Economics Commons^™

Risk Price Variation: The Missing Half Of Empirical Asset Pricing, Andrew John Patton, Brian M. Weller

Research Collection School Of Economics

Equal compensation across assets for the same risk exposures is a bedrock of asset pricing theory and empirics. Yet real-world frictions can violate this equality and create apparently high Sharpe ratio opportunities. We develop new methods for asset pricing with cross-sectional heterogeneity in compensation for risk. We extend k-means clustering to group assets by risk prices and introduce a formal test for whether differences in risk premiums across market segments are too large to occur by chance. We find significant evidence of cross-sectional variation in risk prices for almost all combinations of test assets, factor models, and time periods considered.

Investing In Low-Trust Countries: On The Role Of Social Trust In The Global Mutual Fund Industry, Massimo Massa, Chengwei Wang, Hong Zhang, Jian Zhang

Research Collection Lee Kong Chian School Of Business

We hypothesize that social trust, in mitigating contracting incompleteness, may have an important effect on the activeness and effectiveness of delegated portfolio management. Using a complete sample of worldwide open-end mutual funds, we find that trust is positively associated with the activeness of funds and that trust-related active share delivers superior performance (e.g., approximately 2% per year for cross-border investments). Moreover, "trust in the market" and "trust in managers" play important yet different roles for different types of cross-border delegated portfolio management. Our results suggest that trust acts as a fundamental building block for delegated portfolio management.

Short Selling Etfs, Frank Weikai Li, Qifei Zhu

Research Collection Lee Kong Chian School Of Business

We provide novel evidence that arbitrageurs use exchange-traded funds (ETFs) as an avenue to circumvent short-sale constraints at the stock level. Using a large sample of U.S. equity ETF holdings, we document that shorting activity on ETFs rises with the difficulty of shorting underlying stocks. Stocks heavily shorted via their holding ETFs underperform those that are lightly shorted. The return predictability of ETF shorting is distinct from stock-level shorting measures and is concentrated among stocks that face severe arbitrage constraints. These findings suggest that ETFs allow arbitrageurs to target overpriced stocks that are otherwise difficult to short.

A Panel Clustering Approach To Analyzing Bubble Behavior, Yanbo Liu, Peter C. B. Phillips, Jun Yu

Research Collection School Of Economics

This study provides new mechanisms for identifying and estimating explosive bubbles in mixed-root panel autoregressions with a latent group structure. A post-clustering approach is employed that combines a recursive k-means clustering al-gorithm with panel-data test statistics for testing the presence of explosive roots in time series trajectories. Uniform consistency of the k-means clustering algorithm is established, showing that the post-clustering estimate is asymptotically equivalent to the oracle counterpart that uses the true group identities. Based on the estimated group membership, right-tailed self-normalized t-tests and coefficient-based J-tests, each with pivotal limit distributions, are introduced to detect the explosive roots. The usual …

Waqf Fund Management Through Micro Waqf Bank Program In Indonesia, Fachry Ganiardi Danuwijaya, Nurwahidin M.Ag

Journal of Strategic and Global Studies

Waqf is a muamalah activity that has a very important economic and social role in Islamic history. Waqf is one of solutions to the problem of poverty and social inequality in society. The establishment of the Micro Waqf Bank initiated by the government together with the Financial Services Authority (OJK) has played an important role as one of the new Islamic microfinance institutions in financial inclusion in Indonesia. This paper will discuss how the management of waqf funds through the Islamic Waqf Bank program based on pesantren in efforts to alleviate poverty and social inequality which has become a chronic …

Vector Autoregression Analysis Of The Relationship Between Inflation Rate, Interest Rate, And Exchange Rate To The Jakarta Islamic Index, Ajeng Qurrota A'Yun, Nur Fatwa

Journal of Strategic and Global Studies

ABSTRACT

The Indonesian Sharia Capital Market is an interesting thing to study because based on the 2019 Global Islamic Finance Report (GIFR) report, Indonesia is ranked first in the Global Sharia Financial Market. The Jakarta Islamic Index (JII) is the sharia stock index that was first launched on the Indonesian capital market on July 3, 2000 and only consisted of the 30 most liquid Islamic shares listed on the Indonesia Stock Exchange. This study will try to uncover how the relationship between macroeconomic variables in Indonesia by using Vector Autoregression (VAR) analysis and using monthly secondary data from 2012-2019. VAR …

Cryptocurrency, Decentralized Finance, And The Evolution Of Money: A Transaction Costs Approach, James L. Caton Jr, Cameron Harwick

Journal of New Finance

We leverage a transaction costs narrative to provide a theoretically unified presentation of the evolution of exchange, with the latest evolutionary frontier being cryptocurrency and decentralized finance. We show that with each new development in the evolution of money, the new form or medium of exchange must reduce transaction costs relative to relevant alternatives. The development of blockchain and cryptocurrency reduced the cost of transferring currency by removing the need for a trusted third party to intermediate funds while also providing the benefit of anonymity/pseudonymity. Likewise, decentralized finance does not require a third party to intermediate savings and investment and …

Two-Sided Platform Pricing And Competition Under Realistic Pricing Structure, Tongyao Jiang, Jie Chen, Zhixuan Xiang

Economics and Finance Student Research

This paper is motivated by the prevailing pricing structure and competition in Chinese food-delivery market. Currently, two oligarchs in China’s food-delivery market are Meituan-Dianping Takeout and ELEME Takeout, which accounting for more than 95% of the market share. Both of these platforms charge a percentage commission based on per-transaction price and involve per-agent fee. So far, few research has been found to make analysis under such realistic pricing structure, and we help to fill this gap by developing a model for platform competition based on the model developed by Armstrong. The results we get under the realistic pricing structure and …

Unintended Consequences Of The Dodd–Frank Act On Credit Rating Risk And Corporate Finance, Bina Sharma, Binay K. Adhikari, Anup Agrawal, Bruno R. Arthur, Monika K. Rabarison

School of Economics and Finance Faculty Publications

Prior research finds that Dodd–Frank Act’s regulations on credit rating agencies (CRAs) increase rated firms’ risk of rating downgrades, regardless of their credit quality. Our difference-in-difference estimates suggest that after Dodd–Frank, low-rated firms, which face steep costs from a further downgrade, significantly reduce their debt issuance and investments compared to similar unrated firms. Our results are not driven by credit supply or the financial crisis. They reveal an unintended consequence of Dodd–Frank: Greater regulatory pressure on CRAs leads to negative spillover effects on firms concerned about credit ratings, regardless of their credit quality.

The Curse Of Central Bank Digital Cash, Fernando Ulrich, Leonidas Zelmanovitz

Journal of New Finance

This paper surveys the consequences of Central Bank Digital Currencies (CBDC) on personal liberty and privacy. The Central Banks’ response to the advent of Bitcoin and other cryptocurrencies has profound implications for financial intermediation, monetary and fiscal policies, financial repression, and surveillance. More than allowing for meddling with money, a CBDC may enable meddling with human free will, posing grave threats to the preservation of freedom.

Regulating Bitcoin - On What Grounds?, William J. Luther

Journal of New Finance

This paper assesses costs and benefits of regulating Bitcoin. A review of the main justifications for regulating it shows that scope for efficient regulation is limited. Private governance structures and fee-based services have already begun addressing many of the known problems. Furthermore, since a regulation would discourage use, the costs—in terms of technological gains forgone—are potentially high. Nonetheless, there is scope for regulation, to ensure one has recourse in the event of theft, as long as the following are addressed: 1) provide a clear regulatory framework; 2) supervise transactions to dissuade crime, without compromising the medium; 3) regulate exchanges, rather …

Riders On The Storm: Hurricane Risk And Coastal Insurance And Mitigation Decisions, Harrison Laird, Craig E. Landry, Scott Shonkwiler, Dan Petrolia

Journal of Ocean and Coastal Economics

This paper utilizes cross-sectional, household-level, survey data combined with data on subjective risk perceptions and experimentally derived risk preferences to analyze the decision to insure against hurricane losses. Our sample encompasses 670 individuals in five states of the United States Gulf Coast Region (Texas, Louisiana, Mississippi, Alabama, and Florida). This study represents one of the few papers to examine wind insurance empirically and the only study to examine flood insurance, wind insurance, and mitigation behavior contemporaneously. Because these decisions are closely related, we employ a mixed-process regression, which allows for correlated error terms across a random-effects bivariate probit model (flood/wind …

The Effects Of Environmental Corporate Social Responsibility On Financial Returns, Kevin Acevedo

Theses and Dissertations

A major issue concerning companies is global warming and the impact that firms have on the environment. Companies are taking steps towards sustainability, but it is unclear if sustainable business practices are beneficial to companies’ financial performance. This paper examines the effect of environmental corporate social responsibility (CSR) of Fortune 250 companies on financial performance. The analysis reveals significant effects on financial performance, but they are inconsistent and hard to interpret.

Us Financial Expansions And Exchange Rate Determination, Matthew Brill

Electronic Theses and Dissertations

The purpose of this thesis is to explore how US financial activity influences the exchange rates of foreign nations. Starting off by building on Currency Hierarchy and Minskyan dynamics, I look at how financial cycles generated in the US, the key economy, transmit liquidity towards economies on the periphery. Additionally, I use the increase in shadow banking asset accumulation relative to commercial banking asset accumulation as indicative of financial expansions in the US, and the driving force of financial cycles. Using vector autoregression (VAR) analysis I test the relationships between the ratio of US shadow banking assets relative to commercial …

Food Insecurity, Racial Diversity, And Reservation Land: Relationships With The Credit Security Index, Theodor Gordon, Braden Orr

Initiative for Native Nation Relations

The Fair Housing Act and the Equal Credit Opportunity Act prohibit banks from discriminating based on race, gender, national origin, and other protected categories. Are these laws enough to mitigate the multigenerational impacts of discrimination experienced by these communities? To address this question, this project examined whether unequal access to credit persists in communities on or adjacent to Indian reservations, communities with high levels of racial diversity, and communities where women are a greater percentage of the population than men.

Electing To Take On Risk: Political Uncertainty, Midterm Elections, And The Cross-Section Of Stock Returns, John Thornhill

Mahurin Honors College Capstone Experience/Thesis Projects

The relatively high average returns on stocks are understood to be partly a function of the risk taken on by investors when investing in stocks. One source of this risk is the uncertainty regarding future government policy. This uncertainty, though, is not constant across time; it is greatest around elections, when new policies are unknown and the impact of the policies will be relatively immediate. As uncertainty resolves following the election, risk premia should decrease & prices should rise. Thus, investors who buy stocks during this period of uncertainty should be compensated with higher average returns in the months following …

An Exponential Formula For Random Variables Generated By Multiple Brownian Motions, Maximilian Lawrence Baroi

CGU Theses & Dissertations

The frozen operator has been used to develop Dyson-series like representations for random variables generated by classical Brownian motion, Lévy processes and fractional Brownian with Hurst index greater than 1/2.The relationship between the conditional expectation of a random variable (or fractional conditional expectation in the case of fractional Brownian motion)and that variable's Dyson-series like representation is the exponential formula. These results had not yet been extended to either fractional Brownian motion with Hurst index less than 1/2, or d-dimensional Brownian motion. The former is still out of reach, but we hope our review of stochastic integration for fractional Brownian motion …

The Industry Expertise Of Sell-Side Equity Analysts, Matthew Louis Dearth

Dissertations and Theses Collection (Open Access)

Institutional investors, the most important consumer of analyst research, consistently rank industry knowledge as the most important attribute of analysts. Despite this, little is known about how investors measure industry knowledge since analyst output which can be evaluated objectively is usually associated with firm-level outcomes such as earnings forecasts or price targets. Comprehensive data are recently available for analyst forecasts of key performance indicators (“KPIs”), firm-performance metrics specific to a particular industry. Whereas reactions to earnings forecasts and other firm-level outputs only inform us about analyst skill in firm-level predictions, stock-price reactions to forecast revisions of industryspecific KPIs can proxy …

Bridging Finance Employability Through Competency-Based Education And Andragogy, Joelle Akiki

Datasets

No abstract provided.

Private Equity – The Rescue Or Destruction Of Financially Distressed Investments, Alex Wilson

CMC Senior Theses

This paper investigates the effect PE-backing has on portfolio companies in financial distress. Inspired by the more recent questioning of the morality of the Private Equity industry, this paper analyzes the change in financial health after a PE buyout transaction and directly compares that of financially distressed firms during the same time period that were not PE-backed. This study utilizes a dataset made up of financially distressed, public US firms as of 2009, and assesses the change in Z-score ~10 years after PE investment to determine whether PE-backing has an effect on the change in financial health. The negative coefficient …

Health And Healthcare In The Financial Reporting And Audit Environments, Landi Morris

2022

This dissertation is comprised of three papers that integrate analyses of health, health crises, and healthcare entities in the financial reporting and audit processes. The first paper considers how physical health influences audit outcomes via auditors’ cognitive processing. The second paper considers a global health disruption that impacts the audit process. In the third paper, I examine financial and tax reporting of hospital entities. I describe each paper in further detail below.

The first paper, co-authored with Rani Hoitash, examines whether influenza (flu), a potential threat to the conduct of public company audits, is associated with audit outcomes. Because the …

Three Papers On Sell-Side Financial Analysts, Zheng Liu

2022

This first paper (co-authored) tests the effect of Markets in Financial Instruments Directive II (MiFID II), which entered into force on 3 January 2018, on European-based sell-side financial analysts. We find that MiFID II, in part, unbundles brokers’ execution and research services. We assess the effectiveness of MiFID II in unbundling and find that the trading volume generated by the brokers that issued recommendation revisions declined significantly after the enactment of MiFID II. Further, in addition to a smaller price reaction to EU broker analysts’ recommendation revisions in the post period than in the pre period, these broker analysts appear …

Evaluating The Impact Of Off-Farm Decisions On Federal Government Program Utilization And Financial Success For Missouri's Beginning Farmers, Lyndsey Ann Parker

Graduate Theses/Dissertations

Farmers and ranchers will have to increase production by approximately 70% by the year 2050 according to the American Farm Bureau Federation (2017). People in the agriculture industry face several challenges from start-up costs to limited land availability (Ahearn, 2011). There are federal and state government programs available to assist with some of these challenges but bring their own hardships as well. This study measures off-farm decisions that affect financial performance and utilization of government programs for Missouri’s farmers and ranchers. Three types of financial performance of Missouri farms are prioritized in this study, liquidity (current ratio), solvency (debt-to-asset ratio), …

The Predictive Ability Of Stock Market Factors, Fatma Ahmed, Mohammed Elgammal Elgammal, David Gordon Mcmillan

Economics

Purpose – This paper aims to ask whether a range of stock market factors contain information that is useful to investors by generating a trading rule based on one-step-ahead forecasts from rolling and recursive regressions. Design/methodology/approach – Using USA data across 3,256 firms, the authors estimate stock returns on a range of factors using both fixed-effects panel and individual regressions. The authors use rolling and recursive approaches to generate time-varying coefficients. Subsequently, the authors generate one-step-ahead forecasts for expected returns, simulate a trading strategy and compare its performance with realised returns. Findings – Results from the panel and individual firm …

Modeling Post-Crisis Monetary Policy, James Dean

Graduate Theses, Dissertations, and Problem Reports (ETD)

Chapter 1, co-authored with Scott Schuh, examines whether the Taylor Rule still adequately captures monetary policy despite unconventional monetary policies (UMP) and the policy rate near zero in 2009-2015. We find structural breaks at 2007:Q3 in macro models with a shadow funds rate. Taylor Rule coefficients shift back toward pre-1984 estimates and breaks occurred in non-policy parameters. Results are similar with the effective funds rate, so either breaks are not due to UMP or the shadow rate is an insufficient specification of UMP. Chapter 2 incorporates the term structure and the Fed’s average inflation targeting (AIT) framework into the model …

The Case Of Singapore, Hwee Kwan Chow, Kong Weng Ho

Research Collection School of Economics

The economic impact of the Covid-19 pandemic on Singapore was more severe and protracted than the global financial crisis. Singapore responded with easing of the monetary policy stance, reinforcing financial stability, helping individuals to reduce debt obligations, easing business cashflow constraints, adjusting financial regulatory and supervisory protocols to cope with immediate challenges, and enabling the financial sectors to build long-term capabilities. Fiscal responses were unprecedented with four consecutive budgets and two ministerial statements, initially focusing on immediate assistance in respect of jobs, businesses, households, and later refined to providing more sector-specific assistance as the pandemic evolved with more detailed information …

The Cost-Effectiveness And Feminization Of The Human Papillomavirus Vaccine, Audrey Jammes

Scripps Senior Theses

Approved in 2006, the Human Papillomavirus (HPV) vaccine provided a medical breakthrough in combating cancer by inoculating first female and then male adolescents in 2010. In 2016, a new HPV vaccine was approved for all adolescents. However, it is the most expensive vaccine created in the United States and its female centered prescription led to debates regarding the vaccine’s necessity and risks. For the STS portion of this paper, analysis of the language in the vaccine’s prescriptions from 2006, 2010, and 2016 demonstrates two implicit assumptions regarding female health built into the vaccine’s rollout. Comparison of the two assumptions to …

Fdi Spillover Channels On Chinese Provincial Economic Growth, Yiqing Wang

Chulalongkorn University Theses and Dissertations (Chula ETD)

China has been opened to the world over several years and make great success in economic growth. Most of the previous literatures have analyzed the determinants of economic growth and the effect of FDI on economic growth in China. However, seldom of them analyze the relationship of FDI and its spillover effect on economic growth through R&D and human capital channels using provincial data. The study employs provincial panel data during period 2006-2018 to estimate the relationship of FDI, FDI spillover from R&D and human capital, R&D, and human capital on economic growth under the consideration of Special economic Zone …

Nft-Related Companies: Token Sale Returns, Robert Liu

CMC Senior Theses

Non-fungible tokens (NFTs) have emerged as a new means of digital asset ownership and many companies are building projects that revolve around the technology. These companies are blockchain-based and raise capital for their projects through cryptocurrency token sales, which have become a new mechanism of entrepreneurial finance. In a sample of 62 NFT-related companies, I examine which company, fundraising, and token sale process characteristics are associated with the performance of 7-day and 60-day market returns after a token’s public listing. A multivariate regression analysis finds that the total amount of capital raised before a token launch has a negative relationship …

The Rising Power Of The Individual Investor: How Social Media Sentiments And User Activity Impact Stock Price Volatility And Trading Volume, Nandini Jayaram

CMC Senior Theses

This paper investigates the relationship between social media sentiments and user activity on the ability of online platforms like Robinhood, Reddit, and Twitter to drive volatility in stock returns and trading volume of shares. The research contributes to the existing literature by studying the potential power of social media communities to influence the stock market parameters. The dataset includes information for several stocks of daily Robinhood users, mentions in r/wallstreetbets, number of Twitter followers, as well as closing price and trading volume data. Using a fixed effects panel data model, the regressions yield statistically significant results that indicate higher WallStreetBets …