I am an Assistant Professor (tenure-track) of Finance at Esade Business School.
My main research interest is Empirical Asset Pricing. I study how equity pricing varies by horizon and what that implies for differences in returns across stocks, and how patterns in well-known investment styles guide long-term portfolio design.
Contact:
Email: jan.sandoval@esade.edu
Alpha Accounting
I present a decomposition based on the principle that an equity portfolio’s CAPM alpha is the value-weighted average of the CAPM alphas of its underlying dividend strips, each corresponding to a specific cash-flow maturity. This decomposition shows that the long-short CAPM alpha of an equity anomaly can be broken down into a term reflecting cash-flow duration differences and two additional terms arising from differences in maturity-specific CAPM alphas. By measuring their relative contributions, this decomposition provides insight into whether cash-flow duration acts as the main driver of CAPM alphas, thereby simplifying the understanding of equity anomalies. To apply it empirically, I construct a new and comprehensive dataset of synthetic dividend strips. This dataset addresses the limitations of dividend futures by spanning a longer sample period, covering a broader set of firms, and being available for all maturities. My results suggest that differences in maturity-specific CAPM alphas explain 92% of the CAPM alphas of major equity anomalies, while cash-flow duration accounts for only 8%. Hence, cash-flow duration plays a more modest role as a unifying driver of anomalies than previously thought, offering limited help in taming the "anomaly zoo."
Financial Integration and the Equity Term Structure: Insights from 150 Years of UK Data
joint with Jens Kvaerner and Ole Wilms
We recover the term structure of equity risk premia in the UK from 1870 to 2019 and develop an international asset pricing model to interpret the results. Four main findings emerge. First, risk premia have declined markedly since the 1980s, particularly at short maturities, leading to a steeper equity term structure in the post-1980 period. Second, over the same time period, correlations in risk premia between the UK and the U.S. have risen substantially, particularly at short horizons. Third, viewed over the full 150-year sample, the equity term structure is upward-sloping on average, and investors demand higher compensation for bearing long-term than short-term equity risk. Fourth, the term structure flattens during periods of financial distress, driven by a disproportionate increase in short-term risk premia. Our international asset-pricing model attributes the post-1980 steepening of the term structure to greater financial integration, via enhanced cross-border diversification, which reduces short-term risk premia more than long-term premia.
Long-Run Factor Returns (draft coming soon)
joint with Jens Kvaerner and Stig Lundeby
We construct a new dataset of U.K. equities spanning 1860 to 2019 to study the long-run behavior of equity factor returns and its relevance for portfolio choice. We find strong evidence of autocorrelation at multi-year horizons. These findings reject the assumption that factor returns are i.i.d. and motivate horizon-specific allocations. To evaluate optimal portfolios, we introduce an “imagined distribution” that regularizes the empirical return distribution by allowing for future return realizations outside the historical sample. This approach improves stability and reduces sensitivity to in-sample overfitting. Out-of-sample tests in both the U.K. and U.S. show that long-horizon investors are willing to pay a meaningful portion of their initial wealth to access horizon-specific strategies.