Stefano Giglio, Research After the Crisis

The global financial crisis has changed the way economists do research. "It pushed us to improve the connection between theory and empirical data" says Stefano Giglio, a Bocconi DES graduate with a PhD at Harvard, now Associate Professor of Finance at the University of Chicago, Booth School of Business. "Topics such as financial frictions, speculative bubbles, turbulences, systemic risks, and the role of intermediaries are now reckoned as fundamental".

In a paper he co-authored with Bryan Kelly and Seth Pruitt, "Systemic Risk and the Macroeconomy: An Empirical Evaluation", Giglio evaluates methodologies for constructing a systemic risk index with a high predictive ability for macroeconomic downturns. He says that doing research means "try to push the envelope, that is the most challenging and fulfilling side of this job. It means constantly asking new questions".

In "Climate Change and Long-Run Discount Rates: Evidence from Real Estate", for instance, he asks what can we learn from the housing market. In this paper he estimates preferences of investors whose benefits will materialize in the long term. Giglio has analyzed the transactions of the last twenty years in markets such as the UK where the ownership of a property can be perpetual or limited to a hundred, two hundred or even a thousand years. According to the results, investors are willing to pay for something they will not enjoy. "People value future benefits. The finding may have important implications in many other contexts where today's choices lead to consequences in the long term, such as the investments needed to mitigate climate change".