A Fast Literature Search Engine based on top-quality journals, by Dr. Mingze Gao.

• Adelino, M., Ferreira, M. A., Giannetti, M., & Pires, P. (2023). Trade Credit and the Transmission of Unconventional Monetary Policy. Review of Financial Studies, 36, 775–813.

  We show that production networks are important for the transmission of unconventional monetary policy. Firms with bonds eligible for purchase under the European Central Bank’s Corporate Sector Purchase Program act as financial intermediaries by extending additional trade credit to their customers. The increase in trade credit is pronounced from core countries to periphery countries and for financially constrained customers. Customers then increase investment and employment in response to the increased trade financing, whereas suppliers expand their customer base, contributing to upstream industry concentration. Our findings suggest that trade credit redistributes the effects of monetary policy across regions and firms.

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• Andrade, S. C., Ekponon, A., & Jeanneret, A. (2023). Sovereign Risk Premia and Global Macroeconomic Conditions. Journal of Financial Economics, 147, 172–197.

  We study how shifting global macroeconomic conditions affect sovereign bond prices. Bondholders earn premia for two sources of systematic risk: exposure to low-frequency changes in the state of the economy, as captured by expected macroeconomic growth and volatility, and exposure to higher-frequency macroeconomic shocks. Our model predicts that the first source, labeled long-run macro risk, is the primary driver of the level and the cross-sectional variation in sovereign bond premia. We find support for this prediction using sovereign bond return data for 43 countries over the 1994–2018 period. A long-short portfolio based on long-run macro risk earns 8.11% per year in our sample.

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• Bao, J., Hou, K., & Zhang, S. (2023). Systematic Default and Return Predictability in the Stock and Bond Markets. Journal of Financial Economics, 149, 349–377.

  We construct a measure of systematic default defined as the probability that many firms default at the same time. We account for correlations in defaults between firms through exposures to common shocks. Systematic default spikes during recessions, is correlated with macroeconomic indicators, and predicts future realized defaults. More importantly, it predicts future equity and corporate bond index returns both in- and out-of-sample. Finally, we find that the cross-section of average stock returns is related to firm-level exposures to systematic default risk.

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• Becker, B., & Ivashina, V. (2023). Disruption and Credit Markets. The Journal of Finance, 78, 105–139.

  We show that over the past half‐century, innovative disruptions were central to understanding corporate defaults. In a given year, industries experiencing abnormally high venture capital or initial public offering activity subsequently see higher default rates, higher segment exits by conglomerates, and higher yields on bonds issued by the firms in these industries. Overall, we find that disruption is a broad phenomenon, negatively affecting incumbent firms across the spectrum of age, valuation, and levers, with the exception of very large and low‐leverage firms, in line with our central hypothesis.

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• Chernov, M., & Creal, D. (2023). International Yield Curves and Currency Puzzles. The Journal of Finance, 78, 209–245.

  The currency depreciation rate is often computed as the ratio of foreign to domestic pricing kernels. Using bond prices alone to estimate these kernels leads to currency puzzles: the inability of models to match violations of uncovered interest parity and the volatility of exchange rates. This happens because of the FX bond disconnect, the inability of bonds to span exchange rates. Incorporating innovations to the pricing kernel that affect exchange rates but not bonds helps resolve the puzzles. This approach also allows one to relate news about cross‐country differences between international yields to news about currency risk premiums.

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• Cordell, L., Roberts, M. R., & Schwert, M. (2023). CLO Performance. The Journal of Finance, 78, 1235–1278.

  We study the performance of collateralized loan obligations (CLOs) to understand the market imperfections giving rise to these vehicles and their corresponding economic costs. CLO equity tranches earn positive abnormal returns from the risk‐adjusted price differential between leveraged loans and CLO debt tranches. Debt tranches offer higher returns than similarly rated corporate bonds, making them attractive to banks and insurers that face risk‐based capital requirements. Temporal variation in equity performance highlights the resilience of CLOs to market volatility due to their closed‐end structure, long‐term funding, and embedded options to reinvest principal proceeds.

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• Cornaggia, J., Cornaggia, K. J., & Israelsen, R. (2023). Rating Agency Fees: Pay to Play in Public Finance? Review of Financial Studies, 36, 2004–2045.

  We examine the relationship between credit rating levels and rating agency fees in a public finance market in which rating agencies earn lower fees and face higher disclosure requirements relative to corporate bond and structured finance markets. Controlling for variation in the complexity of credit analysis at the issue level, we find evidence that rating agency conflicts of interest distort credit ratings in the municipal bond market. Unexpectedly expensive ratings are more likely downgraded, and inexpensive ratings are more likely upgraded. The relationship between credit ratings and rating agency fees is driven by issuers who lose access to AAA insurance.

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• Davydiuk, T., Richard, S., Shaliastovich, I., & Yaron, A. (2023). How Risky Are U.S. Corporate Assets? The Journal of Finance, 78, 141–208.

  We use market data on corporate bonds and equities to measure the value of U.S. corporate assets and their payouts to investors. In contrast to equity dividends, total corporate payouts are highly volatile, turn negative when corporations raise capital, and are acyclical. At the same time, corporate asset returns are similar to returns on equity, and both are exposed to fluctuations in economic growth. To reconcile this evidence, we argue that acyclical but volatile net repurchases mask the exposure of total payouts' cash components to economic growth risks. We develop an asset pricing framework to quantitatively illustrate this economic channel.

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• Duffee, G. R. (2023). Macroeconomic News in Asset Pricing and Reality. The Journal of Finance, 78, 1499–1543.

  Revisions in successive Greenbook forecasts of quarterly real GDP growth proxy for news of current and expected future economic growth. In the sample 1975 through 2015, news of future growth is slightly negatively related to contemporaneous changes in Treasury bond yields, while news of current growth is strongly positively related to changes in these yields. Both results are difficult to reconcile with a representative agent's bondholding first‐order condition. A continuous‐time dynamic model of output attributes almost all of the covariation with yields to martingale innovations in log output and a minimal amount to innovations in the conditional drift of log output.

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• Elkamhi, R., & Jo, C. (2023). Asset Holders Consumption Risk and Tests of Conditional CCAPM. Journal of Financial Economics, 148, 220–244.

  We test the conditional consumption-CAPM using asset holders’ consumption and find that the time variation in the prices of asset holders’ consumption risk is procyclical. This puzzling time variation is at odds with the implication of existing consumption-based equilibrium asset pricing models. We show that our finding is a salient feature of the data observed in multiple asset classes (aggregate equity market, equity portfolios, bond portfolios, and commodities portfolios), using different measures of consumption (household survey data and high-frequency retail shopping data) and alternative empirical methodologies.

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