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Assistant Professor of Finance, University of Luxembourg

Research Affiliate, Centre for Economic Policy Research (CEPR)

 

Address:

6 Rue Richard Coudenhove-Kalergi                

L-1359 Luxembourg        

 

Phone: +352 466 644 5424

Email: diane.pierret@uni.lu

 

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Link to CV | Google Scholar



Research interests:

Banking, financial intermediation, liquidity risk, systemic risk, regulation, monetary policy

Recent research

Systemic Risk Measures: Taking Stock from 1927 to 2023 (with Viral Acharya and Markus Brunnermeier) ***NEW***

Abstract:  We assess the efficacy of systemic risk measures that rely on U.S. financial firms’ stock return co-movements with market- or sector-wide returns under stress from 1927 to 2023. We ascertain stress episodes based on widening of corporate bond spreads and narrative dating. Systemic risk measures exhibit substantial and robust predictive power in explaining the cross-section of market realized outcomes, viz., volatility and returns, during stress episodes. The measures also help predict bank failures and balance-sheet outcomes, confirming their relevance for understanding risks to the real economy emanating from banking sector fragility. Overall, market-based systemic risk measures offer a promising complement to macro-prudential and supervisory assessments of the financial sector.

Similar Investors (with Co-Pierre Georg and Sascha Steffen) ***NEW VERSION***

Abstract: We test the prediction that investors divest from an asset in anticipation of large liquidation costs when their portfolio similarity with other asset holders is high. We provide evidence supporting this hypothesis using detailed data on money market funds that invest in the debt securities of financial institutions. We develop an instrument that exploits variation in portfolio similarity driven by idiosyncratic redemptions from other funds to confirm our results. Consistent with our hypothesis, the effect of portfolio similarity on divestment is stronger for ex-post illiquid securities, for more illiquid and diversified funds, and for actively managed institutional funds.

VoxEU column (3/28/2023)

Presentations: Norwegian School of Economics, CEBRA, BoE-CEPR-Imperial-LSE Conference on Non-bank Financial Sector and Financial Stability, Knut Wicksell Conference in Financial Intermediation, 13th Swiss Winter conference on Financial Intermediation (cancelled due to Covid19), Chicago Financial Institutions Conference (cancelled due to Covid19), CONSOB-ESMA-Bocconi serminar “Securities markets. Trends, risks and policies”, ESSEC Business School, 2023 Regulating Financial Markets conference, EEA 2023, AFA 2024

Stressed Banks (with Roberto Steri)

Abstract: We investigate the risk taking of "stressed banks" — the large financial institutions that have been facing unprecedented regulatory supervision and capitalization requirements. We take steps towards identifying how supervision affects risk taking in the banking system. Supervision in Dodd-Frank Act distinctly improves borrower rating by 0.7 rating classes. Banks respond to supervision heterogeneously, depending on the capital charges associated with their investments. Ignoring the confounding effect of capital requirements misleads the conclusion that Dodd-Frank Act supervision is ineffective. Our results indicate that “stressed banks” are beneficial to financial stability as they are better capitalized and engage in safer lending.

Featured in:

International Banker, "The Role of Stress-Test Supervision" (3/25/2019)

SFI's Practitioner Roundups August 2018

HECimpact November 2017

Covered in Le Temps (8/6/2018), Allnews (6/27/2018)

Presentations: Luxembourg School of Finance, McGill University, Danmarks Nationalbank, BI Norwegian Business School, European Central Bank, Vienna Graduate School of Finance, Norges Bank, FINMA, IESE, Erasmus School of Economics, Bank of England, VU Amsterdam, Deutsche Bundesbank, Federal Reserve Board, Swiss National Bank, CRM Montreal Systemic Risk workshop, ELTE Budapest workshop on Stress Testing and Capital Requirements, 2017 Santiago Finance workshop, 11th Swiss Winter Conference on Financial Intermediation, 2018 Lausanne-Cambridge workshop, 5th Empirical Financial Intermediation Research Network, FEBS 2018, 35th Annual Conference of the French Finance Association, 4th IWH-FIN-FIRE Workshop on "Challenges for Financial Stability", 1st Endless Summer Conference on Financial Intermediation and Corporate Finance, 2018 Federal Reserve Stress Testing Research Conference, CEPR Systemic Risk and Macroprudential Policy conference of the Bank of Israel, Showcasing Women in Finance - EU, 10th European Banking Center Network, Marstrand Finance Conference, WFA, European System of Central Banks' Day‐Ahead Conference, AEA, EFA

The Visible Hand when Revenues Stop: Evidence from Loan and Stock Markets during COVID-19 (with François Koulischer and Roberto Steri)

Abstract: We document that public interventions in the corporate sector during the COVID-19 pandemic help firms access bank loans, cushion liquidity shortfalls, and boost their market valuations. We use firm-level data on COVID-19-related news to trace firms’ liquidity shocks in several European countries, which differ in public spending for fiscal stimulus and debt guarantees to corporations. As market valuations rebound in spite of the deterioration of firms’ revenues, interventions drive a part of the disconnect between markets and the real economy. Remarkably, the financial sector internalizes part of the benefits of interventions targeting non-financial firms. To interpret these results, we lay out a moral hazard model of corporate borrowing and public interventions. The model suggests that interventions in the corporate sector are effective to mitigate incentive problems leading to credit market failures. Lenders benefit from loan guarantees as a compensation to finance firms with severe debt overhang problems.

Presentations: ECB, BPI-Nova SBE Conference on “Corporate Bankruptcy and Restructuring”, CEPR-Norges Bank Conference on “Frontier Research in Banking”, AEA, Université Catholique de Louvain, Nazarbayev University Graduate School of Business, Benelux Banking Research Day, Swiss Winter Conference on Financial Intermediation, BCBS-CGFS conference on "How effective were policy measures in supporting bank lending during the Covid-19 crisis?"

Recently in the media

Last update: 11/24/2024

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