Sofonias Alemu Korsaye

Publications

The Global Factor Structure of Exchange Rates with Fabio Trojani and Andrea Vedolin.
Journal of Financial Economics (2023)
April/May Editor’s Choice JFE

Smart Stochastic Discount Factors with Alberto Quaini and Fabio Trojani.
Management Science (2025)

Working Papers

Investor Beliefs and Trading Frictions
I develop a theoretical framework to identify investors’ subjective beliefs that are jointly consistent with survey expectations and asset prices in markets where investors face trading frictions. To quantify the deviation of investors’ beliefs from Rational Expectations (RE), I provide a metric that is interpretable as an upper bound on the difference between the maximum Sharpe Ratios attainable under investors’ beliefs and RE. Empirically, I show that (i) an economically significant share of the deviation of investors’ beliefs from RE, assessed assuming frictionless markets, can be attributed to small amounts of trading costs, and (ii) the size of the deviation from RE, as well as the share of the deviation attributable to trading costs, varies across investor and asset characteristics. More specifically, the expectations of sophisticated investors are closer to RE and more in line with asset prices.
The Brattle Group Ph.D. Candidate Awards for Outstanding Research at WFA 2023

Teaching

Statistical Analysis (2024–present, Johns Hopkins University)

Foundations of Data Science II (2022, Collegio Carlo Alberto – University of Torino)

Optimization: Applied Machine Learning (2021, University of Lugano)

Contact Information

sofonias.korsaye@jhu.edu
Carey Business School, Johns Hopkins University
555 Pennsylvania Avenue NW, Washington, D.C. 20001