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Mungo Wilson is a Lecturer in the Department of Finance at Saïd Business School and an associate member of the Oxford Man Institute of Quantitative Finance, both in the University of Oxford. He specialises in asset pricing and mutual funds.
Mungo’s research focuses on asset pricing. In particular, his work is centred on assessing how risk affects asset prices. He also studies mutual funds, analysing how their behaviour is affected by growth, and credit risk.
Having studied PPE at the University of Oxford, Mungo initially trained as a solicitor and worked at Slaughter and May, before reading for an MSc in Economics from the London School of Economics and PhD in Economics from Harvard University.
Before joining Saїd Business School in 2009, Mungo held positions as Assistant Professor in the Department of Finance at the Hong Kong University of Science & Technology, and as a Visiting Lecturer at the London School of Economics.
Areas of expertise include:
Mungo’s research is concerned with asset pricing.
A recent paper on credit ratings co-written with Jens Hilscher, challenges ratings’ position as the most widely used measure of corporate credit quality and demonstrates that ratings are not optimal estimates of raw default probability.
‘Our research shows that ratings are not an optimal predictor of default. They explain little of the variation in default probability across firms and they fail to capture the considerable variation in default probabilities and empirical failure rate over the business cycle’ says Wilson.
The researchers conclude that, given the nature of credit risk, a narrow focus on only one measure of credit quality reduces the accuracy of default prediction and, therefore, cannot be an optimal measure of credit quality. Instead, a more accurate and useful measure would be to separate default prediction from the measurement of systematic risk. Default prediction data could update frequently and rapidly and respond to firm-specific news, while measures of systematic risk could be a combination of current credit ratings and aggregate credit conditions.
Macroeconomic conditions and asset prices
In recent years, Mungo has published two important papers which discuss the role of macroeconomic risk in determining asset prices.
One major finding of Mungo’s work came out of research into the effects on stock markets of important macroeconomic announcements, such as inflation, unemployment or interest rates. His research has shown that 60 percent of the cumulative annual US equity risk premium was earned on these announcement days in the past half-century. The resulting insights may help to characterise the trade-off between macroeconomic risk and asset returns.
Elsewhere in his research, Mungo has offered a new method of measuring aggregate risk. He has demonstrated that the average correlation between pairs of stocks can be used to predict future market excess returns far more successfully than previously used measures – such as estimates of the variance of stock market returns.
Mungo’s research also explores mutual funds. A recent paper demonstrates that large mutual funds alter their investment behaviour in ways previously often ignored.
Information transmission across markets
Mungo’s recent research looks at the patterns of serial dependence in returns in the equity and CDS (Credit Default Swap) markets. The research establishes that CDS markets almost always respond sluggishly to news first revealed in equity market returns, suggesting that informed traders are not primarily active in CDS markets.
Mungo's CV can be read here.
Much of Mungo’s research is of relevance to finance practitioners. His work on asset pricing has been presented to hedge funds located in the US, Europe and Asia.
As an associate member of the Oxford-Man Institute of Quantitative Finance, Wilson is keen to take into account the commercial world of quantitative finance as well as the academic.
Mungo sits on the program committee for the Adam Smith Asset Pricing Conference, an annual meeting held at the University of Oxford.
Mungo teaches Microeconomics to MBA and EMBA students. The course introduces students to the core elements of modern economic theory and its applications. It exposes students to some of the tools which are necessary for work in economics, and provides a foundation for further study and research. Mungo teaches supply and demand, how industry structure affects firm profitability, price discrimination, game theory and auctions.
Saïd Business School
University of Oxford
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