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 1,739 resources
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We document a new phenomenon in bond and equity markets that we call cross-asset time series momentum. Using data from 20 countries, we show that past bond market returns are positive predictors of future equity market returns and past equity market returns are negative predictors of future bond market returns. We use this predictability to construct a diversified cross-asset time series momentum portfolio that yields a Sharpe ratio 45% higher than a standard time series momentum portfolio. We present evidence that time series momentum and cross-asset time series momentum are driven by slow-moving capital in bond and equity markets.
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This paper finds that declining bank equity or liquidity reduces liquidation values of bank-owned real estate and accelerates the pace of asset sales. Buyers of these assets earn significant returns for providing liquidity to banks, as prices tend to rebound sharply after sales by illiquid banks. Lower liquidation values also depress the prices of nearby real estate transactions. Policy interventions, such as equity injections and central bank asset purchases, increase liquidation values by providing institutions with the balance sheet capacity to slow asset sales. This evidence suggests that balance sheet adjustments at financial institutions can explain real asset price dynamics.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.
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We study risk management in financial institutions using data on hedging of interest rate and foreign exchange risk. We find strong evidence that institutions with higher net worth hedge more, controlling for risk exposures, across institutions and within institutions over time. For identification, we exploit net worth shocks resulting from loan losses due to declines in house prices. Institutions that sustain such shocks reduce hedging significantly relative to otherwise‐similar institutions. The reduction in hedging is differentially larger among institutions with high real estate exposure. The evidence is consistent with the theory that financial constraints impede both financing and hedging.
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This paper studies the role of the Community Reinvestment Act (CRA) in the U.S. housing boom-bust cycle. I find that enhanced CRA enforcement in 1998 increased the growth rate of mortgage lending by CRA-regulated banks to CRA-eligible census tracts. I show that during the boom period house price growth was higher in the eligible census tracts because of the shift in mortgage supply of regulated banks. Consequently, these census tracts experienced a worse housing bust. I find that CRA-induced mortgages were awarded to borrowers with lower FICO scores and were more frequently delinquent.
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Italian firms delay payment to banks weakened by past loan losses. Exploiting Credit Register data, we fully absorb borrower fundamentals with firm‐quarter effects. Identification therefore reflects firm choices to delay payment to some banks, depending on their health. This selective delay occurs more where legal enforcement of collateral recovery is slow. Poor enforcement encourages borrowers not to pay when the value of their bank relationship comes into doubt. Selective delays occur even by firms able to pay all lenders. Credit losses in Italy have thus been worsened by the combination of weak banks and weak legal enforcement.
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This paper shows that low‐risk anomalies in the capital asset pricing model and in traditional factor models arise when investors require compensation for coskewness risk. Empirically, we find that option‐implied ex ante skewness is strongly related to ex post residual coskewness, which allows us to construct coskewness factor‐mimicking portfolios. Controlling for skewness renders the alphas of betting‐against‐beta and betting‐against‐volatility insignificant. We also show that the returns of beta‐ and volatility‐sorted portfolios are driven largely by a single principal component, which in turn is explained largely by skewness.
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I document that dividend growth and returns on the aggregate U.S. stock market are more correlated with consumption growth in bad economic times. In a consumption-based asset pricing model with a generalized disappointment-averse investor and small, IID consumption shocks, this feature results in a realistic equity premium despite low risk aversion. The model is consistent with the main facts about stock market risk premiums inferred from equity index options, remains tightly parameterized, and allows for analytical solutions for asset prices. An extension with non-IID dynamics accounts for excess volatility and return predictability, while preserving the model’s consistency with option moments.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.
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This paper investigates the pricing of bank loans relative to capital market debt. The analysis uses a novel sample of loans matched with bond spreads from the same firm on the same date. After accounting for seniority, lenders earn a large premium relative to the bond‐implied credit spread. In a sample of secured term loans to noninvestment‐grade firms, the average premium is 140 to 170 bps or about half of the all‐in‐drawn spread. This is the first direct evidence of firms' willingness to pay for bank credit and raises questions about the nature of competition in the loan market.
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Off-balance sheet financing of an investment is covered by limited liability, whereas on-balance sheet financing creates unlimited liability towards the bank’s asset-in-place. Off-balance sheet funding thus gives the bank flexibility to voluntarily support debt repayments when the investment fails, which allows the bank to signal information about the quality of its future projects, improving investment efficiency. Yet, limited liability reduces the bank’s effort incentives. Off-balance sheet funding with voluntary support is optimal for activities that are rapidly growing or negatively correlated with existing assets. The model yields testable predictions on the relationship between off-balance sheet debt spreads and sponsors’ characteristics.
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Modern markets are characterized by speed differentials, with some traders being fractions of a second faster than others. Theoretical models suggest that such differentials may have both positive and negative effects on liquidity and gains from trade. We examine these effects by studying a series of exogenous weather episodes that temporarily remove the speed advantages of the fastest traders by disrupting their microwave networks. The disruptions are associated with lower adverse selection and lower trading costs. In additional analysis, we show that the long‐term removal of speed differentials results in similar effects and also increases gains from trade.
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Journals
- American Economic Review (435)
- Journal of Finance (252)
- Journal of Financial Economics (628)
- Review of Financial Studies (424)
Topic
- Bond (126)
- CEO (31)
- Director (17)
- Mergers and Acquisitions (12)
- Capital Structure (8)
Resource type
- Journal Article (1,739)