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Finance and Financial Management Commons™

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2017

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Institution
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Articles 421 - 426 of 426

Full-Text Articles in Finance and Financial Management

Pricing Kernel Monotonicity And Conditional Information, Matthew Linn, Sophie Shive, Tyler Shumway Jan 2017

Pricing Kernel Monotonicity And Conditional Information, Matthew Linn, Sophie Shive, Tyler Shumway

Faculty Publications

A large literature finds evidence that pricing kernels nonparametrically estimated from option prices and historical returns are not monotonically decreasing in market index returns. We argue that existing estimation methods are inconsistent and propose a new nonparametric estimator of the pricing kernel that reflects the information available to investors who set asset prices. In simulations, the estimator outperforms existing techniques. Our empirical estimates using S&P 500 index option data from 1996 to 2014 and FTSE 100 index option data from 2002 to 2014 suggest that the "pricing kernel puzzle'' is due to flaws in existing estimators rather than a behavioral …

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Bankruptcy Spillovers, Shai Bernstein, Emanuele Colonnelli, Xavier Giroud, Benjamin Iverson Jan 2017

Bankruptcy Spillovers, Shai Bernstein, Emanuele Colonnelli, Xavier Giroud, Benjamin Iverson

Faculty Publications

How do different bankruptcy approaches affect the local economy? Using U.S. Census microdata at the establishment level, we explore the spillover effects of reorganization and liquidation on geographically proximate firms. We exploit the random assignment of bankruptcy judges as a source of exogenous variation in the probability of liquidation. We find that within a five-year period, employment declines substantially in the immediate neighborhood of the liquidated establishments, relative to reorganized establishments. Most of the decline is due to lower growth of existing establishments and, to a lesser extent, reduced entry into the area. The spillover effects are highly localized and …

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Behaviorally Informed Policies For Household Financial Decisionmaking, Brigitte C. Madrian, Hal E. Hershfield, Abigail B. Sussman, Saurabh Bhargava, Jeremy Burke, Scott A. Huettel, Julian Jamison, Eric J. Johnson, John G. Lynch, Stephan Meier, Scott Rick, Suzanne B. Shu Jan 2017

Behaviorally Informed Policies For Household Financial Decisionmaking, Brigitte C. Madrian, Hal E. Hershfield, Abigail B. Sussman, Saurabh Bhargava, Jeremy Burke, Scott A. Huettel, Julian Jamison, Eric J. Johnson, John G. Lynch, Stephan Meier, Scott Rick, Suzanne B. Shu

Faculty Publications

Low incomes, limited financial literacy, fraud, and deception are just a few of the many intractable economic and social factors that contribute to the financial difficulties that households face today. Addressing these issues directly is difficult and costly. But poor financial outcomes also result from systematic psychological tendencies, including imperfect optimization, biased judgments and preferences, and susceptibility to influence by the actions and opinions of others. Some of these psychological tendencies and the problems they cause may be countered by policies and interventions that are both low cost and scalable. We detail the ways that these behavioral factors contribute to …

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Equity Issuance Of Health Care Firms After The 2007 Market Crash And The 2010 Affordable Ca1·E Act, James C. Brau, J. Troy Carpenter Jan 2017

Equity Issuance Of Health Care Firms After The 2007 Market Crash And The 2010 Affordable Ca1·E Act, James C. Brau, J. Troy Carpenter

Faculty Publications

We provide an empirical analysis of 195 initial public offerings (IPOs) and 547 seasoned equity offerings (SEOs) of health care firms that issued between 2008 and October 2016. This period represents eight years after the US financial crisis of late 2007 and also includes all equity issuances since the passage of the Affordable Care Act of late 2010. We compare and contrast our results with those of Brau and Holloway (2009) who study health care equity issuances from 1970-2008. We find that global health care issues in both the IPO and SEO markets are significantly over-represented in both the post-crash …

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Final Demand For Structured Finance Securities, Craig B. Merrill, Taylor Nadauld, Philip E. Strahan Jan 2017

Final Demand For Structured Finance Securities, Craig B. Merrill, Taylor Nadauld, Philip E. Strahan

Faculty Publications

Structured finance boomed during the run-up to the 2008 financial crisis. Highly rated, structured securities offered higher yield than other similarly rated bonds because of their concentration of systematic risk, but regulatory capital requirements did not account for this risk. As a result, regulated entities facing capital constraints had an incentive to invest in them. We show that life insurance companies exposed to unrealized losses from low interest rates in the early 2000s increased their holdings of highly rated securitized assets, consistent with regulatory arbitrage distorting the demand to hold these assets.

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Liquidity In Retirement Savings Systems: An International Comparison, John Beshears, James J. Choi, Joshua Hurwitz, David Laibson, Brigitte C. Madrian Jan 2017

Liquidity In Retirement Savings Systems: An International Comparison, John Beshears, James J. Choi, Joshua Hurwitz, David Laibson, Brigitte C. Madrian

Faculty Publications

What is the socially optimal level of liquidity in a retirement savings system? Liquid retirement savings are desirable because liquidity enables agents to flexibly respond to preretirement events that raise the marginal utility of consumption, like income shocks.1 On the other hand, preretirement liquidity is undesirable when it leads to undersaving arising from, for example, planning mistakes or self- control problems.2

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