Finance Commons^™

Three Essays On Financial Economics, Jiangyuan Li

Dissertations and Theses Collection (Open Access)

Disagreement measures are known to predict cross-sectional stock returns but fail to predict market returns. This paper proposes a partial least squares disagreement index by aggregating information across individual disagreement measures and shows that this index significantly predicts market returns both in- and out-ofsample. Consistent with the theory in Atmaz and Basak (2018), the disagreement index asymmetrically predicts market returns with greater power in high sentiment periods, is positively associated with investor expectations of market returns, predicts market returns through a cash flow channel, and can explain the positive volume-volatility relationship.

Essays On Heterogeneous Large Panel Data Models, Ke Miao

Dissertations and Theses Collection (Open Access)

This dissertation consists of three papers which contribute to the estimation and inference theory of the heterogeneous large panel data models. The first chapter studies a panel threshold model with interactive fixed effects. The least-squares estimators in the shrinking-threshold-effect framework are explored. The inference theory on both slope coefficients and the threshold parameter is derived, and a test for the presence of the threshold effect is proposed. The second chapter considers the least-squares estimation of a panel structure threshold regression (PSTR) model, where parameters may exhibit latent group structures. Under some regularity conditions, the latent group structure can be correctly …

Classification Of Dividend News Based On The Movement Of The Share Market Prices Of Public Listed Companies In Bursa Malaysia, Vijaya Kumar Shubana

Student Works (2020-2029)

Stock market is naturally complex and plays a major role in towards the nation’s growth. However, the performance of a company in stock market varies due to many influences but not limited to economics, political and financial related news. This study attempts to classify the share market dividend news announcement in Bursa Malaysia based on the pattern of share market price. Samples including five hundred (500) observations of dividend news from forty-seven (47) listed companies in Bursa Malaysia during the period of 2000 to 2018 are used in this study. There are three (3) main objectives in this study which …

Political Connections And Abnormal Stock Returns: An Analysis Of The Trump Nominations, Kennon Bacon

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

Shortly after winning the 2016 Presidential Election, Donald Trump began announcing his Cabinet nominations. I examine cumulative abnormal returns (CARs) for firms with political connections to Cabinet and some non-Cabinet level appointments. Nominee and stock characteristics are aggregated, and I find positive and significant CARs surrounding the announcement dates. Additionally, the traits of being a Cabinet nominee, being a board member, and having a narrow confirmation margin all significantly explain the CARs for various event windows and subgroups. The annualized CARs around the announcement date for these firms are often greater than 100% in excess of the market, providing strong …

Lessons Learned: David Wessel, Ben Henken, Rosalind Z. Wiggins

Journal of Financial Crises

Wessel, an award-winning journalist for The Wall Street Journal, talks about some of the issues faced by the media in covering the crisis, discusses the many challenges policymakers faced when trying to communicate the government’s crisis-fighting strategy, and shares suggestions for improvement.

Lessons Learned: James (Jim) Millstein, Alec Buchholtz, Rosalind Z. Wiggins

Journal of Financial Crises

Millstein, who was the Chief Restructuring Officer, U.S. Department of the Treasury, during the Global Financial Crisis and instrumental in the rescue of American International Group, gives us his take on how best to prepare for future crises

Restructuring And Forgiveness In Financial Crises D: The Japanese Financial Crisis Of The 1990s, Christian M. Mcnamara, Andrew Metrick

Journal of Financial Crises

In November 1997 the Japanese government confronted a problem of enormous proportions when the turmoil that had been roiling the financial markets since the collapse of a real estate and stock market asset bubble in 1990 reached a crescendo with the failure of four major financial institutions in quick succession in the space of a month. Prior to these failures, the damage done by the collapsing bubble had seemed to be limited to certain segments of the financial landscape, and the government’s response consisted largely of targeted intervention when necessary for clearly insolvent financial institutions, with a more comprehensive approach …

Restructuring And Forgiveness In Financial Crises C: The Swedish Banking Crisis Of 1990-94, Christian M. Mcnamara, Dr. Lars Thunell, Andrew Metrick

Journal of Financial Crises

In the Spring of 1992, the Swedish government faced a dilemma. The country was in the midst of an economic downturn stemming from the collapse of asset prices (especially in real estate) that had spiked as a result of a credit boom that followed the deregulation of the Swedish banking system in the mid-1980s. Initially the impact of the downturn on the country’s banks had seemed to be limited to a small number of specific firms that the government moved to assist on an ad hoc basis in 1991. However, evidence was mounting that the banking crisis was reaching a …

Restructuring And Forgiveness In Financial Crises B: The Asian Crisis Of 1997, June Rhee, Andrew Metrick

Journal of Financial Crises

Asia’s economy, Thailand in particular, was booming when the financial crises hit in the 1990s. However, troubles were brewing underneath the seemingly buoyant economy. With a fragile financial system and ineffective domestic government responses to these troubles, an exchange rate crisis took over Thailand, and this crisis started a financial contagion in the neighboring countries. This case reviews the background and domestic government responses to contain the crisis, and the international intervention provided by the International Monetary Fund including the assistance and the required reforms accompanying the support.

Restructuring And Forgiveness In Financial Crises A: The Mexican Peso Crisis Of 1994-95, Christian M. Mcnamara, June Rhee, Andrew Metrick

Journal of Financial Crises

Following a year in which repeated political turmoil sapped investor confidence in Mexico, putting pressure on the peso and draining the country’s foreign exchange reserves, on December 22, 1994, the Mexican government sparked a financial crisis by unexpectedly abandoning its policy of anchoring the peso to the US dollar and instead allowing it to float freely. The resulting collapse of the peso left Mexico with $40 billion to $50 billion in external debt (much of it dollar-indexed) coming due in the near term and almost no foreign exchange reserves. Faced with the prospect that Mexico would either default on its …

Guarantees And Capital Infusions In Response To Financial Crises C: U.S. 2009 Stress Test, Chase P. Ross, June Rhee, Andrew Metrick

Journal of Financial Crises

When President Obama took office in 2009, the Treasury focused on restarting bank lending and repairing the ability of the banking system as a whole to perform the role of credit intermediation. In order to do so, the Treasury needed to raise public confidence that banks had sufficient buffers to withstand even a very adverse economic scenario, especially given heightened uncertainty surrounding the outlook of the U.S. economy and potential losses in the banking system. The Supervisory Capital Assessment Program (SCAP)—the so-called “stress tests”—sought to rigorously measure the resilience of the largest bank holding companies. Those found to have insufficient …

Guarantees And Capital Infusions In Response To Financial Crises B: U.S. Guarantees During The Global Financial Crisis, June Rhee, Andrew Metrick

Journal of Financial Crises

During 2008-09, the federal government extended multiple guarantee programs in an effort to restore the financial market and contain the panic and crisis in the market. For example, the Treasury provided a temporary guarantee program for the money market funds, the FDIC decided to stand behind certain debts and non-interest-bearing transaction accounts, and the Treasury, the FDIC, and the Federal Reserve agreed to share losses in certain assets belonging to Citigroup. This case reviews these guarantee programs implemented during the global financial crisis by the government and explores the different rationale that shaped certain design features of each program.

Democracy In Emerging Markets: A New Perspective On The Natural Resources Curse, André V. Mollick, Andre Vianna, Gautam Hazarika

School of Economics and Finance Faculty Publications

Using annual data from 1980 to 2014, we reexamine the relationship between democracy and natural resources for a large sample of emerging market economies. Controlling for human capital (or real GDP per capita) and openness measures, dynamic panel methods address endogeneity from more democratic regimes demanding better control of rents. We find that democracy responds positively to natural resource rents in GDP (NAT) and negatively to terms of trade (TOT). The NAT positive effects mitigate the negative impact of TOT on democracy and holds well in different specifications. By building on a literature focusing on oil rents, increases in NAT …

Trade Financing In Emerging Markets, Jamie L. Morris

Senior Theses

Businesses need capital to initiate trades, drive growth, and produce profit, but unfortunately, not all companies can access to capital easily. Small and medium-sized enterprises (SMEs), although critical to the global economy, typically have trouble funding trades because of a lack of creditworthiness. This problem worsens for SMEs in emerging markets in volatile economies with political instability (“Trade finance and SMEs” 2016, p.11-21). In this study, we analyze how third-party trade finance companies can help finance trades more easily for SMEs in eight (8) emerging markets: Kenya, Rwanda, Ethiopia, Chile, Peru, Thailand, Cambodia, and Indonesia. We use a unique source …

Stock Liquidity Of Malaysian Public Listed Firms, Yee Ee Chia

Student Works (2020-2029)

This thesis is motivated by the limited research on the liquidity of Malaysian public listed firms, the growing number of liquidity horseraces, the recent data commercialization by Bursa Malaysia, and liquidity-enhancing policies being spearheaded mainly by stock exchange regulators in emerging markets. By assembling information that covers 1250 public listed non-financial firms over 2000–2015, the thesis conducts three empirical analyses on the determinants of firm liquidity and the effects of higher liquidity on firm valuation, where liquidity is proxied by the “Closing Percent Quoted Spreads” (CPQS). First, the thesis revisits the standard liquidity model and advocates the inclusion of shareholder …

The Sustainability Of Child Protection Services In The Republic Of Kosovo, Shpetim Bylykbashi

Capstone Collection

Today, in Kosovo, are services provided for the children most in need sustainable? Do these services have stable and long-term funding? Did the decentralization of the Kosovo government strengthen or weaken the existing child protective environment? In an attempt to answer these questions, a review of available literature was completed, as well as direct interviews conducted with relevant stakeholders engaged in Kosovo’s child protection services at both the governmental and civil society levels. The main finding of my research is that vulnerable children in Kosovo, such as children without parental care, children with special needs, and child victims of domestic …

Profit Shifting And Corruption, Katarzyna Anna Bilicka, André Seidel

Economics and Finance Faculty Publications

This paper introduces heterogeneous profit shifting costs induced by corrupt tax officials to the analysis of profit shifting of multinationals. Using a theoretically derived corruption weighted tax differential, we show that corruption increases profit shifting of European firms. We use our estimates to calculate the implied tax revenue elasticities for European countries and find that countries with otherwise similar tax rates face lower tax revenue elasticities when they are more corrupt. This means that corruption negatively affects the revenue gains that countries could have from increasing their tax rates.

Political Design Meets Policy Complexity, Roland Pongou, Jean-Baptiste Tondji

School of Economics and Finance Faculty Publications

The rules that are employed to pass policies in legislative bodies vary widely. It is generally argued that policies that differ in complexity or importance level should be decided under different kinds of voting rules. While this question has been examined for static legislative mechanisms, an analysis of the precise relationship between the level of policy complexity and the type of voting rule is still missing for dynamic mechanisms. We address this problem from the perspective of a preference-blind political designer. Given the level of complexity of the decision that is to be made, the political designer's goal is to …

Social Responsibility Of A Stock Exchange: Corporate Governance At Borsa Istanbul, A. Can Inci

Finance Department Faculty Journal Articles

No abstract provided.

Essays On Mortgage Portfolio Diversification, Timothy Patrick Dombrowski

LSU Doctoral Dissertations

Portfolios of mortgage loans played an important role in the Great Recession and continue to compose a material part of bank assets. The distribution of mortgage portfolio returns, and consequently, the risk of these portfolios, is quite distinct even from other fixed income asset classes. This dissertation contains three essays, each aiming to analyze a specific component of risk in mortgage portfolios and role of geographical diversification in reducing this risk.

The first essay investigates how cross-sectional dependence in the underlying properties flows through to the loan returns, and thus, the risk of the portfolio. In addition to demonstrating this …

Artificial Intelligence & Personal Finance: Legal And Ethical Implications, Aaron Klein

Brookings Scholar Lecture Series

As part of the Brookings Scholar Lecture Series, Brookings Mountain West presents a lecture titled "Artificial Intelligence and Personal Finance: Legal and Ethical Implications" by Brookings fellow in economic studies, Aaron Klein. The rise of big data, machine learning, and artificial intelligence herald great promise in making our financial system safer, fairer, and more inclusive. However, the legacy of the use of credit as a tool to enforce and promote discrimination means these same tools can recreate and reinforce biases in ways that challenge basic ethics and the law. This lecture explores how data is used to make financial decisions, …

The (Unfilled) Fintech Potential, Aluma Zernik

Notre Dame Journal on Emerging Technologies

Part I explores the idea that technology has the utopian potential to significantly improve the way individuals make financial decisions. Part II discusses some existing market failures, while presenting the potential of technological innovation in resolving such failures. Part III presents the realized potential of such innovative products, analyzing the design of credit card comparison websites, financial management tools, and mobile wallets. I will demonstrate the significant benefits of such products, and yet the limited realization of the potential advantages of such services. Part IV presents several explanations for why such potential is not being fully realized. These explanations may …

Portfolio Capital Inflows And Banking Crisis In Emerging Market And Developing Economies (Mdes): Bank-Level Evidence From Nigeria, Tijjani Mohammed Jume

Bullion

The objective of the paper is to assess the effects of foreign portfolio capital surge on the banking sector in Nigeria from 2005 - 2018. Using a simple trend analysing a static general equilibrium framework, the paper reveals that portfolio capital inflows, in the wake of monetary policy independence in Nigeria, led to portfolio capital surge which resulted to credit boom and speculative transactions in the Nigerian Stock Exchange (NSE) leading to assets price bubble. When the bubble burst during the global financial crisis (GFC) in 2007, and thereafter in 2014, portfolio capital inflows reversed and banking stocks prices declined …

Bank Loan Loss Provisioning During Election Years In Nigeria, Peterson Kitakogelu Ozili

Bullion

The paper investigates the behavior of loan loss provisions during election years in Nigeria. Election events create uncertainties in the business environment. Election and post-election events may amplify credit risks for banks, requiring banks to keep higher loan loss provisions. Using country-level data, it was revealed that the election year did not have a significant effect on the level of loan loss provisions in the Nigerian banking sector. However, the banking sector had high provisions when it is undercapitalized during election years.

Measuring The Risk In Risk Measures: The Case Of The Nigerian Foreign Exchange Market, K. Katata

Economic and Financial Review

As part of its mandate, the Central Bank of Nigeria (CBN) carried out a series of foreign exchange policy decisions from 2014 to 2016. This paper, therefore, evaluated model risk of two key risk measures, expected shortfall (ES) and value-at-risk (VaR), due to the CBN's policy decisions using daily data for the naira exchange rates covering 2010 to 2014, as well as, 2011 to 2015 for the respective policy resolutions. The risk measures were implemented using 6 different models, as the most common techniques used by regulators and practitioners. The implementation of Basel III recommends the switchover from VaR to …

Investing With Cryptocurrencies: A Liquidity Constrained Investment Approach, Simon Trimborn, Mingyang Li, Wolfgang Karl Hardle

Sim Kee Boon Institute for Financial Economics

Cryptocurrencies have left the dark side of the finance universe and become an object of study for asset and portfolio management. Since they have low liquidity compared to traditional assets, one needs to take into account liquidity issues when adding them to a portfolio. We propose a Liquidity Bounded Risk-return Optimization (LIBRO) approach, which is a combination of risk-return portfolio optimization under liquidity constraints. Cryptocurrencies are included in portfolios formed with stocks of the S&P 100, US Bonds, and commodities. We illustrate the importance of the liquidity constraints in an in-sample and out-of-sample study. LIBRO improves the weight optimization in …

A Behavioral Signaling Explanation For Stock Splits: Evidence From China, Chenyu Cui, Frank Weikai Li, Jiaren Pang, Deren Xie

Research Collection Lee Kong Chian School Of Business

We propose a behavioral signaling explanation for the positive announcement effects of stock splits. There are two key behavioral ingredients in our model. First, (retail) investors have misconceptions about stock splits that make them view stock splits as good news. Second, investors are loss-averse and will be particularly disappointed if a splitting firm’s ex-post performance falls short of expectation. In a separating equilibrium, only managers with favorable private information use stock splits to signal. Using a comprehensive sample of stock splits in China over the period of 1998 to 2017, we find supporting evidence: (1) stock splits elicit positive announcement …

Why Commonality Persists?, Raja Velu, Zhaoque Zhou, Chyng Wen Tee

Research Collection Lee Kong Chian School Of Business

Studies on commonality in returns, order flows and liquidity find that the first principal component is closely aligned with the market factor. With the increasing presence of high-frequency trading, commonality in returns, order flows, and liquidity can potentially arise from the commonality in the interpretation of real-time signals. In this paper, we go beyond the first factor and show that the other dominant principal components consistently reflects investors' herding behavior, demonstrating the multi-dimensional aspect of commonality. Instead of relating the asset returns to order flows, we take both as endogenous, and provide empirical evidence showing that returns commonality is driven …

Commentary: Where Does The Talent Pools Of Smes Come From?, T. Mandy Tham

Research Collection Lee Kong Chian School Of Business

In a commentary, SMU Assistant Professor of Finance Mandy Tham explored how ‘family members’ is defined could affect the size of talent pool for SMEs and family businesses, and suggested some criteria for the selection of family members to be nurtured for the SMEs and family businesses.

Time-Series Momentum: Is It There?, Dashan Huang, Jiangyuan Li, Liyao Wang, Guofu Zhou

Research Collection Lee Kong Chian School Of Business

Time-series momentum (TSM) refers to the predictability of the past 12-month return on the next one-month return, and is the focus of several recent influential studies. This paper shows, however, that asset-by-asset time-series regressions reveal little evidence of TSM, both in- and out-of-sample. While the t-statistic in a pooled regression appears large, it is not statistically reliable as it is less than the critical values of parametric and non-parametric bootstraps. From an investment perspective, the TSM strategy is profitable, but its performance is virtually the same as that of a similar strategy that is based on historical sample mean and …