Finance and Financial Management Commons^™

Lead-Lag And Volatility Point Change Estimations For Cryptocurrencies, Jules Clement Mba, Jenipher Mutale, Ehounou Serge Eloge Florentin Angaman

Journal of Banking and Financial Economics

This study investigates the lead-lag relationships and volatility dynamics among four major cryptocurrencies – Bitcoin, Ethereum, Solana, and Polygon – during the turbulent year of 2022. We address three primary research questions: (1) To what extent do lead-lag relationships exist among major cryptocurrencies, and how do they challenge or support the notion of market efficiency in the crypto space? (2) How do volatility change points in different cryptocurrencies relate to each other and to major market events? (3) How can the identification of lead‑lag relationships and volatility change points inform cryptocurrency investment strategies and risk management practices? Using a continuous-time …

A Method To Incorporate Transition Risk Stress Testing Into Probability Of Default (Pd) Models For Retail Portfolios, Aneta Ptak-Chmielewska, Paweł Kopciuszewski, Alvaro Fernandez Toledo

Journal of Banking and Financial Economics

Climate risk is one of the type of risks in a bank’s portfolio which is not fully recognized, and its impact on the future overall risk changes is hidden due to lack of sufficient knowledge at the moment. One of the most common data comes from Network for Greening the Financial System (NGFS) scenarios related to climate change (physical risk) and climate policy and technology trends (transition risk). In the paper we focused on the transition risk scenarios and their impact on the economy and in particular on credit risk. Our main goal was to check the tendency in the …

An Empirical Test Of Auction Efficiency: Evidence From Mbs Auctions Of The Federal Reserve, Pietro Bonadi, Ali Hortacsu, Zhaogang Song

Research Collection Lee Kong Chian School Of Business

PurposeWe estimate the marginal cost curve of each dealer in each auction, based on structural models of the multiunit discriminatory-price auction.Design/methodology/approachAuction theory has ambiguous implications regarding the relative performance of three formats of multiunit auctions: uniform-price, discriminatory-price and Vickrey auctions. We evaluate the performance of these three auction formats using bid-level data of the Federal Reserve’s purchase auctions of agency MBS from June 2014 through November 2014.FindingsOur results suggest that neither uniform-price nor Vickrey auctions outperform discriminatory-price auctions in terms of the total expenditure. However, Vickrey auctions outperform discriminatory-price auctions in terms of efficiency, with the efficiency gain around 0.74% …

A Practical Guide To Driving Financial Inclusion Through Cbdcs, Heng Wang

Research Collection Yong Pung How School Of Law

Welcome back to our blog series exploring the potential that central bank digital currencies (CBDCs) hold to positively impact individuals that are currently unserved or underserved by financial systems globally. Together with Professor Wang, we first delved into the challenges and opportunities of driving financial inclusion, and how CBDCs could serve as an important mechanism in ensuring that no one is excluded from financial services – or our increasingly digital economies and societies. In our second blog we then examined how CBDCs can be intentionally designed to drive financial inclusion. In this third and final piece, Professor Wang offers a …

Challenges And Prospects Of Islamic Financial Services Industry (Ifsi), Ishrat Husain Dr.

Faculty Research - Talks, Speeches, & Discourse

Dr. Ishrat Husain addresses a distinguished gathering of Shariah scholars from across the globe on the transition from conventional to Islamic finance. He raises ten critical questions that explore the challenges and prospects of the Islamic Financial Services Industry.

Do Women Receive Worse Financial Advice?, Utpal Bhattacharya, Amit Kumar, Sujata Visaria, Jing Zhao

Research Collection Lee Kong Chian School Of Business

We arranged for trained undercover men and women to pose as potential clients and visit all 65 local financial advisory firms in Hong Kong. At financial planning firms, but not at securities firms, women were more likely than men to receive advice to buy only individual or only local securities. Female clients who signaled high confidence, high risk tolerance, or a domestic outlook were especially likely to receive this suboptimal advice. Our theoretical model explains these patterns as a result of statis-tical discrimination interacting with advisors’ incentives. Taste-based discrimination is unlikely to explain the results.

Machine Learning As Arbitrage: Can Economics Help Explain Ai?, Huahao Lu, Matthew Spiegel, Hong Zhang

Sim Kee Boon Institute for Financial Economics

Machine learning algorithms have shown to be remarkably successful tools for predicting asset returns. However, the underlying economic mechanisms behind their performance remain unclear. This paper proposes a model-based dynamic arbitrage trading strategy that combines economic and statistical nonstationarity to demystify this black box. In predicting stock returns based on 153 firm characteristics (anomalies), our strategy ranks anomalies similarly to neural networks in the cross-section. Overall, it accounts for approximately 87.9 bps monthly alphas of the high-minus-low portfolios selected by neural networks in the time series. When unpublished anomalies and microcap stocks are excluded from trading, this strategy can fully …

Climate Challenges: Central Banks In The Hot Seat – Rethinking Monetary Policy And Educational Activity, Łukasz Kurowski

Journal of Banking and Financial Economics

Global warming poses many challenges for all economic entities. The two main challenges facing all countries are climate change mitigation and adaptation. Central banks also face difficult tasks in this context. The difficulty stems from the impact of climate change on all sectors of the economy. Central banking has to deal with the new challenges created by climate change for monetary policy, macroprudential policy, but also climate education. The aim of the article is to verify to what extent climate change is considered in the central bank’s main objective – monetary policy. Therefore, the article examines the frequency with which …

Geographic Links And Predictable Returns, Zuben Jin, Frank Weikai Li

Research Collection Lee Kong Chian School Of Business

Using establishment-level data of U.S. public firms, we construct a novel measure of geographic linkage between firms. We show that the returns of geography-linked firms have strong predictive power for focal firm returns and fundamentals. This effect is distinct from other cross-firm return predictability and is not easily attributable to risk-based explanations. It is more pronounced for focal firms that receive lower investor attention, are more costly to arbitrage, and during high sentiment periods. The cross-firm information spillovers and return predictability are also stronger for geographic peers with economic linkages and with positive information. Our results are broadly consistent with …

How Can Cbdcs Be Designed To Drive Financial Inclusion?, Heng Wang

Research Collection Yong Pung How School Of Law

As a new form of national currency, central bank digital currencies (CBDCs) hold the potential to be a transformative innovation that can enhance financial inclusion. However, the realization of this potential is very much contingent on their design. The realization of the benefit is also influenced by the barriers to financial inclusion that were identified in our first blog such as financial literacy, digital divide, and complexity.

India: Yes Bank Restructuring, 2020, Salil Gupta

Journal of Financial Crises

Yes Bank was suffering from liquidity outflows in the second half of 2019 owing to a combination of deposit withdrawals, invocation of pledged shares, losses from extraordinary credit provisions, and overexposure to stressed sectors like power and infrastructure. In December 2019, Yes Bank reported a Common Equity Tier 1 capital ratio at 0.6%, far below the Reserve Bank of India (RBI) mandated levels, and a quarterly loss of 185 billion Indian rupees (INR; USD 2.5 billion). In early March 2020, the RBI and the Ministry of Finance announced a restructuring plan for India’s fourth-largest private bank, Yes Bank, to prevent …

Consumers’ Financial Literacy In Poland - The Research And The Resulting Conclusions, Andrzej Bień, Łukasz Gębski

Journal of Banking and Financial Economics

Background & Purpose of the article: The research paper raises important issues in the field of consumer financial literacy in Poland. The authors note that efforts made in financial education are not fully effective and the number of wrong decisions made by consumers is high. The study led to two interesting observations: high self-assessment of knowledge is not confirmed in practice. The mistakes made do not result solely from the lack of knowledge of consumers. They are very often a result of their personality and a way of perceiving reality.

Methods: The authors compared Polish and foreign research results in …

Can Financialisation Counteract Banking Exclusion? A Study On The Example Of The European Union Member States, Tomasz Florczak, Marika Ziemba

Journal of Banking and Financial Economics

The purpose of the article is to assess the relationship between financialization and banking exclusion. The research hypothesis that financialization contributes to the reduction of financial exclusion was also verified. The research was based on an analysis of the variables describing financialization and banking exclusion of 27 European Union countries in the 2014–2021 period. The zero-unitarization method and Pearson’s correlation coefficient were used. The results of the study indicate that a high degree of financialization is found in Croatia, Greece, Cyprus and Portugal. In contrast, the level of banking exclusion is the highest in Finland, Sweden, the Netherlands and Latvia. …

Can Corporate Sustainability Performance (Csp) Overcome Indonesia's Corporate Debt Problems?, Johnson Ferry Febrian, Nora Sri Hendriyeni

Jurnal Akuntansi dan Keuangan Indonesia

Based on IMF publications (2022), Indonesian companies have a risky debt level that may cause bankruptcy, so companies are required to make leverage adjustments to return the debt to its optimal level. In recent years, corporate sustainability performance (CSP) practices have been proven to improve performance and overcome financial problems such as debt by integrating sustainability aspects into business processes. Based on stakeholder theory and trade-off theory, this study aims to examine the effect of CSP on leverage adjustment and the role of competitive advantage, equity mispricing, profitability, and firm size in moderating this relationship. This study used a sample …

Policy Frameworks And Citizens’ Use Of Fintech Solutions: The Pros And Cons In Egypt, Salma Al-Mohamady

Theses and Dissertations

This thesis provides a comprehensive analysis of the significant influence of financial technology (FinTech) on the banking industry, consumer finance, and economic growth. It specifically concentrates on the swiftly changing FinTech environment in Egypt. The study investigates the impact of incorporating advanced technologies on worldwide financial practices, which has significantly transformed traditional banking models and facilitated the emergence of inventive financial services. The transition is clearly apparent in Egypt, where the expansion of FinTech has been driven by advances in regulations, adaptation to technology, and a population that is becoming more comfortable with digital solutions.

Using a combination of quantitative …

The Role Of Macroprudential Policies Under Carbon Pricing, Maria Teresa Punzi

Sim Kee Boon Institute for Financial Economics

This paper analyses the effectiveness of macroprudential policy on macro-financial fluctuations when the government enforces carbon pricing to reduce carbon emissions and achieve the net-zero target. A carbon tax policy alone can reduce carbon emissions by 2030, but at the cost of a deep and prolonged recession, with consequential financial instability due to a higher probability of default on entrepreneurs in the brown sector. This result suggests that carbon pricing should be coupled with complementary policies, such as macroprudential policy. In particular, differentiated LTV ratios and differentiated capital requirements that penalize the brown sector in favour of the green sector …

Identifying Risk-Taking Behavior And Prudent Asset Allocation In Pension Funds In Indonesia, Mohammad Alvin Prabowosunu, Reza Yamora Siregar, Rosi Melati, Devan Hadrian, Rizky Rizaldi Ronaldo

Economics and Finance in Indonesia

This research aims to investigate asset allocation strategies in the pension fund industry in Indonesia in relation to liability profiles and risk-taking behavior. Utilizing data on market returns for each asset class and several financial indicators of pension funds, we applied the risk-taking behavior model proposed by Andonov & Rauh (2022) and a modified model to observe the Liability-Driven Investment (LDI) strategies of pension funds in Indonesia. We discovered that private defined contribution pension fund schemes (PPIP) tend to exhibit higher risk-taking behavior, primarily through investment allocation in equities. On the other hand, private defined benefit pension funds (PPMP) demonstrate …

The Research Of The Non-Financial Factors In The Investment Decision, Wenbiao Hou

Dissertations and Theses Collection (Open Access)

Driven by globalization and technological innovation, the complexity of investment decisions is continuously increasing. While traditional financial factors still play a crucial role in these decisions, an increasing number of real-life cases indicate that investors are relying more on non-financial factors. This paper systematically analyzes the impact of these non-financial factors in the framework of investment decision-making.

This paper employs a mixed research method, incorporating both qualitative and quantitative analyses to ensure comprehensive coverage of the topic. First, it outlines the theoretical basis and development of non-financial factors in investment decisions through a review of prior literature. Next, it collects …

Empirical Essays On Retail Investors, Institutional Investors, And Anomalies, Yuqing Yang

Dissertations, Theses, and Capstone Projects

This dissertation consists of five chapters on market efficiencies through retail and international mutual fund investors.

Chapter 1 This chapter briefly introduces this dissertation.

Chapter 2 This chapter Anomalies Never Disappeared: The Case of Stubborn Retail Investors delves into the “stubborn” retail investors and finds that anomalies traded against by retail investors never disappear in the long run, defying the conventional wisdom that anomalies are disappearing in recent years as market efficiency improves. Incorporating retail trading, I develop asset pricing models that surpass existing prominent models in explaining these long-run alphas. I hypothesize that retail investors exacerbate anomalies: the more …

Dreams And Livelihoods In Rural Areas Require Capital, Too: An Investigation Into The Role Of Diminishing Community Banks, Financial Education, And Access To Capital In Rural Areas, Jackson Walton

Finance Undergraduate Honors Theses

Individuals in rural communities face unprecedented economic challenges due to a lack of financial education and a decline in the prevalence of community banks. These problems have continuously grown exponentially without successful attempt at remedy. The community banks that once served as the center of economic activity and prevalence in rural communities are leaving these communities quickly- leaving many without access to lines of credit, personal relationship banking, and without necessary financial education in a world with more financial options than ever. Access to banking and higher financial literacy proficiency rates are almost directly linked to better financial outcomes like …

The Mathematics Of Financial Portfolio Optimization Incorporating Environmental, Social, And Governance Score Information, Ian Driskill

Master's Theses

We numerically investigate the effects that Environmental, Social, and Governance (ESG) scores have on portfolio optimization with Modern Portfolio Theory assumptions and how ESG scores correlate with the market returns of a rated company's stock. Additionally, we review and analyze a research paper published in the Journal of Financial Economics regarding ESG investing titled “Responsible investing: The ESG-efficient frontier” by Pedersen, Fitzgibbons, and Lukasz. Our overall goal is provide insight for socially responsible inclined investors, to help them understand what ESG scores tell us and how those scores may effect their overall investment returns."

Jargon To Jackpot: The Financial Impact Of Infusing Pop Culture References In Social Media, Madelynn Solow

Business and Economics Honors Papers

This research explores the impact of incorporating pop culture references in a company's Twitter feed on the company's stock price. Pop culture is integral to people's everyday lives, providing a sense of familiarity and fun between individuals. Many companies have started leveraging pop culture references on social media platforms like Twitter to establish a relatable and engaging connection with diverse consumer demographics. The primary purpose of this research is to investigate whether this strategy is beneficial within the stock market. It is hypothesized that incorporating pop culture references on Twitter can lead to increased sales and higher stock prices, as …

The Effect Of Massage Therapy On Test Anxiety Experienced By Traditional-Aged Undergraduate Business Students, Jorge A. Pazmiño

Graduate Theses, Dissertations, and Capstones

Test anxiety impacts traditional-aged undergraduate business students and influences their academic performance and overall well-being. This study explored the efficacy of massage therapy (MT) as a means of mitigating test anxiety within this demographic. Building on existing literature that addresses the consequences of anxiety and alternative coping mechanisms, this research study focused on MT as a potential strategy for test anxiety management. The study employed the Adult Manifest Anxiety Scale–College Version (AMAS-C) to gather data from participants at a private liberal arts institution in the East South-Central region of the United States. An experimental group received an MT intervention, while …

Green Transition And Financial Stability: The Role Of Green Monetary And Macroprudential Policies And Vouchers, Ying Tung Chan, Maria Teresa Punzi, Hong Zhao

Sim Kee Boon Institute for Financial Economics

This paper analyzes a mix of alternative policies in supporting the green transition and the phase-out of fossil fuels, without compromising financial stability. An environmental dynamic stochastic general equilibrium (E-DSGE) model with two sectors (green and brown) and endogenous default is developed to assess potential climate-induced financial stability threats that can be mainly generated through physical and transition risks mechanism. Those risks are evaluated through a compound capital depreciation shock and a carbon tax shock. The paper offers several findings. First of all, a too stringent carbon tax would increase the medium-term default rate in both sectors, harming financial stability …

“Njangi Never Dies”: The Social Impacts And Non-Financial Benefits Of Njangis In Batoufam And Yaoundé, Cameroon, Georgia Schaefer-Brown

Independent Study Project (ISP) Collection

Rotating Credits and Savings Associations (ROSCAs) are present in much of the developing world and are incredibly common in Cameroon. The financial impacts of ROSCAs have been researched extensively, but there has been less research on the social impacts and non-financial benefits. This research aims to fill this gap and add to the discussion of ROSCAs in Cameroon (called njangis), as well as demonstrate how njangis are social institutions. This project is in the specific context of njangis in Batoufam and Yaoundé, Cameroon. Interviews and observations informed the conclusion that there are extensive social impacts and non-financial benefits within the …

Historical Perspectives In Volatility Forecasting Methods With Machine Learning, Zhiang Qiu, Clemens Kownatzki, Fabien Scalzo, Eun Sang Cha

Seaver College Research And Scholarly Achievement Symposium

Volatility forecasting in the financial market plays a pivotal role across a spectrum of disciplines, such as risk management, option pricing, and market making. However, volatility forecasting is challenging because volatility can only be estimated, and different factors influence volatility, ranging from macroeconomic indicators to investor sentiments. While recent works suggest advances in machine learning and artificial intelligence for volatility forecasting, a comprehensive benchmark of current statistical and learning-based methods for such purposes is lacking. Thus, this paper aims to provide a comprehensive survey of the historical evolution of volatility forecasting with a comparative benchmark of key landmark models. We …

“Safe” Annuity Retirement Products And A Possible Us Retirement Crisis, Thomas E. Lambert, Christopher B. Tobe

Faculty and Staff Scholarship

This paper examines a looming possible crisis in many Americans’ retirement plans due to the proliferation of annuity products in their retirement investment portfolios. As defined benefit pension plans have almost completely disappeared as a means of retirement savings and have been replaced by defined contribution retirement plans over the last 40 to 50 years, a great number of private and public sector defined contribution retirement plans have become laden with insurance contracts called annuities. Of the remaining solid defined benefit plans many, through a process called Pension Risk Transfer are being converted to high-risk single entity annuities. Such products …

Essays On Empirical Asset Pricing, Luying Wang

Dissertations and Theses Collection (Open Access)

The dissertation consists of three chapters on empirical asset pricing. The first chapter examines
the market return predictability of media coverage on climate change. Specifically, we introduce a
comprehensive media climate change concern (ΔCMCCC) index, derived from unexpected climate
change coverage across diverse media channels, including print (newspapers), voice (radio), and
video (television). We show that this index negatively predicts aggregate stock market returns, both
in-sample and out-of-sample, offering potential gains for investors. Our findings emphasize the
media’s influence on market returns through climate change discussions, mainly via the cash-flow
channel. This reveals possible shifts in product demand, while demand …

From Canonical Law To Offshore Finance: Confessing To Priests And Bankers In Luxembourg, Samuel Weeks

Journal of Global Catholicism

In this article, I address two recurring tendencies that I heard during a recent period of research on banking secrecy in Luxembourg. First, my banker interviewees frequently mentioned personal transgressions for why many of their clients hide assets “offshore.” The wrongdoings my interlocutors cited included not only clients’ tax evasion, bankruptcy, and avoidance of liability – but also divorce, adultery, and the existence of out-of-wedlock children. Second, with a similar frequency, my interviewees drew parallels between the secrecy laws covering bankers and those afforded to other professionals in the country. Article 458 of Luxembourg’s Penal Code, dating from the nineteenth …

Legal Risk And Insider Trading, Marcin Kacperczyk, Emiliano Sebastian Pagnotta

Research Collection Lee Kong Chian School Of Business

Do illegal insiders internalize legal risk? We address this question with hand-collected data from 530 SEC (the U.S. Securities and Exchange Commission) investigations. Using two plausibly exogenous shocks to expected penalties, we show that insiders trade less aggressively and earlier and concentrate on tips of greater value when facing a higher risk. The results match the predictions of a model where an insider internalizes the impact of trades on prices and the likelihood of prosecution and anticipates penalties in proportion to trade profits. Our findings lend support to the effectiveness of U.S. regulations' deterrence and the long-standing hypothesis that insider …