Finance and Financial Management Commons^™

The Planned Reforms Of The American And European Deposit Insurance Systems: Similarities And Differences, Konrad Szeląg

Journal of Banking and Financial Economics

Last year, at around the same time, two reforms of deposit insurance systems were announced – one in the United States and the other in the European Union. The American proposal of the reform was triggered by the banking crisis of March 2023 (bank runs and failures) and it was put forward by the Federal Deposit Insurance Corporation in May 2023. In Europe, the European Commission published in April 2023 its legislative proposal to reform the current EU framework for crisis management in the banking sector (including both deposit insurance and bank resolution). The EU proposal for the reform was …

Journal Of Banking And Financial Economics 2024, 2(22)

Journal of Banking and Financial Economics

Journal of Banking and Financial Economics 2024, 2(22)

Government Subsidy In The U.S. Mortgage Market: A Structural Analysis With Bunching, Bowen Shi, Yunhui Zhao

Journal of Banking and Financial Economics

It is crucial to better understand the U.S. residential mortgage market, where the global financial crisis originated. In this paper, we develop an infinite-horizon continuous-time structural model to study the effects of the longstanding and widespread Government-Sponsored Enterprises (GSEs) mortgage default insurance subsidy on U.S. mortgage underwriters’ equilibrium lending behaviour. Despite the richness of the model, we obtain analytical solutions for the equilibrium loan size and interest rate. We then employ truncated loan-level data to estimate the subsidy’s magnitude using maximum likelihood by exploiting a distinctive data feature that many borrowers bunch at the subsidy eligibility cutoff. We find that …

Optimal Empirical Strategy For Deriving The Spot Curve: The Case Of Poland, Piotr Bartkiewicz

Journal of Banking and Financial Economics

We use a proprietary dataset of daily quotations of individual bonds from the period 2005–2018 to assess the appropriateness of three common yield curve intrapolation methods: Nelson-Siegel (NS), Diebold-Li (DL) and cubic splines. Spot (zero-coupon) yield curves derived from the methods are used to price all securities in the sample in both in-sample and out-of-sample settings. The results highlight trade-offs inherent in any empirical strategy: between flexibility and in-sample fit, between overall fit and fit in particular segments of the curve. We look at both in-sample and out-of-sample. Cubic splines offer the best in-sample fit, but out-of-sample results indicate that …

Indirect Measure Of Financial Constraints: Evidence From Unquoted Innovative Smes, Katarzyna Prędkiewicz

Journal of Banking and Financial Economics

This paper examines whether companies’ innovativeness affects the availability of capital and, therefore, whether this group is financially constrained. It uses an objective, indirect way of measuring financial constraints based on the assumption that financially restricted firms only invest when internal cash flow allows them to do so. Therefore, the research was based on the investment-cash flow equation, more precisely the adjusted ECM model adapted to the SME sector. The companies’ innovativeness was measured based on a proprietary synthetic indicator covering a broad range of information on innovation activity. The research was conducted on a sample of 403 firms, including …

The Impact Of Expansionary Monetary And Fiscal Policy On Firm Performance: A Comparative Analysis Of Pre, During, And Post-Covid Periods, Kofi O. Adansi Pipim

Doctoral Dissertations (DBA)

In this research, we use panel data regression analysis to investigate the impact of expansionary monetary and fiscal policies on firm performance in pre (2017 to 2019), during (2020 to 2021), and post COVID-19 (2022 to 2023) periods. We combine quarterly data sourced from the Wharton Research Data Services (WRDS)-Compustat and the St Louis Federal Reserve Economic Data (FRED) databases. After combining all data, our final sample consists of 3,226 publicly listed firms in the United States. We test the hypothesis that the economic and fiscal policy interventions instituted by the Federal Reserve (Fed) significantly affected firm performance during and …

Relative Impact Of Economic Policy Uncertainty And Mortgage Rates On The Supply Of New Homes For Sale In The United States, Jaclyn M. Devylder-Gaidish

Doctoral Dissertations (DBA)

This paper analyzes the changeable impact of economic policy uncertainty and mortgage rates on the supply of new homes for sale in the United States. The homes supply is proxied by the ratio of new homes for sale to new houses sold. The analysis utilizes monthly data from January 1985 to November 2023. The relationship is assessed using least square regression with second order autoregressive correction as well as Bai-Perron multiple breakpoint regression for structural breaks and Markov switching tests for state-dependency. The results demonstrate a significant direct correlation between economic policy uncertainty and housing supply, but only during the …

Economic Policy Uncertainty And Its Impact On Unemployment Rates Among U.S. Ethnic Groups, Melody Shirley Nimoh

Doctoral Dissertations (DBA)

The study aims to investigate the transmission of Economic Policy Uncertainty (EPU) shocks on unemployment rates across different ethnic groups in the United States. The research employs econometric analysis such as regression modeling to determine the relationship between EPU and unemployment rates among African American, Hispanic or Latino American, and White American communities. The study estimates coefficient estimates for the lagged change in EPU and its impact on respective unemployment rates for each ethnic group. This shows that there are statistically significant positive relationships between EPU shocks and unemployment rates across all ethnic groups. An increase in EPU leads to …

Justifying The Cost Of Implementing Contactless Travel In Non-Primary Airports: A European Perspective, Sumeet Hassan Anwar Mr., Humna Asad Miss

International Journal of Aviation, Aeronautics, and Aerospace

In the wake of the COVID-19 pandemic, the aviation industry faces an unprecedented push towards digital transformation. This paper delves into the economic, operational, and safety imperatives of implementing contactless travel solutions in Europe's non-primary airports. By juxtaposing the substantial upfront costs against the long-term operational savings and improved passenger experience, the study presents a compelling financial justification for such investments. Drawing on case studies and current trends, the research demonstrates that, despite initial expenditures, the adoption of contactless technology is a prudent strategy that aligns with evolving consumer preferences and the heightened need for efficiency and safety. The paper …

Revisiting The Effect Of Bank Deregulation On Income Inequality, William B. Hankins, Anna-Leigh Stone, Gary Hoover

Research, Publications & Creative Work

We use recently developed difference-in-differences methodologies and a panel of U.S. states over the period 1960 – 2015 to examine how bank branching deregulation impacted state-level income inequality. Existing research relying on traditional two-way fixed effects (TWFE) estimates and event studies provide mixed results. However, these results potentially suffer from biases due to treatment effect heterogeneity and the failure to account for multiple related treatments. Using bias-corrected difference-in-differences procedures and properly accounting for the timing of treatment, we find evidence that the combined effect of intrastate and interstate banking deregulation increased the income share of the top 10%, 5%, and …

A Profitability Analysis Of Products And Services In The Biotechnology Industry, Olivia Halverson

Senior Honors Theses and Projects

This paper will discuss the various ways to address profitability within firms and compare the profitability of three firms within the same industry. It will also touch upon rebranding within firms, the differences between brand and reputation, and how companies decide to use these leverages. Within, the paper dives into one successful account of a rebranding and its positive or negative effects in the long run. This will mainly be reflected in the literary review. In the profitability review, I will review three comparable companies within the biotechnology industry, including two public companies and one owned by a private equity …

Climate Change Concerns And Mortgage Lending, Tinghua Duan, Frank Weikai Li

Research Collection Lee Kong Chian School Of Business

We examine whether beliefs about climate change affect loan officers’ mortgage lending decisions. We show that abnormally high local temperature leads to elevated attention to and belief in climate change in a region. Loan officers approve fewer mortgage applications and originate lower amounts of loans in abnormally warm weather. This effect is stronger among counties heavily exposed to the risk of sea-level rise, during periods of heightened public attention to climate change, and for loans originated by small lenders. Additional tests suggest that the negative relation between temperature and approval rate is not fully explained by changes in local economic …

Shadow Bank, Risk-Taking, And Real Estate Financing: Evidence From The Online Loan Market, Xiaoying Deng, Chong Liu, Eng Seow Ong

Research Collection Lee Kong Chian School Of Business

This paper examines whether and how individual risk-taking behavior affects real estate financing through shadow banks. Using the loan data from an online platform in China, we show that riskier households tend to employ online loans to meet the increasing down-payment in their home purchase. Individual investors are likely to fund riskier real estate loans with higher expected returns. Real estate loans experience higher ex-post default rates than other types of loans. The effect is more pronounced during the period of credit constraints.

Derivatives And Market (Il)Liquidity, Shiyang Huang, Bart Zhou Yueshen, Cheng Zhang

Research Collection Lee Kong Chian School Of Business

We study how derivatives (with nonlinear payoffs) affect the underlying assets liquidity. In a rational expectations equilibrium, informed investors expect low conditional volatility and sell derivatives to the others. These derivative trades affect different investors utility differently, possibly amplifying liquidity risk. As investors delta hedge their derivative positions, price impact in the underlying drops, suggesting improved liquidity, because informed trading is diluted. In contrast, effects on price reversal are ambiguous, depending on investors relative delta hedging sensitivity, i.e., the gamma of the derivatives. The model cautions of potential disconnections between illiquidity measures and liquidity risk premium due to derivatives trading.

Capm With Independent Regimes For The Alpha And Beta And An Application In Portfolio Optimization, Suwapith Payakapong

Chulalongkorn University Theses and Dissertations (Chula ETD)

We develop a regime-dependent Capital Asset Pricing Model (CAPM), in which alpha and beta follow independent regime-switching processes, and use it in the mean-variance optimization (MVO) framework. Although the model does not significantly improve predictive metrics, we find that the predicted returns from the model have a larger rank correlation with the realized future returns than those from the historical mean and the common-regime CAPM, which assumes shared regime shifts between alpha and beta. The mean-variance portfolio derived from our model yields a superior out-of-sample risk-adjusted return compared to the portfolios derived from the equal-weight strategy, market index replication, the …

A Panel Partial Break Model For Forecasting Stock Returns With Parameter Instability, Nuttapat Bumrungrat

Chulalongkorn University Theses and Dissertations (Chula ETD)

Predicting stock returns is one of the most fascinating problems in finance. However, predicting stock returns is also one of the most challenging problems due to the instability and noisy nature of stock returns. One of the promising directions to handle both problems is to use a panel break model. Recently, a panel common break model has been proposed and shown to generate superior predictive performance. However, the model assumes that every parameter breaks simultaneously, which is not aligned with empirical data. In this article, we propose a novel panel break model that addresses the main limitation of the common …

Option Pricing Based On A Stochastic Volatility With Co-Jump Model And Application In Thai Market, Lu Tang

Chulalongkorn University Theses and Dissertations (Chula ETD)

The correlated jumps in returns and volatility serve different, but complementary purposes in studying asset dynamic properties. In this paper, we choose Heston’s square-root stochastic volatility model, simultaneously incorporating jumps in returns and volatility, and propose a closed-form solution for European call option pricing. Applied to SET50 index in Thailand stock market, comparisons between the stochastic volatility with co-jump (SVCJ) model and the classical stochastic volatility (Heston) model are made to emphasize the significance of contemporaneous jumps appeared in asset dynamics. Empirical research demonstrates the superiority of SVCJ model in both out-of-sample pricing and hedging performance.

Absentee Ownership And Rental Affordability: Evidence From Commuting Zones, Luke Petach

Funded Scholarship

In this paper, we examine the intersection of financialization, wealth inequality, and the housing market in the United States with an emphasis on the relationship between absentee ownership and declining rental affordability. At the same time as financialization has increasingly transformed the market for residential real estate into a vehicle for financial speculation, households at the bottom of the income distribution have been disproportionately affected by rising rents and declining housing affordability. Using data from the decennial Census and the American Community Survey from 1990 to 2020, we investigate the link between absentee ownership and rental affordability across US commuting …

Market For Manipulable Information, Hui Chen, Jian Sun

Research Collection Lee Kong Chian School Of Business

We study how investors, firms, and information sellers interact in a market with manipulable information. To better predict the firm characteristics they care about, investors can buy a score from a monopolistic information seller, which aggregates signals that are subject to firm manipulation. The average degree of signal manipulability has no effect on the equilibrium, while the uncertainty about manipulability becomes a new source of noise. Its contribution depends on firms' incentive to manipulate the signals, which in turn depends on the equilibrium price sensitivity to the score. The optimal design of the score weighs signal precision against the endogenous …

Understanding The Impact Of Dual Shock On Kuwait Stock Market, Talal A.N.M.S. Alotaibi

Doctoral

The emergence of the COVID-19 pandemic has caused financial markets to suffer historic losses during the first quarter of 2020 at unseen levels since the crisis of the futures markets in 1987. In January 2020, the World Health Organisation officially declared the pandemic, bringing with it significant uncertainty levels to the global economy. The COVID-19 pandemic affected global markets parallel to a simultaneous shock from the Saudi Arabian and Russian oil price wars. As the worldwide health crisis escalated, governments worldwide were forced to take measures that led to economic lockdowns, leading to significant disruption of global supply chains and …

The Mediating Effect Of Financial Literacy On Blockchain Technology Application And Financial Risk: Insight From Ghanaian Professionals Toward Policy Recommendations, Maxwell Okpoti Mensah, Williams Kwasi Peprah [email protected]

Faculty Publications

This study explores the mediating effect of financial literacy on the relationship between blockchain technology application and financial risk among financial institution professionals in Ghana. Utilizing a correlational research design, data were collected from a sample of 336 professionals through a self-constructed Likert-scale questionnaire. The analysis was conducted using path analysis and mediation techniques. The findings reveal that financial literacy had a significant partial mediating effect between blockchain technology application and financial risk, accounting for 26.0% of the total effect. The direct negative effect of blockchain technology applications on financial risk also remained significant, highlighting the independent contribution of blockchain …

The Efects Of Cryptocurrency Wealth On Household Consumption And Investment, Darren Aiello, Scott R. Baker, Tetyana Balyuk, Marco Di Maggio, Mark Johnson, Jason Kotter

Faculty Publications

We use bank transaction data from millions of U.S. households to:

1. Characterize retail crypto investing
2. Examine the efect of crypto wealth on consumption and investment behavior
3. Zoom in on the efect of crypto wealth on housing spending
4. Document spillovers of crypto wealth to the local economy

2024 Finance Calendar, Amanda Christensen, Melanie Jewkes, Andrea Schmutz, Vincenza Vicari-Bentley, Kelan Combe, Rochelle Allen, Jenny Weller, Lauren Olsen, Rachel Booth

All Current Publications

The 2024 Finance Calendar outlines monthly steps to improve your personal finances over the course of the year.

Unattended In-Home Delivery Under Varying Scenarios Of Technology-Enabled Anonymity, James C. Brau, Hugo A. Decampos

Faculty Publications

Whereas many companies have explored attended in-home delivery as one solution to challenges associated with last mile delivery, few have explored unattended in-home delivery. This paper examines consumer willingness to allow unattended in-home delivery under various scenarios of anonymity. Specifically, we study how blockchain-enabled anonymity of sellers, delivery companies, and consumers can influence consumer willingness to allow unattended in-home delivery of a nutritional product in this last mile service triad. Hypotheses build on agency theory and the potential for information asymmetry and opportunism. The analyses are based on data from 784 responses to an online survey of end-consumers who were …