Finance Commons^™

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 …

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.

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 …

Essays In Financial Economics And Applied Macroeconomics, Marius Mihai

Dissertations, Theses, and Capstone Projects

This dissertation consists of three chapters that cover topics in finance and macroeconomics.

Chapter 1 - Do Credit Booms Predict U.S. Recessions?

This paper investigates the role of bank credit in predicting U.S. recessions since the 1960s in the context of a bivariate probit model. A set of results emerge. First, credit booms are shown to have strong positive effects in predicting declines in the business cycle at horizons ranging from six to nine months. Second, by isolating the effect of credit booms, I identify their contributions to recession probabilities which range between three and four percentage points at a …

Economics Of Higher Education Productivity, Uchenna K. Oparah

Dissertations, Theses, and Capstone Projects

How does spending affect academic outcomes in higher education institutions? Postsecondary schools incur costs to provide services to its student body. In this study, I introduce multiple outcome variables, a two-stage production function, and current-year expenditures on core services to evaluate how school spending affects academic outcomes.

The empirical analysis includes 28 group sample parameter estimates from four outcome variables, the pooled sample, and group samples for each of six sectors. The fixed effects/instrumental variable (FE-IV) instructional expenditure parameter estimates were positive for 20 of the 28 group samples. The sign and size of the estimated academic output effects varied …

Applications Of Machine Learning And Deep Learning In Macroeconomic And Financial Forecasting, Andi Cupallari

Dissertations, Theses, and Capstone Projects

This dissertation consists of three chapters.

In the first chapter I propose a novel approach to forecast risk premia selecting relevant predictors among hundreds of correlated stock characteristics. I adapt a recently developed method from the deep learning literature, Deep Neural Networks with Group Lasso Regular- ization. This method achieves high out of sample R2, and at the same time yields a sparse representation of the characteristics space that allows for interpretability of the otherwise black box deep learning model. For each period, the model chooses a subset of characteris- tics to be relevant for the risk premia forecast. Our …

Shocks To Aggregate Demand And Aggregate Supply In The Midst Of Covid-19, Anna M. Gellerman

Publications and Research

COVID-19 sent shockwaves throughout the economy, changing the amounts of goods and services distributed and altering the demand. This article discusses the negative demand shock and adverse supply shock that the U.S. economy faced in 2020, and the policies that the government implemented to reverse these effects.

Essays On The Application Of The Machine Learning Methods In Finance And Policy Evaluation, Olga Guska

Dissertations, Theses, and Capstone Projects

In the age when "Big Data" is becoming almost a household word, such abundance of information in different forms and representations can be of a great help for one's decision-making let it be a trader betting on a stock, or a policy-maker assessing the potential impact of proposed regulation. Whereas traditional economic research is primarily based on the use of numerical data continuous or discrete, there is a great deal of useful information that can be extracted from text data. Such information can power novel identification strategies or help perceive solutions from a different angle, but observed volumes of such …

Essays On Anomalies In International Equity Markets, Xiao Cheng

Dissertations, Theses, and Capstone Projects

This dissertation consists of three chapters related to empirical asset pricing in the international stock market.

Chapter 1: "Loss of International Sales and Stock Performance" Using international firm-level data from 1990-2015, I show that when global firms' total international sales drop to zero, this conveys an important signal about future firm operations. An equal-weighted portfolio that sells stocks of firms that completely lost international sales and buys stocks of global firms earns up to 86 basis points per month (over 10% per year). This return predictability cannot be explained by the Fama-French international three- or five-factor models. Further examination suggests …

Financial Development And Economic Growth, Chiau-Jiun Jiang

Dissertations and Theses

This paper purposes to discuss the relationship between the financial development and economic growth. In the past, most studies related to the influence of financial development on economic growth used cross-sectional analysis or time series analysis. However, the cross-sectional analysis cannot explain the long-term trend of the time series, and the time series is unable to explain the multiple samples of the cross-section. Based on Arellano and Bond (1991), and Arellano and Bover (1995), this paper utilizes the panel data model to discuss financial development and economic growth. The results point out that bank credit in total GDP and capitalization …

New Factor Structure Models And Idiosyncratic Volatility, Ossama Elhadary

Dissertations, Theses, and Capstone Projects

In this dissertation, I propose new factor structures that are based on the Fama-French style factors but include additional locations like the industry groups and the exchanges where the stocks are traded. I show that the stock returns are clustered around the industry groups and the exchanges. Idiosyncratic volatility calculated using the new factor structure models tend to be smaller than those calculated using the traditional Fama-French model. By sorting portfolios using the idiosyncratic volatility computed using the new factor models, a trader can gain larger profits compared to sorting the portfolio using the traditionally calculated idiosyncratic volatility.

Essays On Applied Machine Learning For Implied Volatility Interpolation And Artificial Counterfactuals, Pablo A. Crespo

Dissertations, Theses, and Capstone Projects

This dissertation consists of two chapters.

Chapter 1: Volatility estimates under the risk neutral density have become a much revisited topic of interest in recent years. The density proves itself a powerful tool for sentiment analysis, since its moments provide insights about expectations in price trends. A standard procedure for its extraction utilizes artificial volatility predictions to form a dense enough grid for approximating a complete probability distribution. This paper proposes two common machine learning technique variations to produce implied volatility predictions when data is very scarce. First, a model using regularization through a variation of a generalized LASSO path …

Garch Modeling Of Value At Risk And Expected Shortfall Using Bayesian Model Averaging, Ismail Kheir

Theses and Dissertations

This thesis conducts Value at Risk (VaR) and Expected Shortfall (ES) estimation using GARCH modeling and Bayesian Model Averaging (BMA). BMA considers multiple models weighted by some information criterion. Through BMA, this thesis finds that VaR and ES estimates can be improved through enhanced modeling of the data generation process.

The Quality Of Xbrl Structured Financial Statements: An Empirical Examination Of Custom Tags, Aidana Razhap Kyzy

Theses and Dissertations

In 2009 the US Securities and Exchange Commission (SEC) adopted the eXtensible Business Reporting Language (XBRL) system to improve the process by which financial statements can be used. Interactive financial data filed with the SEC using XBRL provides easily readable and comparable financial data, thereby improving transparency and efficiency in the corporate market. SEC rules permit companies to use custom tags in their financial reports in cases when an appropriate element cannot be found in the Financial Accounting Standards Board (FASB) standard XBRL taxonomy. The inordinate use of custom tags may result in a reduction of financial report quality by …

Essays On The Equity Premium Puzzle, Oren Shmuel

Dissertations, Theses, and Capstone Projects

The equity premium puzzle emanates from the inability of the theoretical models to explain the empirically observed high equity premium (when the average stock returns so much higher than the average bond returns). The puzzle is that in order to reconcile the much higher return on stock compared to the return on government bonds in the United States, individuals must have very high (unrealistic) risk aversion according to standard economics models.

Mehra and Prescott (1985) [35] found that for high values of relative risk aversion coefficients (=RRA), and a given small variance of the growth rate in the per capita …

Objectively-Measured And Subjectively-Perceived Financial Literacy, Wenyi Lu

Dissertations, Theses, and Capstone Projects

This dissertation consists of three chapters on financial literacy. The chapters examine the impact of financial literacy on households’ risk tolerance and financial planning behavior. Financial literacy was assessed in two dimensions: an objectively-measured financial literacy score, and a subjectively-perceived financial literacy level.

The first chapter reviews the literature measuring financial literacy, and raises concerns about the prevalent state of financial-literacy overconfidence, which can lead to underprepared financial planning and irrational financial behavior. This chapter uses the survey data from the Financial Regulatory Authority’s (FINRAs) 2009, 2012 and 2015 National Financial Capability Study (NFCS) to explore how individual and regional …

Shapes And Transitions Of The Interest Rate Term Structure, Biwei Chen

Dissertations, Theses, and Capstone Projects

I analyze different shapes of Treasury yield curves in order to better reflect and predict the U.S. economy. Since the late 1980s, macroeconomists have found that the slope of the yield curve predicts economic activity such as inflation, output growth, and recessions, but they have not fully examined the links between various shapes of yield curve and the macroeconomy. To fill the gap, I classify yield curve shapes with the U.S. Treasury yield data, detect the shape patterns over the business cycles, and map these shapes onto corresponding inflation and production states. Although the downward-sloping yield curve reliably predicts U.S. …

International Finance, Paul A. Hayes

Open Educational Resources

No abstract provided.

Global Capital Flows, Time Varying Fundamentals And Transitional Exchange Rate Dynamics: An Ms-Var Approach, Süleyman Hilmi Kal, Ilhami Gunduz

Publications and Research

This paper studies whether dynamic relationship between exchange rate and economic and financial fundamentals vary depending on exchange rate is overvalued and undervalued with respect to its fundamental value. To achieve this, we implement two-state Markov Switching Vector Auto Regression (MSVAR) model with time varying transition probabilities to investigate whether the relationship among exchange rate, interest rate and inflation dynamics depend on overvaluation and undervaluation of exchange rates for the pre-crises period between years 1972-2009. We govern the transition between the undervalued and overvalued states by using Sharpe Ratios of debt and equity investments of the currency to assess whether …

Could An Alternative Policy Design Have Produced A Stronger Mortgage Modification Outcome For Hamp?, Sean Macdonald

Publications and Research

This paper conducts a study of the relative effectiveness of the Home Affordable Modification Program (HAMP) - the primary federal mortgage loan modification program - from early 2009 through 2016. It evaluates U.S. Treasury Department and other data sources, and reviews the recent literature on the relative success of the program. The analysis suggests that HAMP’s success rate in modifying mortgage loans was likely constrained by its voluntary design, a structure that enabled lenders and servicers to prioritize the interests of investors in assessing the risks of modification. It then considers the economic issues surrounding the foreclosure issue and presents …

Time-Series And Cross-Section Variation Of Bond Risk Premia, Niloofar Sahebalzamany

Dissertations, Theses, and Capstone Projects

A long-term bond that is sold before its maturity has an uncertain excess return over the certain return from a shorter-term risk-free bond maturing at the time of sale. There is strong evidence that this excess return is predictable and that the predicted excess return, or risk premium, is time varying. Cochrane and Piazzesi (2005) use five forward rates to predict excess returns on one to five-year maturity bonds. I extend and improve their approach in multiple aspects. Firstly, the data set for the US market is expanded in two dimensions: cross-section and time series. In the cross-section dimension, one- …

Essays On Banking And Corporate Finance, Alev Isil Yildirim

Dissertations, Theses, and Capstone Projects

This dissertation consists of two chapters.

Chapter 1: The Effect of Relationship Banking on Firm Efficiency

This paper analyzes the impact of relationship bank oversight on firm operational efficiency and default risk. I find that a new loan from a relationship bank improves the technical efficiency of inefficient firms that have an elevated probability of default. Moreover, borrowing firms with elevated default risk exposure experience reductions in their probabilities of default in the years following new relationship bank loans, benefiting both banks and borrowers. Thus, the benefits of relationship bank monitoring are most apparent the higher the ex ante default …

Essays On Wealth Inequality And Asset Pricing, Georgios Koimisis

Dissertations, Theses, and Capstone Projects

Economic and financial theories are often found to be in conflict with empirical evidence, suggesting revisions and elaborations of existing models. There are usually many revisions proposed in response to these "puzzles", but often the true resolution may be a factor not yet realized. This dissertation consists of three chapters and contributes to the explanation of a persistent and significant anomaly, the equity premium puzzle, by taking into account the implications of wealth inequality on consumer preferences and, consequently, on asset prices.

The first chapter examines how wealth inequality affects asset prices in a complete market setting. Wealth inequality is …

Bayesian State Space Representation Model: Applications To Macroeconomics And International Finance, Hiroshi Morita

Dissertations, Theses, and Capstone Projects

This dissertation develops three new econometric models using Bayesian state space representation model in order to apply to macroeconomics and international finance. It consists of 3 chapters. Chapter 1 develops a Markov mixture model of macroeconomic fundamentals to analyze the short-run dynamics of foreign exchange rates. In our model, foreign exchange rates are simultaneously determined by three parities: the interest rate parity, the inflation rate parity, and the equity return rate parity. Using four exchange rates: the U.S. dollar price of the British pound, the German mark, the Japanese yen, and the Canadian dollar, the findings are: (1) Our model …

Essays In Financial Development And Income Inequality, Samuel M. Jung

Dissertations, Theses, and Capstone Projects

This dissertation consists of three essays of original research. Chapter 1 is a survey of the literature on the theoretical and empirical interactions among financial development, economic growth, and income inequality.

Chapter 2 describes empirical research on the relationship between financial development and income inequality based on Generalized Method of Moments (GMM) method using a Chinese provincial dataset between 1998 and 2014. The empirical findings support the notion that well-developed financial markets increase income inequality in China. After adding a year dummy for 2001 to examine the impact of China’s entry into the World Trade Organization, which caused the financial …

Essays On The Impact Of Exchange Rate Movements On Stock Return And Country Output, Junnan Zhao

Dissertations, Theses, and Capstone Projects

Exchange rate movements are widely believed to be a major source of uncertainty at both micro- and macro-economic levels. At the microeconomic level, corporate managers controlling risk and investors seeking to hedge their portfolios are both obviously interested in estimates of a firm’s exchange rate exposure ̶ i.e., how much of the value of a firm will be affected by exchange rate movements. At the macroeconomic level, a currency appreciation may have a contractionary effect on a country's output.

Chapter 1 tests whether the launch of the euro around 1999 significantly reduced stock market volatility and exchange rate risk exposure …

Essays On Inequality And Macroeconomic Stability, Thomas Hauner

Dissertations, Theses, and Capstone Projects

This dissertation consists of three chapters. . .

Chapter 1: Aggregate Wealth and Its Distribution as Determinants of Financial Crises: Panel Evidence This essay investigates the relationship between wealth inequality and financial crises across a panel of nine advanced economies over the past 100 years. While substantiation of a role for income inequality is ambiguous in the literature, evidence is presented suggesting a unique capacity for the accumulation of assets to increase the likelihood of a future financial crisis episode. Testing long-run panel data with a reduced form, two-way fixed effects model, estimates suggest that increasing wealth inequality, in an …

Three Essays On The European Sovereign Debt Crisis With A Special Focus On Greece, Flora Leventi

Dissertations, Theses, and Capstone Projects

This dissertation consists of three chapters where I examine several aspects of the European sovereign debt crisis. The first chapter focuses on systemic risk. Following the financial crisis of 2007-08, both in academic as well as policy circles, much of the research has focused toward the systemic importance of financial institutions. Parallel to that research, but to somewhat lesser extent, there have been improvements in our understanding of how risk is transmitted from the financial system to the real economy. This chapter investigates a related yet distinct manifestation of systemic risk, namely systemic sovereign risk. Using data on sovereign credit …

Gender And Financial Risk Aversion, Efstathia Korkou

Dissertations, Theses, and Capstone Projects

The primary goal of this dissertation is the study and measurement of the effect of gender in the process of financial decision making and investment decision making in particular, under uncertainty. In terms of investment decisions, researchers have linked investors’ risk aversion to several individual characteristics of theirs, such as their age, their income or their financial knowledge. However, an investor’s characteristic, somehow overlooked or not properly investigated, has been the investor’s gender, and the latter’s bearing on investment decision making. Research from the 1990s suggested that once individuals are called to allocate their wealth and make investment decisions, women …