Dr. Cooper obtained his Ph.D. from the University of Chicago in 2003. His main research interests lie at the intersection of asset pricing and real investment under uncertainty. His primary research focuses on the relation between the real side of the economy, namely firms' decisions as to investing in physical capital and hiring workers, and asset return dynamics.
Technology choice allows for substitution of production across states of nature and depends on state-dependent risk aversion. In equilibrium, endogenous technology choice can counter a persistent negative productivity shock with an increase in investment. An increase in risk aversion intensifies transformation across states, which directly leads to higher investment volatility. In our model and the data, the conditional volatility of investment correlates negatively with the price-dividend ratio and predicts excess stock market returns. In addition, the same mechanism generates predictability of consumption growth and produces fluctuations in the risk-free rate
Cooper, Ilan; Mitrache, Andreea & Priestley, Richard (2020)
A Global Macroeconomic Risk Model for Value, Momentum, and Other Asset Classes
Value and momentum returns and combinations of them across both countries and asset classes are explained by their loadings on global macroeconomic risk factors. These loadings describe why value and momentum have positive return premia, although being negatively correlated. The global macroeconomic risk factors also perform well in capturing the returns on other characteristic-based portfolios. The findings identify a global macroeconomic source of the common variation in returns across countries and asset classes.
While positive, long-run abnormal returns following share repurchase announcements are substantially lower when CEOs are overconfident. This effect is particularly strong for (i) difficult to value firms, such as small, young, non-dividend paying, distressed, and having negative earnings firms, (ii) firms with poor past stock return performance and high book-to-market ratio, indicators of possible overreaction to bad news, and (iii) financially constrained firms. Overall, these results are consistent with the mispricing hypothesis as a motive for repurchases and as an explanation for the buyback anomaly. Additionally, irrespective of the CEO’s level of confidence, abnormal returns are considerably larger for financially constrained firms, implying their managers require larger undervaluation due to the higher cost of capital.
Cooper, Ilan & Maio, Paulo (2018)
Asset Growth, Profitability, and Investment Opportunities
We show that recent prominent equity factor models are to a large degreecompatible with the Intertemporal CAPM (ICAPM) framework. Factors associated withalternative profitability measures forecast the equity premium in a way that is consistentwith the ICAPM. Several factors based on firms’ asset growth predict a significant declinein stock market volatility, thus being consistent with their positive prices of risk. Theinvestment-based factors are also strong predictors of an improvement in future economicactivity. The time-series predictive ability of most equity state variables is not subsumedby traditional ICAPM state variables. Importantly, factors that earn larger risk prices tendto be associated with state variables that are more correlated with future investmentopportunities or economic activity. Moreover, these risk price estimates can be reconciledwith plausible risk-aversion parameter estimates. Overall, the ICAPM can be used as acommon theoretical background for recent multifactor models.
The Review of financial studies, 22(7), s. 2801- 2833. Doi: 10.1093/rfs/hhn087
Cooper, Ilan (2006)
Asset pricingimplications of nonconvex adjustment costs and irreversibility of investment
Journal of Finance, 61(1), s. 139- 170.
This paper derives a real options model that accounts for the value premium. If real investment is largely irreversible, the book value of assets of a distressed firm is high relative to its market value because it has idle physical capital. The firm's excess installed capital capacity enables it to fully benefit from positive aggregate shocks without undertaking costly investment. Thus, returns to equity holders of a high book-to-market firm are sensitive to aggregate conditions and its systematic risk is high. Simulations indicate that the model goes a long way toward accounting for the observed value premium.
Xiouros, Costas; Ehling, Paul, Cooper, Ilan & Zhanhui, Chen (2019)
Risk Aversion Sensitive Real Business Cycles
[Report]. BI Center of Asset Pricing Research.
Cooper, Ilan; Maio, Paulo & Philip, Dennis (2017)
Multifactor models and the APT: Evidence from a broad cross section of stock returns
[Academic lecture]. Midwest Finance Association annual meeting.
Cooper, Ilan; Maio, Paulo & Philip, Dennis (2017)
Multifactor models and the APT: Evidence from a broad cross section of stock returns
[Academic lecture]. ITAM Finance Conference.
Cooper, Ilan; Mitrache, Andreea & Priestley, Richard (2017)
A Global Macroeconomic Risk Model for Value, Momentum, and other Asset Classes
[Academic lecture]. Jacob Levy Center conference.
Cooper, Ilan; Priestley, Richard & Mitrache, Andreea (2017)
A Global Macroeconomic Risk Model for Value, Momentum, and other Asset Classes
[Academic lecture]. Financial Intermediation Research Society annual conference.
Cooper, Ilan; Maio, Paulo & Philip, Dennis (2017)
Multifactor models and the APT: Evidence from a broad cross section of stock returns,
[Academic lecture]. China International Conference in Finance.
Cooper, Ilan; Priestley, Richard & Mitrache, Andreea (2017)
A Global Macroeconomic Risk Model for Value, Momentum, and other Asset Classes
[Academic lecture]. NES 25th anniversary conference.
Cooper, Ilan; Maio, Paulo & Mitrache, Andreea (2017)
What drives Q and investment fluctuations?
[Academic lecture]. NES 25th anniversary conference.
Cooper, Ilan & Maio, Paulo (2016)
Equity Risk Factors and the Intertemporal CAPM
[Academic lecture]. 2016 Midwest Finance Association Annual Meeting.
Atanasov, Victoria; Cooper, Ilan, Priestley, Richard & Zhong, Junhua (2016)
The factor structure of time-varying discount rates