-and industry-specific controls, industry-level implied cost of equity regressions, and alternative cost of equity measures. We exploit robotics usage in developed European countries and occupation replaceability as instrumental variables to provide causal interpretation of the relation between robotics and the cost of equity.
3) Revisions in Expected Unemployment Rate and the Cross-section of Stock Returns R&R at the Journal of Empirical Finance(2023)
This paper provides evidence to the importance of revisions in expected unemployment rate in the cross-sectional pricing of individual stocks. We introduce a measure of unemployment beta which quantifies monthly-varying stock sensitivity to the innovations in forecasted unemployment rate. Stocks in the lowest unemployment beta decile generate 7% more annualized risk-adjusted return compared to stocks in the highest unemployment beta decile. The unemployment premium is higher during low economic activity, high economic uncertainty, and high unemployment periods. The premium is robust to various regression specifications which account for various risk factors, and macroeconomic and financial variables. Finally, (labor) operating leverage is an important factor in the cross-sectional pricing of unemployment beta.
4) Digging Into Maxing Out: A Re-examination of MAX Anomaly with Turan Bali and Han Ozsoylev (2025)
We re-examine the MAX anomaly, which the literature attributes to investors' preference for lottery-like stocks. We find that, when using value-weighted portfolios, the mispricing factors introduced by Stambaugh and Yuan (2017) explain the anomaly. Also, the anomaly occurs, i.e., stocks with extremely high daily returns in the prior month (namely, high MAX stocks) generate significant negative returns over the subsequent month, only when these stocks exhibit persistence in extreme daily returns in earlier months. This contradicts with the prevalent view that high MAX stocks are lottery-like. We propose an alternative sorting order to MAX, namely MAX^beta, which controls for the effect of market-wide movements on stock-level daily returns. Portfolio sorts by MAX^beta have significant predictive power, and this cannot be accounted for by the mispricing factors. Moreover, the predictive power of MAX^beta does not depend on whether or not stocks exhibit persistent past performance in extreme daily returns, rendering MAX^beta sorts a more likely proxy for lottery-like features as compared to MAX sorts.
5) Demand for Idiosyncratic Lottery-like Payoffs and the Cross-section of Expected Returns with Han Ozsoylev (2022)
Motivated by existing evidence of a preference among investors for stocks with high maximum daily returns, we document that daily extreme lottery-like payoffs measured by maximum daily returns are almost entirely idiosyncratic. Firm-level cross-sectional regressions and portfolio-sort analyses prove that there is a significant and negative relation between idiosyncratic maximum daily return (IMAX) and future stock returns. Retail investors tend to invest even further on high IMAX lottery-type stocks during high sentiment periods with loose funding liquidity constraints. Moreover, high market beta stocks are predominantly stocks that generate high idiosyncratic lottery-like payoffs. Hence, betting against beta phenomenon disappears when we control for IMAX.