About

Xavier Gabaix is the Pershing Square Professor of Economics and Finance at Harvard University. His office is located at Littauer Center 209, 1805 Cambridge Street, Cambridge, MA 02138. He can be contacted via email at xgabaix@fas.harvard.edu. The biography and CV details, as well as information about his classes and publications, are available through his Harvard profile. No additional research focus, background, or key contributions are provided in the given page text.

Research topics

• Macroeconomics
• Mathematics
• Economics
• Keynesian economics
• Microeconomics
• Mathematical economics
• Econometrics
• Finance
• Statistics
• Psychology

Selected publications

• Limited Risk Transfer Between Investors: A New Benchmark for Macro-Finance Models

  National Bureau of Economic Research · 2025-01-01

  reportOpen access1st authorCorresponding

  We define risk transfer as the percent change in the market risk exposure for a group of investors over a given period.We estimate risk transfer using novel data on U.S. investors' portfolio holdings, flows, and returns at the security level with comprehensive coverage across asset classes and broad coverage across the wealth distribution (including 400 billionaires).Our key finding is that risk transfer is small with a mean absolute value of 0.65% per quarter.Leading macro-finance models with heterogeneous investors predict risk transfer that exceeds our estimate by a factor greater than ten because investors react too much to the time-varying equity premium.Thus, the small risk transfer is a new moment to evaluate macro-finance models.We develop a model with inelastic demand, calibrated to the standard asset pricing moments on realized and expected stock returns, that explains the observed risk transfer.The model is adaptable to other macro-finance applications with heterogeneous households.

  PublisherDOI

• Asset Embeddings

  SSRN Electronic Journal · 2025-01-01

  articleOpen access1st authorCorresponding
  PublisherDOI

• A Theory of Complexity Aversion

  SSRN Electronic Journal · 2025-01-01 · 1 citations

  preprintOpen access1st authorCorresponding
  PublisherDOI

• Asset Embeddings

  National Bureau of Economic Research · 2025-04-01 · 5 citations

  reportOpen access1st authorCorresponding

  Firm characteristics, based on accounting and financial market data, are commonly used to represent firms in economics and finance.However, investors collectively use a much richer information set beyond firm characteristics, including sources of information that are not readily available to researchers.We show theoretically that portfolio holdings contain all relevant information for asset pricing, which can be recovered under empirically realistic conditions.Such guarantees do not exist for other data sources, such as accounting or text data.We build on recent advances in artificial intelligence (AI) and machine learning (ML) that represent unstructured data (e.g., text, audio, and images) by high-dimensional latent vectors called embeddings.Just as word embeddings leverage the document structure to represent words, asset embeddings leverage portfolio holdings to represent firms.Thus, this paper is a bridge from recent advances in AI and ML to economics and finance.We explore various methods to estimate asset embeddings, including recommender systems, shallow neural network models such as Word2Vec, and transformer models such as BERT.We evaluate the performance of these models on three benchmarks that can be evaluated using a single quarter of data: predicting relative valuations, explaining the comovement of stock returns, and predicting institutional portfolio decisions.We also estimate investor embeddings (i.e., representations of investors and their strategies), which are useful for investor classification, performance evaluation, and detecting crowded trades.We discuss other applications of asset embeddings, including generative portfolios, risk management, and stress testing.Finally, we develop a framework to give an economic narrative to a group of similar firms, by applying large language models to firm-level text data.

  PublisherDOI

• Limited Risk Transfer Between Investors: A New Benchmark for Macro-Finance Models

  SSRN Electronic Journal · 2025-01-01 · 1 citations

  preprintOpen access1st authorCorresponding
  PublisherDOI

• Asset Embeddings

  SSRN Electronic Journal · 2025-01-01 · 2 citations

  preprintOpen access1st authorCorresponding
  PublisherDOI

• Limited Risk Transfer between Investors: A New Benchmark for Macro-Finance Models

  SSRN Electronic Journal · 2025-01-01

  articleOpen access1st authorCorresponding
  PublisherDOI

• Upgrading Credit Pricing and Risk Assessment through Embeddings

  SSRN Electronic Journal · 2025-01-01 · 5 citations

  preprintOpen access1st authorCorresponding
  PublisherDOI

• Asset Demand of U.S. Households

  SSRN Electronic Journal · 2024-01-01 · 4 citations

  articleOpen access1st authorCorresponding
  PublisherDOI

• Propagation of Shocks in Networks: Identification and Applications

  SSRN Electronic Journal · 2024-01-01

  preprintOpen access
  PublisherDOI

Recent grants

• DRU -- Collaborative Research -- An Econophysics and Behavioral Approach to Financial Fluctuations

  NSF · $58k · 2008–2011

• DRU -- Collaborative Research -- An Econophysics and Behavioral Approach to Financial Fluctuations

  NSF · $127k · 2005–2009

• Sparsity: A Tractable Approach to Bounded Rationality, Applied to Basic Consumer Theory, Equilibrium Theory, and Dynamic Programming

  NSF · $277k · 2013–2016

Frequent coauthors

• David Laibson

  Harvard University Press

  212 shared

• Alex Edmans

  London Business School

  102 shared

• Vasiliki Plerou

  Boston University

  101 shared

• Parameswaran Gopikrishnan

  97 shared

• H. Eugene Stanley

  Boston University

  96 shared

• Ralph S. J. Koijen

  84 shared

• John C. Driscoll

  Federal Reserve Board of Governors

  30 shared

• Sumit Agarwal

  National University of Singapore

  27 shared

Education

• Ph.D., Economics

  Massachusetts Institute of Technology

  1999

• M.S., Economics

  Massachusetts Institute of Technology

  1996

• B.A., Economics

  Harvard University

  1992

Awards & honors

• Fischer Black Prize
• Bernacer Prize
• Lagrange Prize
• Allais Prize