Knowledge that Transforms

Journal Article Subscription Page Get access The Review of Asset Pricing Studies, Volume 7, Issue 2, December 2017, Page i3, https://doi.org/10.1093/rapstu/rax007 Published: 13 November 2017

Journal Article Announcements Get access The Review of Asset Pricing Studies, Volume 7, Issue 1, June 2017, Page 1, https://doi.org/10.1093/rapstu/rax013 Published: 12 May 2017

Journal Article Announcements Get access The Review of Asset Pricing Studies, Volume 7, Issue 2, December 2017, Page 171, https://doi.org/10.1093/rapstu/rax022 Published: 13 November 2017

We specify and estimate a no-arbitrage model for sovereign CDS contracts in which countries’ default intensities depend on economic and financial indicators. To facilitate identification and to distinguish the importance of local and global covariates, we estimate a model with three global and four local covariates using CDS spreads for five maturities and twenty-five countries. The model provides a good fit. The impact of the economic and financial variables on spreads is consistent with economic intuition, and substantially varies across countries and over time. Estimated risk premiums are highly variable and peak during the 2008 financial crisis for most countries.

We use a unique data set from the Trade Reporting and Compliance Engine (TRACE) to study liquidity effects in the U.S. structured product market. Our main contribution is the analysis of the relation between accuracy in measuring liquidity and the level of detail of the trading data employed. We find evidence that, in general, liquidity measures that use dealer-specific information can be efficiently proxied by means of measures that use less detailed information. However, when the level of trading activity in individual securities or overall market activity is low, measures based on more detailed trading data permit a more precise assessment of liquidity. These results provide us with a better understanding of the information contained in disseminated OTC trading data, in general.

By using a unique data set on the organizational structure of fixed-income portfolio managers, that is, mutual funds and insurance companies, we study the effects of organizational hierarchy within a fund management team on bond investing. We document that team hierarchies reduce the portfolio managers’ incentive to collect and share soft information. Funds with multiple hierarchies invest less in bonds of local firms, hold less concentrated portfolios, and herd more with the market. Overall, they deliver lower portfolio performances. We also show that changes in fund hierarchy subsequently find their way into fund behaviors.

Our paper investigates extended abnormal returns for S&P 500 index changes in a comprehensive 1979-2015 sample. The literature’s depiction of longer window returns lacked both appropriate nuance and cross-sectional analysis. Solid evidence for reversion appears in the 2000s. Stocks no longer experience permanent shifts in investor demand when they are either added to or removed from the S&P 500. Received April 19, 2016; editorial decision January 23, 2017 by Editor Jeffrey Pontiff

Corporate loans increasingly have become an important part of portfolio management with the advent of a liquid and transparent secondary market. This paper examines the pricing of characteristics and betas in the cross-section of expected loan returns. Expected loan returns decrease with default beta. Default beta contains information not captured by rating or spread-to-maturity. Among loan characteristics, a 3-month formation momentum strategy earns a monthly premium of 122 bps. Momentum is prominent in loans issued by the lowest-rated borrowers.