Published Papers

A main puzzle in the sovereign debt literature is that defaults have only minor effects on subsequent borrowing costs and access to credit. This paper comes to a different conclusion. We construct the first complete database of investor losses (“haircuts”) in all restructurings with foreign banks and bondholders from 1970 until 2010, covering 180 cases in 68 countries. We then show that restructurings involving higher haircuts are associated with significantly higher subsequent bond yield spreads and longer periods of capital market exclusion. The results cast doubt on the widespread belief that credit markets “forgive and forget.”


The country credit rating is a key covariate of the cost and availability of international financing for an economy. This paper models ratings as a function of expected repayment capacity, derives empirical implications, and tests them using the most comprehensive consistent series of sovereign credit ratings. These are the Institutional Investor ratings which have been widely used in the international finance literature. We report several stylized facts: volatility clustering, asymmetric adjustments, and serial correlation in credit revisions, especially in Emerging countries.  These features are consistent with rational behavior of credit rating teams and have important implications in assessing the long term risk of international investments.

Working Papers

Joint with Javier García-Cicco (Central Bank of Chile and Universidad Católica Argentina) 


We propose a novel approach to grade presidential economic performance using stock returns. In efficient markets, asset prices are unique in that they impound the long term effects of changes in the environment, including government policy.  To purge national returns of state-of-the-world conditions that do not result from local events, we introduce a global twin portfolio and a regional return.  The twin portfolio for a country reports the return of a combination of world stocks that each month has the same industrial composition as that one country’s stock index.  These benchmark external conditions are most volatile: they vary between a 295% appreciation (or tailwind under some interpretations) and a 30% reduction (or headwind ) in asset prices over extreme four-year presidencies in our sample.  We interpret the gap of national performance over these counterfactual returns as a proxy for the quality of domestic policies during a given presidency, as seen from the standpoint of equity investors.  We apply this approach to seven Latin American countries from 1980 until 2011.  From this perspective, Colombia, Peru and Chile stand out as the countries that have implemented the best long run policies over the sample.  In addition, we provide a grading of relative presidential performance.


It is widely believed that insider trading is rampant in Latin America. If insider trading is widespread, then equity prices should incorporate the information in a public corporate announcement prior to its release and not react thereafter. We study the market’s anticipation to, and impact of, major announcements of leading firms from Chile, Argentina, Brazil, Mexico and the US. In line with the popular view, we find a sizable degree of anticipation in the region. In spite of this anticipation, corporate announcements tend to surprise the market in Latin America, contrary to the findings of the received literature. Moreover, we find that the Latin American pattern of anticipation and impact is not so different from that prevailing in the US.

Book Chapters

  • “Insider Trading and Corporate Governance in Latin America,” joint with Enrique Kawamura, in Investor Protection and Corporate Governance: Firm-level Evidence across Latin America, Florencio López de Silanes and Alberto Chong, eds., Stanford University Press, 2007.

  • “The Term Structure of Country Risk and Valuation in Emerging Markets (Estructura Temporal del Riesgo País y Valuación en Mercados Emergentes)” en conjunto con Joaquín Alonso y Marcos Buscaglia, pp. 71-101 in Risk and Crises in Emerging Economies, Jyoti Gupta ed., Centre d’Études et de Recherche - Amérique latine - Europe (CERALE), ESCP-EAP European School of Management (École Superièure de Commerce de Paris), 2005.