Dmitry Kuvshinov

I am a PhD candidate at the Bonn Graduate School of Economics.

I will be joining Universitat Pompeu Fabra as an assistant professor in September 2019.

My research interests lie in the fields of finance, macroeconomics and economic history.

My research focuses on documenting and uncovering the drivers of booms and busts in financial markets, and their consequences for the real economy.

Here is a link to my CV.

Email: dmitry.kuvshinov[at]

Job Market Paper

The Time Varying Risk Puzzle     [This version: January 2019]

This paper shows that the correlation between discount rates on three major risky asset classes – equity, housing and corporate bonds – is approximately zero. I establish this new stylised fact – the time varying risk puzzle – by using new long-run data for 17 advanced economies. I confirm that asset valuations and macro-financial risk factors predict returns on individual asset classes, but I show that none of these variables have predictive power across asset classes. The absence of observed discount rate co-movement is puzzling since all but a very select set of asset pricing models assume a joint pricing kernel and hence predict a high correlation of risk premia. My findings imply that variation in discount rates – through factors such as risk aversion, disaster risk and intermediary risk appetite – is, ultimately, not the key driver of observed asset price volatility. The absence of co-movement is not fully attributable to asset-specific risk, investor heterogeneity or market segmentation. Instead, the data point to volatile expectations as the central source of asset price volatility, in line with behavioural models. The observed expectation volatility has real economic effects on a business cycle frequency. Elevated sentiment – or overoptimistic expectations – predict low future GDP growth, and sentiment reversals often mark the onset of financial crises.

Working papers

The Rate of Return on Everything, 1870 – 2015

(with Òscar Jordà, Katharina Knoll, Moritz Schularick, and Alan M. Taylor)
Forthcoming at the Quarterly Journal of Economics

What is the aggregate real rate of return in the economy? Is it higher than the growth rate of the economy and, if so, by how much? Is there a tendency for returns to fall in the long-run? Which particular assets have the highest long-run returns? We answer these questions on the basis of a new and comprehensive dataset for all major asset classes, including housing. The annual data on total returns for equity, housing, bonds, and bills cover 16 advanced economies from 1870 to 2015, and our new evidence reveals many new findings and puzzles.

VOX column

Media coverage: Economist, Financial Times, FT AlphavilleBloomberg View, Quartz, Washington Post, FAZ

The Big Bang: Stock Market Capitalization in the Long Run

(with Kaspar Zimmermann)

This paper presents new annual long-run stock market capitalization data for 17 advanced economies. Extending our knowledge beyond individual benchmark years in the seminal work of Rajan and Zingales (2003) reveals a striking new time series pattern: over the long run, the evolution of stock market size resembles a hockey stick. The stock market cap to GDP ratio was stable between 1870 and 1980, tripled in the 1980s and 1990s and remains high to this day. This trend is common across countries and mirrors increases in other financial and price indicators, but happens at a much faster pace. We term this sudden structural shift “the big bang” and use novel data on equity returns, prices and cashflows to explore its underlying drivers. Our first key finding is that the big bang is driven almost entirely by rising equity prices, rather than quantities. Net equity issuance is sizeable but relatively constant over time, and plays very little role in the short, medium and long run swings in stock market cap. Second, much of this price increase cannot be explained by more favourable fundamentals such as profits and taxes. Rather, it is driven by lower equity risk premia. Third, consistent with this risk premium view of stock market size, the market cap to GDP ratio is a reliable indicator of booms and busts in the equity market. High stock market capitalization – the “Buffet indicator” – forecasts low subsequent equity returns, and low – rather than high – cashflow growth, outperforming standard predictors such as the dividend-price ratio.

Sovereigns Going Bust: Estimating the Cost of Default
(with Kaspar Zimmermann)
R & R at the European Economic Review

What is the cost of sovereign default, and what makes default costly? This paper uses a novel econometric method – combining local projections and propensity score weighting as in Jordà and Taylor (2016) – to study these questions. We find that default generates a long-lasting output cost – 2.7% of GDP on impact and 3.7% at peak after five years – but in the longer term, economic activity recovers. The downturn is characterised by a collapse in investment and gross trade. The cost rises dramatically if the default is followed by a systemic banking crisis, peaking at 9.5% of GDP. Our findings suggest that financial autarky and sovereign-banking spillovers play a key role in generating the cost of default.


Deleveraging, Deflation and Depreciation in the Euro Area
(with Gernot Müller and Martin Wolf)

European Economic Review, 2016, Vol. 88, pp. 42–66.

During the post-crisis period, economic performance has been highly heterogenous across the euro area. While some economies rebounded quickly after the 2009 output collapse, others are undergoing a protracted further decline as part of an extensive deleveraging process. At the same time, inflation has been subdued throughout the whole of the euro area and intra-euro-area exchange rates have hardly moved. We interpret these facts through the lens of a two-country model of a currency union. We find that deleveraging in one country generates deflationary spillovers which cannot be contained by monetary policy, as it becomes constrained by the zero lower bound. As a result, the real exchange rate response becomes muted, and the output collapse—concentrated in the deleveraging economies.