Finance Commons^™

Review Of The Causes Of 1907 Panic And Aftermath, Maria H. Ramjerdi

Department of Economics Faculty Scholarship and Creative Works

The Panic of 1907 is often known as the Panic that initiated the development of the Federal Reserve System (Bordo, 1985). The Panic of 1907 was "The beginning of the end of unregulated capital markets and banking system without the lender of the last resort in the United States." (Fohlin, Gehrig and Haas, 2015, page 2). Numerous causes lead to the Panic of 1907 including: shadow banking, the San Francisco earthquake and fire, stock price manipulation, seasonal agriculture fluctuations, an outflow of gold, and higher interest rates. This paper reviews the primary literature on these causes, and how they led …

Inflation Targeting And Exchange Rate Volatility In Emerging Markets, Rene Cabral, Francisco G. Carneiro, Andre V. Mollick

School of Economics and Finance Faculty Publications

The paper investigates the exchange rate on the reaction function of 24 emerging markets economies’ (EMEs) central banks from 2000Q1 to 2015Q2. This is done by first employing fixed-effects (FE) ordinary least squares and then system generalized methods of the moments techniques. Under FE, the exchange rate is important in the reaction function of EMEs. Allowing for the endogeneity of inflation, output gap, and the exchange rate, the exchange rate remains positive and statistically significant (but quantitatively less) across inflation targeting countries. When the sample is partitioned into targeting and non-targeting countries, the exchange rate remains relevant in the reaction …

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 …

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 …

Lessons Learned: Ray Dalio, Andrew Metrick, Rosalind Z. Wiggins, Kaleb B. Nygaard

Journal of Financial Crises

Insights from a discussion with Ray Dalio, Founder, Chairman, and Co-Chief Investment Officer of Bridgewater Associates, one of the largest hedge funds in the world. Topics range from monetary policy to communications strategy when responding to a financial crisis.

Basel Iii G: Shadow Banking And Project Finance, Christian M. Mcnamara, Andrew Metrick

Journal of Financial Crises

The Net Stable Funding Ratio (NSFR), a liquidity standard introduced by Basel III, seeks to promote a better match between the liquidity of a bank’s assets and the manner in which the bank funds those assets. The NSFR requires banks to maintain a minimum amount of funding deemed “stable” by the Basel framework based on the liquidity of the banks’ assets and activities over a one-year timeframe. One of the areas seen as most affected by this development may be bank participation in project finance for infrastructure development. Since the global demand for infrastructure development remains robust, the shadow banking …

Basel Iii D: Swiss Finish To Basel Iii, Christian M. Mcnamara, Natalia Tente, Andrew Metrick

Journal of Financial Crises

After the Basel Committee on Banking Supervision (BCBS) introduced the Basel III framework in 2010, individual countries confronted the question of how best to implement the framework given their unique circumstances. Switzerland, with a banking industry that is both heavily concentrated and very large relative to the size of its overall economy, faced a special challenge. It ultimately adopted what is sometimes referred to as the “Swiss Finish” to Basel III—enhanced requirements applicable to Switzerland’s “too-big-to-fail” banks Credit Suisse and UBS that go beyond the base requirements established by the BCBS. Yet the prominent role played by relatively new contingent …

Basel Iii B: Basel Iii Overview, Christian M. Mcnamara, Michael Wedow, Andrew Metrick

Journal of Financial Crises

In the wake of the financial crisis of 2007-09, the Basel Committee on Banking Supervision (BCBS) faced the critical task of diagnosing what went wrong and then updating regulatory standards aimed at preventing it from occurring again. In seeking to strengthen the microprudential regulation associated with the earlier Basel Accords while also adding a macroprudential overlay, Basel III consists of proposals in three main areas intended to address 1) capital reform, 2) liquidity standards, and 3) systemic risk and interconnectedness. This case considers the causes of the 2007-09 financial crisis and what they suggest about weaknesses in the Basel regime …

Jpmorgan Chase London Whale Z: Background & Overview, Arwin G. Zeissler, Rosalind Bennett, Andrew Metrick

Journal of Financial Crises

In December 2011, the Chief Executive Officer and Chief Financial Officer of JPMorgan Chase (JPM) instructed the bank’s Chief Investment Office to reduce the size of its Synthetic Credit Portfolio (SCP) during 2012, so that JPM could decrease its Risk-Weighted Assets as the bank prepared to adopt the impending Basel III bank capital regulations. However, the SCP traders were also told to minimize the trading costs incurred to reduce Risk-Weighted Assets, while still maintaining the opportunity to profit from unexpected corporate bankruptcies. In an attempt to balance these competing objectives, head SCP derivatives trader Bruno Iksil suggested in January 2012 …

Incorporating Macroprudential Financial Regulation Into Monetary Policy, Aaron Klein

Journal of Financial Crises

This paper proposes two insights into financial regulation and monetary policy. The first enhances understanding the relationship between them, building on the automobile metaphor that describes monetary policy: when to accelerate or brake for curves miles ahead. Enhancing the metaphor, financial markets are the transmission. In a financial crisis, markets cease to function, equivalent to a transmission shifting into neutral. This explains both monetary policy’s diminished effectiveness in stimulating the economy and why the financial crisis shock to real economic output greatly exceeded central bank forecasts.

The second insight is that both excess leverage and fundamental mispricing of asset values …

Designing Student Projects In Finance: Structure, Technology, And Assessment, Jack W. Trifts, Laura Kohl

Finance Department Faculty Journal Articles

Student projects are a typical part of finance courses, but little has been written about their design. This article describes a five-year process of developing a web-based, semester-long, project in financial statement analysis and provides a road map for faculty members seeking to enhance learning. A key for any instructor is how to manage the trade off the benefits of individual projects and significant formative feedback with the time demands involved.

The Influence Of Internal Audit Competency On Financial Reporting Quality And Enterprise Risk Management, Melissa E. Renschler

2020

The internal audit function (IAF) is critically important to financial reporting quality and enterprise risk management (ERM). Following both the Sarbanes-Oxley Act of 2002 and the financial crisis of 2008, there have been improvements to other monitoring functions, such as the audit committee, management, and the external auditor, but regulation over the IAF is nearly absent. Further, our understanding of how IAF competency is developed and how IAF competency impacts both financial reporting quality and ERM outcomes is limited. My dissertation consists of three archival studies that investigate IAF competency using LinkedIn data. Taken together, these three studies contribute to …

Hedge Fund Investment In Initial Coin Offerings (Icos), Adam B. Wing

Honors Undergraduate Theses

Initial Coin Offerings (ICOs) came into worldwide attention in 2018, when over $11.6 billion flowed through them. The CME Group launched Bitcoin futures contracts in December 2017, giving large funds their first regulated exposure to digital assets. As digital assets move towards the mainstream of finance, institutional investors have followed. This study comparatively analyzes Hedge Fund investment in digital assets against that of other institutional investment firm types (Private Equity and Venture Capital) by analyzing their crypto holdings and rebuilding an equally weighted portfolio for each fund. Under these conditions, the study succeeds in finding significant differences between hedge fund …

Municipal Fiscal Distress In Pennsylvania: Assessing The Municipalities Financial Recovery Act 47 Of 1987, Terry Tracy

West Chester University Doctoral Projects

In the Commonwealth of Pennsylvania, the Department of Community and Economic Development administers a Municipal Financial Recovery program to improve outcomes in fiscally and socio-economically distressed cities. The program operates under the auspices of the Pennsylvania Municipal Recovery Act 47 of 1987.

It is designed to provide state and municipal governments the resources necessary to combat fiscal distress and economic decline, where municipalities lack the political or financial wherewithal to do so autonomously. Those resources include access to grant funding, special latitude over tax policy and fee structures not otherwise permitted by Pennsylvania’s Constitution, and developing a five-year fiscal recovery …

Working Capital Management And Economic Policy Uncertainty, Jacob Kplorla Tandoh

Electronic Theses and Dissertations

In the aftermath of the financial crisis, Ernst and Young (2009) working capital report note that the leading 2,000 corporations in the US and Europe can extract an up to US$1 trillion if they manage their working capital efficiently. While the existing literature documents the effects of working capital management on firm performance, there is a dearth of research between economic uncertainty and working capital management. We attempt to fill this gap by examining the effect of the economic policy uncertainty on firms’ ability to manage their working capital. For this study, with over 80,000 US firm-year observation over the …

Parents’ Perceived Financial Behaviors Impact On College Students’ Financial Behaviors, Naomi Saxon

Masters Theses

The purpose of this study was to explore the relationship between traditional-aged college students and their parents perceived financial behaviors. It utilized Dew and Xiao’s Financial Management Behavior Scale (FMBS) (2011). Past research indicated that there is a positive impact between a parent’s involvement in students’ academic endeavors, however little research explored the relationship between their impact on a young adults’ financial behaviors. Students’ were asked a series of questions from the FMBS rating their actual financial behaviors. These results were compared to their perception of their parent’s financial behaviors in the following categories: money management, credit management, savings management, …

Saudi Stock Market Reaction To Different Major Events, Ahmed Aljarba

CGU Theses & Dissertations

This study implements event study analyses to investigate participants’ reactions to nine different, important events impacting the Saudi Arabian stock market. It analyzes the dynamics of security prices in the Saudi Arabian stock market during the first five days surrounding the event dates. I tested the significance of abnormal returns and cumulative abnormal returns of all the 20 sectors during the (-5,+5) days event window. I found that the market participants react both positively and negatively to different events examined in the study, which was reflected in both the positive and negative cumulative average abnormal returns. The results could be …

Optimal Execution In Cryptocurrency Markets, Ethan Kurz

CMC Senior Theses

The purpose of this paper is to study the Almgren and Chriss model on the optimal execution of large block orders both on the NYSE and in cryptocurrency exchanges. Their model minimizes execution costs, which include linear temporary and permanent price impacts. We focus on how the stock market microstructure differs from a cryptocurrency exchange microstructure and what that means for how the model functions. Once the model and microstructures are explained, we examine how the Almgren-Chriss model functions with stocks from the NYSE, looking at specifically selling a large number of shares. We then investigate how a large "wholesale" …

K-Means Stock Clustering Analysis Based On Historical Price Movements And Financial Ratios, Shu Bin

CMC Senior Theses

The 2015 article Creating Diversified Portfolios Using Cluster Analysis proposes an algorithm that uses the Sharpe ratio and results from K-means clustering conducted on companies' historical financial ratios to generate stock market portfolios. This project seeks to evaluate the performance of the portfolio-building algorithm during the beginning period of the COVID-19 recession. S&P 500 companies' historical stock price movement and their historical return on assets and asset turnover ratios are used as dissimilarity metrics for K-means clustering. After clustering, stock with the highest Sharpe ratio from each cluster is picked to become a part of the portfolio. The economic and …

Another Look At The Relationship Between Portfolio Returns And Market Multiples, Marlena Akhbari, M. Fall Aininan, James E. Larsen

Finance and Financial Services Faculty Publication

No abstract provided.

Environmental Governance For Whom? Examining The Political, Institutional, Fiscal, And Legal Determinants Of State Environmental Agency Budget Policy In The Us, Andrew R. Duggan

Theses and Dissertations

Budgets are a prospective tool of governance, and appropriations are a planning vehicle reflecting: bureaucracies’ values, complex interactions, collective preferences, political influences, and available resources. Research spanning 30 years finds that environmental pollution is a key determinant of environmental budgets in the US, though myriad factors, actors, and subsystems are important to consider. Due to federalism and devolution of responsibilities and authorities, environmental governance falls largely to the states. While the dynamics that shape state environmental budget policy have received scholarly interest, theoretically-driven examinations of environmental appropriations remain limited within the public budgeting and environmental policy literature.

Using panel data …

King Leopold's Bonds And The Odious Debts Mystery, Joseph Blocher, Mitu Gulati, Kim Oosterlinck

Faculty Scholarship

In 1898, in the wake of the Spanish-American war, Spain ceded the colony of Cuba to the United States. In keeping with the law of state succession, the Spanish demanded that the U.S. also take on Spanish debts that had been backed by Cuban revenues. The Americans refused, arguing that some of those debts had been utilized for purposes adverse to the interests of the Cuban people. This, some argue, was the birth of the doctrine of “odious debts”; a doctrine providing that debts incurred by a non-representative government and utilized for purposes adverse to the population do not need …

Systemic Review Of Personal Finance Articles In Family And Consumer Sciences Journals, Lorna Saboe-Wounded Head

Consumer Sciences Faculty Publications

The purpose of this article is to report the results of a systematic review of personal finance articles published from 2009 to 2019 in seven family and consumer sciences journals. Articles included in the review addressed personal finance topics. The qualitative analysis examined categorizations and themes. Published most often were articles on the topics of financial education, financial literacy, and investing/saving. Research articles were predominately on the topic of financial literacy, programs were most often on the topic of financial education. A limited number of articles reported on research results or program impact for minority groups.

Underpricing In The Fintech Industry Compared To Non-Fintech Ipos, Kelsey A. Goss

Honors Undergraduate Theses

In this thesis, I investigate the amount of underpricing in FinTech companies compared to non-FinTech companies. Both data sets contain thirty companies spanning from 1993 to 2018. Each FinTech company is matched to a non-FinTech company by year and comparatively similar revenue. Prior research explores underpricing on different industries, but it hasn’t yet explored underpricing in the FinTech segment. The variables considered in this paper are offer price, close price, shares offered, number of banks involved, fees per share, and money left on the table. I find some evidence that the average amount of underpricing in both dollars and by …

The Economic Determinants Of American Professional Sports Franchise Valuations, Ryan Flora

Mahurin Honors College Capstone Experience/Thesis Projects

This thesis seeks to analyze the impact of regional identities on American professional sports team valuations. Regional identities are classified as any name of a team that is not tied directly to the city that they reside in. For example, the Carolina Panthers have a regional identity because they are not based out of “Carolina”, they are based out of Charlotte, North Carolina. Another example would be the Arizona Cardinals, whose name encompasses the whole state of Arizona rather than Phoenix, the city they are based out of. The leagues that will be involved in this study are the National …

Libor Manipulation And The Transition To Sofr, Seth Taylor-Brill

CMC Senior Theses

With the London Interbank Offer Rate (LIBOR) likely to disappear at the end of 2021 due to its manipulation during the 2008 financial crisis, the financial industry must decide what to do about legacy contracts tied to LIBOR and must select a new interest rank benchmark regime going forwards. This paper provides insight into those questions by first contributing to the existing literature aimed at measuring the extent of LIBOR manipulation and then by developing a model to explain the LIBOR-SOFR spread. This paper analyzes banks’ LIBOR submissions from 2006 to 2008 to identify bank collusion to strategically increase or …

Education Tax Credits: A Different Trajectory For Federal Funding Of Higher Education And Remediation For Effectual Policymaking, Anna C. Bartel

Journal of Student Financial Aid

Education tax credits provide federal financial aid to a wide expanse of American taxpayers; however, little research or analysis has been done on these costly programs. There has been little evidence of its link to college enrollment growth. This descriptive paper outlines the establishment of education tax credits, their original intent, and the lack of evidence of effectual federal policy over the past two decades. Thus, the purpose of this article is to assess how the federal government has reached an $18.9 billion annual expenditure for education tax credits with little to show in returns on investment. Further, this paper …

Asset Portfolio Maturity Changes During The Financial Crisis: Evidence From U.S. Banks, Thomas W. Secrest

Finance and Economics

This paper determines if the maturity structure of commercial banks' asset portfolios changed as a result of the financial crisis of the late 2000s and whether any changes in the portfolios may be homogeneous across bank size. A proxy for the maturity of rate-sensitive assets is constructed, and it is found that significant changes did begin to occur during the third quarter of 2008. The maturity structure of assets of relatively small banks gradually began to increase before leveling off six years later. The maturity of larger bank asset portfolios had been falling and continued to decrease for three more …

Employee Satisfaction And Stock Performance, Michael Snyder

Undergraduate Honors Thesis Collection

This study aims to explore the previously documented relationship between employee satisfaction and superior stock returns. Previous research suggests that firms with higher employee satisfaction also deliver superior stock returns. Furthermore, previous research has established a logical connection from employee satisfaction to superior stock performance. This study constructed an equally-weighted portfolio of the publicly traded companies on Fortune’s “100 Best Companies to Work For” list. This performance was compared to the performance of the S&P 500 on a total return basis for the calendar years 2015, 2016, 2017, 2018, and 2019. The study also collected fundamental data related to each …

Market Structures In Production Economics, Devin Garcia, Levent Kutlu, Robin C. Sickles

School of Economics and Finance Faculty Publications

Our chapter begins by discussing the structure-conduct-performance (SCP) paradigm, which is an early descriptive literature that provided many of the stylized facts about market behaviors. This is followed by a discussion of the bounds approach, which concentrates on making predictions that can hold across a broad range of industries and is achieved by aiming conclusions based on minimal assumptions. We then briefly talk about commonly used fundamental market structures and illustrate how different combinations of various standard concepts are combined to describe market structures. As dynamic en and markets with product differentiation play important roles in defining market structures, we …