Research

Research Interests:

Asset pricing, dynamic corporate finance, optimal stopping and free-boundary problems, derivative pricing, and general real options.

Working Papers:

"Excess Co-movement in Default Risk," with Jan Ericsson, Alexandre Jeanneret, and Lucie Y. Lu

R&R at Management Science, working paper version.

Abstract: This paper proposes a new explanation for the excess co-movement in default risk observed across borrowers. We develop a model with endogenous default decisions in a multi-borrower economy, where a negative idiosyncratic shock to one borrower reduces its creditworthiness while simultaneously increasing the relative importance of another borrower. The resulting increase in systematic risk raises the borrowing costs of the latter, accelerating its default decision, particularly when short-term refinancing is required. This mechanism uncovers a novel source of default risk dependence that cannot be attributed to shared fundamental shocks alone. Moreover, the embedded leverage in equity enables our model to jointly explain excess co-movement in default probabilities, credit spreads, equity returns, and equity volatilities, aligning with recent empirical evidence across U.S. industries.

"Is ESG’s market impact fading? Stock price reactions to ESG news over time," with Vladislav Pyzhov and Vitali Alexeev

Under Review, working paper version.

Abstract: We examine how the stock market’s reaction to ESG news has evolved since 2000. To do so, we develop a systematic, firm-level event-detection framework that identifies ESG shocks from media sentiment and attention data. Using these events, we document a pronounced inverted U-shaped pattern in market responses over time. In the early 2000s, the market penalized both positive and negative ESG news, consistent with ESG initiatives being perceived as agency costs at that time. From the late 2000s to the mid-2010s, market reactions aligned with news polarity, with positive ESG news rewarded and negative news penalized. By the late 2010s, however, the impact of positive ESG news weakened substantially, while negative news elicited strong market penalties. These patterns are robust across ESG pillars, industries, and firm characteristics, with small firms more responsive to positive news and large firms more sensitive to negative news. Our findings help reconcile previously conflicting evidence by showing that the market impact of ESG news is fundamentally time-varying.

Publications:

[21]. Glover, K. (2024), "A comment on the relationship between operating leverage and financial leverage," Finance Research Letters, 67(A):1-7; publisher's website, working paper version.

[20]. Glover, K. and Peskir, G. (2024), "Quickest detection problems for Ornstein-Uhlenbeck processes," Mathematics of Operations Research, 49(2):1045-1064; publisher's website, working paper version.

[19]. Glover, K., Evatt, G. W., Johnson, P. and Chen, M. (2023), "Capital Ideas: Optimal capital reserve strategies for a bank and its regulator," The European Journal of Finance, 29(18): 2075-2106; publisher's website, working paper version.

[18]. Glover, K. (2023), "With or without replacement? Sampling uncertainty in Shepp's urn scheme," Journal of Applied Probability, 60(2):661-675; publisher's website, working paper version.

[17]. Glover, K. and Hulley, H. (2022), "Financially constrained index futures arbitrage," Journal of Futures Markets, 42(9):1688-1703; publisher's website, working paper version.

[16]. Glover, K. (2022), "Optimally stopping of a Brownian bridge with an unknown pinning time: A Bayesian approach," Stochastic Processes and Their Applications, 150:919-937; publisher’s website, working paper version.

[15]. Glover, K. and Hulley, H. (2022), "Short selling with margin risk and recall risk," International Journal of Theoretical and Applied Finance, 25(2), article no. 2250007; publisher's website, working paper version.

[14]. Glover, K., De Angelis, T. and Ekström, E. (2022), "Dynkin games with incomplete and asymmetric information," Mathematics of Operations Research, 47(1):560-586; working paper version.

[13]. Glover, K., Ross, S., Trayler, R., Hambusch, G., Koh, C., Westerfield, B., and Jordan, D. (2021), "Fundamentals of Corporate Finance, 8th Edition," McGraw-Hill Education; publisher's website.

[12]. Glover, K., Ekström, E. and Leniec, M. (2017), "Dynkin games with heterogeneous beliefs," Journal of Applied Probability, 54(1):236-251; publisher's website, working paper version.

[11]. Glover, K. and Hambusch, G. (2016), "Leveraged investments and agency conflicts when cash flows are mean reverting," Journal of Economic Dynamics and Control, 67:1-21; publisher's website, working paper version.

[10]. Glover, K. and Baur, D. (2015), "Speculative trading in the gold market," International Review of Financial Analysis, 39:63-71; publisher's website, working paper version.

[9]. Glover, K. and Hulley, H. (2014), "Optimal prediction of the last-passage time of a transient diffusion," SIAM Journal on Control and Optimization, 52(6):3833-3853; publisher's website, link to arXiv.

[8]. Glover, K. and Baur, D. (2014), "Heterogeneous expectations in the gold market: Specification and estimation," Journal of Economic Dynamics and Control, 40:116-133; publisher's website, working paper version.

[7]. Glover, K. and Hambusch, G. (2014), "The trade-off theory revisited: On the effect of operating leverage," International Journal of Managerial Finance, 10(1):2-22; publisher's website, working paper version.

[6]. Glover, K., Hulley, H. and Peskir G. (2013), "Three-dimensional Brownian motion and the golden ratio rule," Annals of Applied Probability, 23(3):895-922; publisher's website, working paper version.

[5]. Glover, K. and Baur, D. (2012), "The destruction of a safe haven asset?" Applied Finance Letters, 1(1):8-15; working paper version.

[4]. Glover, K., Peskir, G. and Samee, F. (2011), "The British Russian Option," Stochastics: An International Journal of Probability and Stochastic Processes, 83(4-6):315-332; publisher's website, working paper version.

[3]. Glover, K., Peskir, G. and Samee, F. (2010), "The British Asian Option," Sequential Analysis, 29(3):311-327; publisher's website, working paper version.

[2]. Glover, K., Duck, P. and Newton, D. (2010), "On nonlinear models of markets with finite liquidity: Some cautionary notes," SIAM Journal on Applied Mathematics, 70(8):3252-3271; publisher's website.

[1]. Glover, K. (2008), "The Analysis of PDEs Arising in Nonlinear and Non-standard Option Pricing", Doctoral Thesis, The University of Manchester; downloadable version.

In Preparation:

Glover, K., Anthonisz, S. and Pan W.-T. (2026+), "Selecting active managers: Skill, conviction and costly termination."
Glover, K. Hulley, H. and K. Engelund (2026+), "Caught with your shorts down: Optimal short selling with short-selling constraints,"
Glover, K. and Ekström, E. (2026+), "Sequential testing of diffusion processes."

Research Grants:

(with V. Alexeev) The Power of Public Opinion: Quantifying the Market’s Reaction to Corporate Social (Ir)responsibility. AFAANZ Research Grant 2023. Amount: $5,700.
(with V. Alexeev) Beyond E, S, and G: Asset pricing implications of a novel ESG sentiment dataset. AFAANZ Research Grant 2021. Amount: $7,031.
(with G. Peskir) Quickest detection strategies for a changing Ornstein-Uhlenbeck process with application to pairs trading. UTS Faculty of Business Research Grant 2016. Amount: $9,953.
(with G. Evatt and P. Johnson) Optimal capital reserve strategies for a bank and its regulator. UTS Faculty of Business Research Grant 2014. Amount: $9,972.
(with A. Gerig) Determining the components of the spread in an order-driven market. UTS Faculty of Business Research Grant 2010. Amount: $9,905.
(with G. Hambusch) Bank lending, credit crunches and agency conflicts. UTS Faculty of Business Research Grant 2010. Amount: $9,905.
(with H. Hulley) Exploring and developing the use of Mathematica in the teaching of Finance and Economics. UTS Small Learning and Teaching Improvement Grant 2009. Amount: $3,908.
Calibrating in a crisis: Using crisis market data to calibrate and improve liquidity modelling. UTS Faculty of Business Research Grant 2009. Amount: $9,479.

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