ProfessorAndrea Buraschi

Overview
Professor Andrea Buraschi’s research spans five interconnected areas of financial economics:
1. Economic uncertainty and the impact of beliefs
2. Term structure, monetary policy, and derivative markets
3. Hedge funds, incentives, and agency problems
4. General equilibrium, networks, and asset pricing
5. Portfolio management and investment strategies

Across these domains, his work combines rigorous theory, empirical testing, and applied insights to advance understanding of how modern financial markets function, how risks are priced, and how institutions shape outcomes. His publications regularly appear in leading journals such as The Journal of Finance, The Journal of Financial Economics, and The Review of Financial Studies, and have been recognised with multiple international awards for their originality and impact.
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Economic Uncertainty and the impact of Beliefs

Professor Buraschi has made foundational contributions to understanding how heterogeneity in beliefs affects asset pricing. His theoretical and empirical studies establish links between differences in beliefs, derivatives trading, and the dynamics of expected excess returns across options, credit, bonds, and currency markets.

Selected publications:

1. Subjective Bond Returns and Belief Aggregation, Review of Financial Studies (2022, lead article; Best Paper Awards at Cavalcade Asia Meetings and CIFC, Sloan School MIT).
2. Speculation, Sentiment and Interest Rates, Management Science (2022).
3. The Geography of Risk Capital and Limits to Arbitrage, Review of Financial Studies (2015).
4. When Uncertainty Blows in the Orchard: Comovement and Equilibrium Volatility Risk Premia, Journal of Finance (2014).
5. Differences in Beliefs and Currency Risk Premia, Journal of Financial Economics (2010, lead article).
6. Model Uncertainty and Option Markets with Heterogeneous Beliefs, Journal of Finance (2006).

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Networks, Complex Systems, and Asset Pricing

His research explores how network connectivity and systemic interactions shape equilibrium asset prices. He identifies two distinct regimes: one in which idiosyncratic shocks are diversifiable, and another where shocks propagate through networks, creating non-diversifiable “financial pandemics” and new risk premia unexplained by traditional factors.

Selected publications:

1. Financial Contagion in Network Economies and Asset Prices, Management Science (2024).
2. Dynamic Networks and Asset Prices (2012, Winner of the NYSE Euronext Best Paper Award in Asset Pricing).

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Term Structure, Monetary Policy, and Derivative Markets

Professor Buraschi has examined how monetary policy affects the inflation risk premium and bond return dynamics, including the role of habit formation in shaping bond risk premia. His early research also pioneered the identification of a volatility risk premium in option returns. Other contributions include work on liquidity, repo markets, and specialness in funding markets.

Selected publications:

1. Speculation, Sentiment and Interest Rates, Management Science (2022).
2. Habit Formation and Macroeconomic Models of the Term Structure of Interest Rates, Journal of Finance (2007).
3. Inflation Risk Premia and the Expectations Hypothesis, Journal of Financial Economics (2005; Winner of WFA Best Paper in Investments).
4. Liquidity Risk and Specialness: Forward Repo Spreads and Future Specialness, Journal of Financial Economics (2002).
5. The Price of a Smile: Hedging and Spanning in Option Markets, Review of Financial Studies (2001).

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Hedge Funds and Agency Problems

His research on hedge funds focuses on performance evaluation under fragile capital structures and non-linear incentives. He has shown that long–short and risk-arbitrage strategies, while reducing market beta, expose investors to correlation risk—a dimension of risk not captured by conventional models.

Selected publications:

1. Incentives and Endogenous Risk Taking: A Structural View of Hedge Fund Alphas, Journal of Finance (forthcoming, 2013).
2. When There is No Place to Hide: Correlation Risk and the Cross-Section of Hedge Fund Returns, Review of Financial Studies (Winner, Inquire UK Award 2009).

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General Equilibrium, Networks, and Asset Pricing

Professor Buraschi has advanced general equilibrium models by incorporating heterogeneity in beliefs and network effects, highlighting how these shape systemic risk, contagion, and asset price dynamics.

Selected publications:

1. Financial Contagion in Network Economies and Asset Prices, Management Science (2024).
2. When Uncertainty Blows in the Orchard, Journal of Finance (2013).
3. Understanding Short vs Long-Run Risk Premia, European Financial Management (2013).
4. Dynamic Networks and Asset Pricing (Winner, NYSE Euronext Best Paper Award 2012).

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Portfolio Management

His portfolio management research highlights the central role of correlation risk in optimal asset allocation and demonstrates the economic value of predictability for portfolio strategies.

Selected publications:

1. Correlation Risk and Optimal Portfolio Choice, Journal of Finance (2010; Winner of the Inquire Europe Best Paper Award).
2. The Economic Value of Predictability for Portfolio Management, Journal of Financial Management, Markets and Institutions (2013, lead article).