Since 2023, I am a Research Fellow at the Economics Department of the University of Bologna (IT).

Research

I am an applied financial economist, fascinated by economic growth, the natural environment, and the act of lending. In my work I study aggregate economic phenomena related to these themes, primarily applying statistical tools, such as cointegration models and dimension-reduction techniques, to financial markets data.

Working papers

The Innovation Long-Run Risk Component (JMP) [Abstract] [Paper] [Slides]

This paper provides empirical evidence that fluctuations in aggregate Research and Development (R&D) pose a significant risk for investors, as predicted by the ‘long-run risk’ literature. The analysis pivots on a definition of R&D intensity that is grounded on a limited set of flexible economic conditions from the endogenous growth literature, where deviations from the equilibrium R&D level are reflected in the error correction term of the cointegration among R&D, total factor productivity, and labor force. In US data, this process exhibits high persistence despite remaining stationary, allowing for reliable demonstration of its strong forecasting power for both productivity and consumption growth. Driving the persistent component shared by these two series, R&D intensity is argued to identify the innovation long-run risk component. This claim finds further empirical validation through evidence that R&D intensity acts as a risk factor associated with a positive risk premium in the cross-section of US stocks, as predicted by theory.

Does CAPM Overestimate More the Risk or Its Price? [Abstract] [Paper]

CAPM is known to empirically underestimate expected returns of low-risk assets and overestimate those with high risk. This paper studies how risks omission and funding tightness jointly contribute to explaining this anomaly, with the former affecting the definition of assets’ riskiness and the latter affecting how risk is remunerated. Theoretically, the two effects are shown to counteract each other. Empirically, the spread related to binding leverage constraints is found to be significant at 2% yearly. Nonetheless, average returns of portfolios that exploit this anomaly are found to mostly reflect omitted risks, contrasting how they have been used in previous analysis.

Are You Betting On Sustainability? [Abstract] [Paper]

When sustainability of assets is appreciated, its effect on the discount rates does not depend on the sustainability of the asset priced only, but it is intrinsically mediated by the risk profile of the asset itself. This has significant implications for the measurement of the actual spreads associated to sustainability concerns in financial markets as well as for hedging changes in the sustainability concerns. Specifically, (1) average returns of long-short portfolios of assets sorted on sustainability can be totally unrelated to the priced spread and (2) the effectiveness of assets in hedging changes to the sustainability concerns will depend on assets' "sustainability intensity" and their risk jointly. The main implications are tested on a ESG score measure for US stocks, revealing, in fact, a detachment between the average excess return of a high-minus-low ESG portfolio and the measured ESG spread.

Research in progress

Local Physical Climate Uncertainty
(with G. Cavaliere and L. Fanelli)

Asset pricing models with downside risk
(with E. Ossola and L. Trapani)

The Long-Run Temperature Risk Component

Education

2024: PhD in Economics at University of Bologna (IT)

• Advisors: M. Gonzalez-Eiras (U of Bologna) and M.M. Croce (Bocconi U)
• PhD students’ representative in the Council of Department
• Organizer of the DSE Reading Group in Macro-Finance

2023: Visiting Student at London Business School (UK), sponsor: H. Kung
2021: Visiting Student (virtual) at Bocconi University (IT), sponsor: M.M. Croce
2020: Visiting Student (virtual) at Vienna Graduate School of Finance (AT), sponsor: C. Wagner

2018: MSc in Advanced Economics and Finance at Copenhagen Business School (DK)
2016: BSc in Business Administration at University of Bologna (IT)
2013: HSD in Mechanical Engineering at I.I.S. Aldini Valeriani (Bologna, IT)

Teaching experience

 At University of Bologna (IT):

2022-25: Asset Pricing (Grad), TA to Prof. M. Gonzalez-Eiras

2024-25: Financial Econometrics (Grad), TA to Prof. G. Moramarco

2021: Asset Pricing (Grad), TA to Prof. G. Camera

2020: Financial Instruments and Markets (UndGrad), TA to Prof. G. Camera

 At Copenhagen Business School (DK):

2018: Macroeconomics 2 (UndGrad), TA to Prof. A. Sørensen

Work experience

2017: Research assistant at Copenhagen Economics A/S (DK)

2014: Planning and Control internship at Bologna Local Health Authority (IT)

Contacts

Office: Piazza Scaravilli 2, 40126 Bologna, Italy

Institutional email: f.franceschini -> unibo.it

Institutional webpage

ORCID

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References

Martín Gonzalez-Eiras
Associate Professor
University of Bologna

Mariano Massimiliano Croce
Professor of Finance
Bocconi University

Giuseppe Cavaliere
Full Professor
University of Bologna

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