Economics Commons^™

Teres: Tail Event Risk Expectile Shortfall, Andrija Mihoci, Wolfgang Karl Hardle, Cathy Yi-Hsuan Chen

Sim Kee Boon Institute for Financial Economics

We propose a generalized risk measure for expectile-based expected shortfall estimation. The generalization is designed with a mixture of Gaussian and Laplace densities. Our plug-in estimator is derived from an analytic relationship between expectiles and expected shortfall. We investigate the sensitivity and robustness of the expected shortfall to the underlying mixture parameter specification and the risk level. Empirical results from the US, German and UK stock markets and for selected NASDAQ blue chip companies indicate that expected shortfall can be successfully estimated using the proposed method on a monthly, weekly, daily and intra-day basis using a 1-year or 1-day time …

Tournament-Based Incentives And Mergers And Acquisitions, Nam H. Nguyen, Hieu V. Phan, Hung V. Phan, Dung T. T. Tran, Hong Vo

School of Economics and Finance Faculty Publications

This research examines the relation between tournament-based incentives, which are proxied by the difference between a firm’s CEO pay and the median pay of the senior managers, and mergers and acquisitions (M&As). We find that tournament-based incentives are positively related to firm acquisitiveness and acquiring firms’ stock and operating performance. Further analysis indicates that positive acquisition performance increases the likelihood of the CEO being promoted from inside the acquiring firm. Our evidence is consistent with the view that tournament-based incentives motivate acquiring firms’ managers to make greater efforts and take more risk that result in superior acquisition performance.

Human Flourishing And The Subjective Dimension Of Work, Geoffrey Friesen

Department of Finance: Faculty Publications

This essay considers the Christian understanding of the subjective dimension of human work and the implications for economics, finance, and the modern firm. The biblical account of people profoundly captures the fullness of human nature and the role of work and economy in developing the full person. People’s reality is both individual and collective, encompassing their subjective interior and objective exterior dimensions of reality. This issue is important because economic models affect economic decisions, and these decisions help shape social reality. Current economic and financial models are problematic because they are self-limiting: They close off certain outcomes by assuming they …

Does Early Access To Pension Wealth Improve Health?, Seonghoon Kim, Kanghyock Koh

Research Collection School Of Economics

We examine the health impacts of early access to public pension wealth by exploiting a unique policy in Singapore allowing individuals to withdraw a proportion of their pension savings after their 55th birthday. For the identification, we employ a regression discontinuity design by comparing individuals before and after their 55th birthday. To address anticipated and lagged health impacts, we adopt the donut regression discontinuity approach. Using nationally representative monthly panel data, we find that early access to pension wealth improves self‐reported overall health.

Financial Knowledge And Portfolio Complexity In Singapore, Benedict S. K. Koh, Olivia S. Mitchell, Susann Rohwedder

Research Collection Lee Kong Chian School Of Business

Financial literacy in Singapore has not been analyzed in much detail, despite the fact that this is one of the world’s most rapidly aging nations. Using the Singapore Life Panel®, we explore older Singaporeans’ levels of financial knowledge and compare them to those observed in the United States. We assess portfolio complexity for these older households, to examine how financial literacy is related to outcomes of interest. We show that older Singaporeans’ levels of financial literacy are comparable overall to those in the United States, even though older Singaporeans score slightly lower on some dimensions (knowledge of interest and inflation), …

Financial Literacy And French Behaviour On The Stock Market, Luc Arrondel

Numeracy

This article looks back over the different dimensions of financial literacy: theoretical, methodological, empirical and political. The theoretical foundations of the notion of financial literacy are presented with reference to recent contributions by psychological or behavioural economics: “household finance” refers to the concept of financial literacy based on the empirical dead-ends of standard saver theory. This raises the fundamental question as to how to measure and evaluate financial literacy. Here, we are especially interested in the empirical robustness of a standard measure of financial literacy based on three straightforward questions (interest calculations, notion of inflation and risk diversification). Is this …

Socially Useless? The Crucial Contribution Of Finance To Economic Life, Philip Booth, Diego Zuluaga

Journal of New Finance

The value of financial markets is under-appreciated. Financial markets perform fundamental functions which are vital in reducing transactions costs in the economy for businesses and households. Without well-functioning financial markets, business would find if much more costly to raise capital and ordinary households would find retirement, protection against everyday risks and day-to-day transactions impossible. Those who criticise financial markets ignore the breadth of their functions and focus on a narrow range of activities. However, even activities such as trading, speculation and so on have social value. The evidence that they cause social problems appears more circumstantial when put under closer …

Brand Equity, Earnings Management, And Financial Reporting Irregularities, Ghada M. Ismail, Fariz Huseynov, Pankaj K. Jain, Thomas H. Mcinish

School of Economics and Finance Faculty Publications

Owning valuable brands enhances the financial well-being of firms not only through increased revenues and profitability but also by mitigating agency problems, earnings management, and financial reporting irregularities. Firms with high brand equity are less likely to have income-inflating discretionary accruals, announce earnings restatements, or experience SEC investigations. Brand equity reduces the likelihood of manipulation through incentive and opportunity channels, which we capture in CEO characteristics and compensation, and corporate governance measures. Brand equity reduces the likelihood of financial reporting irregularities more for durable goods firms and firms with shorter-tenured CEOs, as the latter are most vulnerable to performance pressures.

Family Matters: Decade Review From Journal Of Family And Economic Issues, Heather H. Kelly, Ashley B. Lebaron, E. Jeffery Hill

Faculty Publications

This article reviews research regarding economic influences on a variety of family matters published in Journal of Family and Economic Issues from 2010 to 2019. As finances permeate nearly every facet of everyday life, scholarly research related to finances and family issues has spanned a wide array of topics. We briefly review research focused on the following 11 areas related to finances and family matters: (a) family formation decisions, (b) gender and relational power in family finances and relationships, (c) finances and fathers, (d) finances and mothers, (e) finances and parenting, (f) finances and elderly family members, (g) finances and …

Microfinance Credit And Micro Enterprise Development In The Agricultural Sub-Sector Of The Nigerian Economy, Ademola A. Adebisi

Bullion

This study seeks to examine the relevance of micro financing credit loans to Agri-business in Lagos State, Nigeria - the development of Agricultural sub-sector centering the attention to the contribution of the institutions involved in the provision of these credits.It makes a critical review of the performance of microfinance institutions in Nigeria, based on a survey of the Agricultural Credit Guarantee Scheme Fund (a microfinance scheme established to boost the agricultural sub-sector of Nigeria). The study examines the scheme – the institutions involved and analyses the performance using the outreach paradigm via the mixed approach research techniques – qualitative and …

An Adjusted Classical Model For Interest-Free Financing In Nigeria, Abdul Ibrahim, Habibu M-G Salihu

Bullion

This paper examines an interest-free macroeconomic models by adjusting the classical model into an interest-free macroeconomic model as a basis for developing a comparative analysis. The study adopted a descriptive approach by describing the mechanics for obtaining an interest-free macroeconomic model from a prototype western model. It was observed that most Muslims in Nigeria are interested in adopting interest free financing under the western system. This is a reason for converting a western model into an interest-free model.This conversion allows policy-makers to gain useful insight in the process in transition from the western system to the Islamic system. The Islamic …

The Role Of The Central Bank Of Nigeria Analytical Balance Sheet In Monetary Policy Implementation, Salihu Audu

Bullion

This paper examines the role of the Central Bank of Nigeria (CBN) analytical balance sheet in the implementation of monetary policy. The Bank currently uses a mix of both quantity-based (monetary base) and price-based (short-term interest rate) nominal anchors. However, irrespective of the targeting regime adopted, both depends on the central bank's ability to manage its balance sheet given the huge fiscal influence on banking system liquidity in Nigeria. Therefore, the paper analyses the various liquidity management operations of the CBN and their implications for the size and structure of the analytical balance sheet.

Firm Survival Of Listed Nigerian Financial Institutions: A Consolidated Methods Approach, Sunusi Garba, Adamu M. Abubakar, Ahmad I. Mohammed, Mohammed S. Damamisau

Bullion

The firm's survival is regarded as an essential element usually used by the capital market participants in making vital decisions. This study examines the combined roles of bankruptcy, earnings management, and profitability in explaining a firm's survival in the listed Nigerian financial institutions. To achieve this, a descriptive research design is adopted and data were generated from databases of the listed companies in the Nigerian Stock Exchange for the period 2006 to 2015. Panel data analysis was employed in analysing collected data of the sampled 29 financial institutions in the Nigerian financial sector. The study found that most of the …

Fiscal And Monetary Policies And Stock Market, Ilhami Gunduz

Dissertations, Theses, and Capstone Projects

This dissertation consists of three chapters.

The first chapter analyzes the stock market transmission channel of the monetary policy of the Turkish economy not only at the aggregate but also at the sectoral level in a structural vector autoregression (SVAR) framework. I adopt alternative variables as a policy instrument. When the spread is used as a policy instrument, I find that contractionary monetary policy has a significant negative effect on both output and the price level and it appreciates the Turkish Lira. In addition, tight monetary policy reduces both aggregate and sectoral market returns. Hence, the results suggest that policymakers …

Do Short Sellers Use Textual Information? Evidence From Annual Reports, Hung Wan Kot, Frank Weikai Li, Ming Liu, K.C. John Wei

Research Collection Lee Kong Chian School Of Business

We examine short-sellers’ use of textual information in annual reports for shorting activities. We find that more uncertainty and negative words in annual reports are associated with greater abnormal shorting volume. Short selling motivated by textual information negatively predicts stock price reaction around the filing date of 10-K reports. We further provide some evidence that textual information used by short-sellers are related to revisions of analysts’ earnings forecasts, changes in firm fundamentals, and increasing crash risk subsequently. Our results suggest that textual information in annual reports forms an important part of short-sellers’ information advantage.

Alternative Economic Indicators, C. James Hueng, Editor

Upjohn Press

Policymakers and business practitioners are eager to gain access to reliable information on the state of the economy for timely decision making. More so now than ever. Traditional economic indicators have been criticized for delayed reporting, out-of-date methodology, and neglecting some aspects of the economy. Recent advances in economic theory, econometrics, and information technology have fueled research in building broader, more accurate, and higher-frequency economic indicators. This volume contains contributions from a group of prominent economists who address alternative economic indicators, including indicators in the financial market, indicators for business cycles, and indicators of economic uncertainty.

Stock Market Transmission Channel Of Monetary Policy: Empirical Evidence From Turkey, Ilhami Gunduz

Publications and Research

Monetary policy is one of the instruments that policymakers use to provide both sustainable economic growth and price stability. In this study, I analyze the stock market transmission channel of the monetary policy of the Turkish economy not only at the aggregate but also at the sectoral level in a structural vector autoregression (SVAR) framework. I adopt alternative variables as a policy instrument. When the spread is used as a policy instrument, I find that contractionary monetary policy has a significant negative effect on both output and the price level, and it appreciates the Turkish Lira. Besides, the tight monetary …

New Kid On The Blockchain: The Rise Of Cryptocurrency In The Global Arena: Humanitarian Usage With Blockchain, Rhonda S. Binda

Open Educational Resources

In 2018, the world was shaken by the fast rise of Bitcoin and other cryptocurrencies that use a decentralized, blockchain technology for payment transfers outside of the traditional banking system. The potential impact this alternative form of banking could have in the medium and long term on the over 2 billion people globally unbanked is tremendous. Additionally, blockchain itself is being used for value transfer combined with bio and genetic tagging technologies in refugee camps for example, bringing to rise a new era where technology for development is disrupting education, healthcare and security programs globally.

Empirical Asset Pricing Of Saudi Stock Market, Muath Alolayan

LSU New Orleans Theses and Dissertations

This essay tests the differences in equity returns between Islamic and conventional firms using the Capital Asset Pricing Model (CAPM), Fama & French three factors model, and Fama & French four factors model. We us the Fama-Macbeth methodology to test the adequacy and explanatory power of the various model specifications. We find that the CAPM can better predict the factors for Islamic firms but not the conventional firms. There was a failure of Fama and French three factors and four factors model for Islamic, conventional and the total market. The estimated Beta is very close to the market for the …

Chinese Equity Market Pricing And Loan Sales Discount In Us Banking, Yichi Zhang

LSU New Orleans Theses and Dissertations

Abstract

In the recent decades, the Fama–French three-factor (1992, 1993, 1996) and five-factor (2015) models become the most widely used asset pricing models in the world. The U.S. (i.e., developed financial market) country-specific 2 additional factors in the 5-factor model, RMW and CMA or profitability and investment premium, empirically cannot further capture the return variation of the classic three-factor/characteristic in China’s stock market (i.e., developing financial markets). In China, based on our result, therefore, the classic three-factor outperforms the five-factor model. We do not presume that firms in different countries share the same features. Following Liu, Stambaugh, and Yuan (2019), …

We Can Use Machine Learning To Determine Which Financial Ratios Are Best For Investors, Collin Butterfield

All Graduate Plan B and other Reports, Spring 1920 to Spring 2023

This study develops and tests the hypothesis that the machine learning algorithm, Random Forests, can be used to systematically pick financial ratios that would be best for indicating market trends and be used subsequently to perform comparable analysis to speculate whether a firm is over- or under-valued. Results show that financial ratio selection differs depending on the market sector to which a firm pertains. We examine the 11 financial sectors representing the key areas of the economy. We also look at four possible trading strategies that an investor could have: month-long, quarter-long, semi-annual, and annual to capture differing trading horizons.

Why Do Nonprofits Fail? A Quantitative Study Of Form 990 Information In The Years Preceding Closure, Mackenzie Arbogust

School of Public Service Theses & Dissertations

Nonprofit organizations are an important piece of the community and economy in the United States. Each year, nonprofit organizations close their doors and stop providing services to the community. While there are large amounts of literature around financial health and vulnerability and governance best practices of nonprofit organizations, few of the studies have ever looked specifically at failed organizations. In general, the end stages of the life cycle of nonprofit organizations have not been well studied and are not well understood. This study draws on resource dependency theory and institutional theory to identify financial and governance factors that may serve …

Pricing Climate Change Risk In Corporate Bonds, Elsa Allman

Publications and Research

This paper examines whether corporate bondholders price climate change risk. I find that firms exposed to higher sea level rise (SLR) across U.S. branch locations pay a premium when issuing bonds. Specifically, a one standard deviation increase in a firm’s SLR exposure is associated with a 2% increase of average yield spreads equivalent to 4 basis points. This effect is more pronounced for firms in industries vulnerable to extreme weather conditions, which are less spatially diversified, and issuing bonds with maturities ranging from 5 to 10 years. In addition, I find no evidence that credit rating agencies account for SLR …

Unknown Latent Structure And Inefficiency In Panel Stochastic Frontier Models, Levent Kutlu, Kien C. Tran, Mike G. Tsionas

School of Economics and Finance Faculty Publications

This paper extends the fixed effect panel stochastic frontier models to allow group heterogeneity in the slope coefficients. We propose the first-difference penalized maximum likelihood (FDPML) and control function penalized maximum likelihood (CFPML) methods for classification and estimation of latent group structures in the frontier as well as inefficiency. Monte Carlo simulations show that the proposed approach performs well in finite samples. An empirical application is presented to show the advantages of data-determined identification of the heterogeneous group structures in practice.

Lessons Learned: A Conversation With Paul A. Volcker, Andrew Metrick, Rosalind Z. Wiggins, Kaleb B. Nygaard

Journal of Financial Crises

On March 26, 2019, Andrew Metrick, the Janet Yellen Professor of Finance at the Yale School of Management and Founder and Director of the Yale Program on Financial Stabilitysat down with Paul A. Volcker to discuss his perspectives on the Federal Reserve, central banking autonomy, “too big to fail,” and how his perspectives on these topics have changed over the decades.It turned out to be one of the last interviews given by the former Chairman of the Federal Reserve System who passed away on December 8, 2019, at the age of 92.

The Federal Reserve’S Financial Crisis Response E: The Term Asset-Backed Securities Loan Facility, Rosalind Z. Wiggins, Andrew Metrick

Journal of Financial Crises

Securitization is a process that allows banks and other lenders to package loans and sell them as bonds called asset-backed securities (ABS), removing them from their balance sheets and immediately generating cash for new loans. ABS are an important component of the financing cycle for many types of loans to households and small businesses, including mortgages. In the fall of 2008, financial markets began experiencing disturbances as the effects of the U.S. subprime market meltdown spread. The ABS market froze decreasing the volume of new loans to households and small businesses. The Federal Reserve became very concerned about the potential …

The Federal Reserve’S Financial Crisis Response D: Commercial Paper Market Facilities, Rosalind Z. Wiggins, Andrew Metrick

Journal of Financial Crises

During the summer of 2007, the U.S. residential mortgage market began to decline sharply negatively impacting the asset-backed commercial paper (ABCP) market, which often relied on mortgages as underlying support. Money Market Mutual Funds (MMMFs), significant investors in commercial paper (CP), quickly retreated from the market, causing a substantial decline in outstanding ABCP. In September 2008, pressures on the markets severely escalated again, when the Reserve Primary Fund MMMF “broke the buck” and prompted run-like redemption requests by many MMMF investors. These disruptions resulted in higher rates and shorter maturities, practically freezing the market for term CP. Concerned about the …

The Federal Reserve’S Financial Crisis Response C: Providing U.S. Dollars To Foreign Central Banks, Rosalind Z. Wiggins, Andrew Metrick

Journal of Financial Crises

The financial crisis that began in late 2007 with the decline in the United States (U.S.) subprime mortgage markets quickly spread to other markets and eventually disrupted the interbank funding markets in the U.S. as well as overseas. To address the strain in the U.S. dollar (USD) funding markets, the Federal Reserve worked with foreign central banks around the world to provide USD liquidity to affected overseas markets by entering into currency swap agreements. Following the bankruptcy of Lehman Brothers in September 2008, and the resulting further destabilization of the world’s financial systems, the size and utilization of these swaps …

The Federal Reserve’S Financial Crisis Response B: Lending & Credit Programs For Primary Dealers, Rosalind Z. Wiggins, Patricia C. Mosser, Andrew Metrick

Journal of Financial Crises

Beginning in the summer 2007 the Federal Reserve (the Fed) deployed numerous conventional and innovative programs to address the credit crisis occurring in the wholesale lending markets that was beginning to affect the broader financial markets and threaten the economy at large. Two of those programs, the Term Securities Lending Facility (TSLF) and the Primary Dealer Credit Facility (PDCF) were aimed at providing liquidity to primary dealers and required the Fed to rely on its authority under Section 13(3) of the Federal Reserve Act. Section 13(3) is a Depression Era amendment that permits the Fed expanded powers in “unusual and …

The Federal Reserve’S Financial Crisis Response A: Lending & Credit Programs For Depository Institutions, Rosalind Z. Wiggins, Andrew Metrick

Journal of Financial Crises

Beginning in summer 2007, the Federal Reserve (the Fed) was called upon to address a severe disruption in the interbank lending markets sparked by a downturn in the subprime mortgage market. As these developments began to impact the ability of banks to raise adequate funding, the Fed encouraged them to utilize the Discount Window (DW), its standing facility for lending to depository institutions, and repeatedly decreased the lending rate to make the facility more accessible. Despite the Fed’s efforts, for a number of reasons, including historical perceptions of stigma, banks were reluctant to utilize the DW. In December 2007, the …