A Fast Literature Search Engine based on top-quality journals, by Dr. Mingze Gao.
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- Please kindly let me know [mingze.gao@mq.edu.au] in case of any errors.
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Results 16 resources
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Bond underwriters, lacking “Greenshoe options” and formal systems to track “flipping” activity, have fewer tools than equity underwriters to manage secondary market order flow uncertainty. We show that bond underwriters respond by selectively “overallocating” some issues to attain net short positions. Overallocations are economically substantive, facilitate the syndicate's price stabilization efforts, and are largely offset in the days after issuance. These issues on average experience more net selling by institutional investors and, despite large syndicate purchases, appreciate less in the secondary market. Thus, overallocation is an observable indicator that underwriters anticipate weakness in net secondary market demand.
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Green assets delivered high returns in recent years. This performance reflects unexpectedly strong increases in environmental concerns, not high expected returns. German green bonds outperformed their higher-yielding non-green twins as the “greenium” widened, and U.S. green stocks outperformed brown as climate concerns strengthened. Despite that outperformance, we estimate lower expected returns for green stocks than for brown, consistent with theory. We estimate expected returns in two ways: ex ante, using implied costs of capital, and ex post, using realized returns purged of shocks from climate concerns and earnings. A theoretically motivated green factor explains much of value stocks’ recent underperformance.
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Firms sharing a board member with a media company receive more news coverage. This in turn affects those firms’ financing choices: they issue more bonds, rely less on bank loans, and have lower blockholder ownership. These findings are consistent with media coverage acting as an external governance mechanism that substitutes for monitoring by banks and equity blockholders. The effect of media-linked directors on financing is evident in panel and time series analyses and using two different instrumental variable analyses, suggesting a causal relation.
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This paper introduces a real-time, continuous measure of national sentiment that is language-free and thus comparable globally: the positivity of songs that individuals choose to listen to. This is a direct measure of mood that does not pre-specify certain mood-affecting events nor assume the extent of their impact on investors. We validate our music-based sentiment measure by correlating it with mood swings induced by seasonal factors, weather conditions, and COVID-related restrictions. We find that music sentiment is positively correlated with same-week equity market returns and negatively correlated with next-week returns, consistent with sentiment-induced temporary mispricing. Results also hold under a daily analysis and are stronger when trading restrictions limit arbitrage. Music sentiment also predicts increases in net mutual fund flows, and absolute sentiment precedes a rise in stock market volatility. It is negatively associated with government bond returns, consistent with a flight to safety.
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We examine voluntary disclosure decisions when firms are uncertain about audience preferences and are risk averse. In contrast to classic “unraveling” results, some firms remain silent in equilibrium. Silence is safer than disclosure; silence reduces the sensitivity of a firm’s payoff to audience preferences. Increases in firm (audience) risk-aversion reduce (increase) disclosure. Our model explains why some firms do not disclose earnings breakdowns, executive compensation, or Environmental, Social, and Governance (ESG) performance when they face diverse audiences, and why they disclose less under regulatory rules mandating that disclosure be entirely public.
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We evaluate the impact of the Federal Reserve corporate credit facilities (PMCCF and SMCCF) on corporate bond markets. Conditions in primary markets improve once the facilities are announced, particularly for issuers that need to refinance before 2022. Issuance accelerates before spreads normalize. The secondary market points to a causal role for the facilities, with a differential impact on eligible issues and a significant effect of direct bond purchases, but less so for purchases through ETFs. We find evidence that dealers link the primary and secondary market recovery, with facilities affecting dealer willing to underwrite issuances and intermediate in secondary markets.
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We find evidence of widespread stale pricing in bond mutual funds and the resulting risks of dilution and fragility. A principal driver of this phenomenon is the high illiquidity of funds’ holdings, which makes accurate pricing difficult and provides funds with greater discretion over valuation. Consequently, net asset values (NAVs) are extremely stale and fund returns are predictable over several days and weeks, particularly during market crises. Opportunistic traders withdraw capital from overvalued funds, exacerbating the risk of fund runs, while buy-and-hold investors face annual dilution of around $1.2 billion. Our results highlight adverse consequences of insufficient fair valuation practices that remain pervasive even after corrective regulations that followed the 2003 market-timing scandal.
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I study the sufficiency of macroeconomic information to explain the time-variation in second moments of stock and bond returns, with a particular attention to stock-bond correlations. I propose an external habit model supplemented with realistic non-Gaussian fundamentals estimated solely from macroeconomic data. Intertemporal smoothing and precautionary savings effects – driven by consumption shocks – combine with a time-varying covariance between consumption and inflation to generate large positive and negative stock-bond return correlations. Macroeconomic shocks are most important in explaining second moments of stock and bond returns from the late 1970’s to mid-1990’s and during the Great Recession.
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We study the effect of the US Affordable Care Act (ACA) on healthcare borrowing costs. The ACA provides insurance subsidies to low-income enrollees. States could accept funding to expand Medicaid, although many declined, citing the cost burden. The ACA significantly reduced healthcare yields after a favorable 2012 Supreme Court ruling. Furthermore, hospital investment spending increased, and investment-cash flow sensitivities decreased. The yield effect was double in Medicaid expansion states, and insignificant in rural areas of non-expansion states. Our results highlight how the municipal market can be used to evaluate the heterogeneous effects of public policy and guide a targeted policy approach.
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We study the effects of the Liberty Bond drives of World War I on financial intermediation in the 1920s and beyond. Using panel data on US counties, and an instrument that captures differences in the approaches used to market the bonds, we find that higher Liberty Bond subscription rates led to an increase in investment banks and a contraction in commercial bank assets. We also find that in the late 1930s, individuals residing in states where Liberty Bond subscription rates had been higher were more likely to report owning stocks or bonds. Although they were conducted to support the American effort in World War I, these bond drives reshaped American finance.