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Author : Augusto Perilla
Publisher :
ISBN 13 :
Total Pages : 146 pages
Book Rating : 4.:/5 (428 download)
Download or read book Three Essays on Liquidity Risk written by Augusto Perilla and published by . This book was released on 2008 with total page 146 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author :
Publisher :
ISBN 13 :
Total Pages : 87 pages
Book Rating : 4.:/5 (914 download)
Download or read book Three Essays on Liquidity Risk written by and published by . This book was released on 2015 with total page 87 pages. Available in PDF, EPUB and Kindle. Book excerpt: Liquidity risk is inherent to the very nature of the banking activity which is to transform short term liabilities into long term assets. That is why liquidity crises are in one way or another implied in most financial crisis episodes. This thesis contributes to the understanding of how liquidity risk and liquidity crises in the banking and financial sector affect the allocation of resources and the functioning of the economy, and also discusses what could be the best institutional arrangements to share liquidity risk across agents and the best economic policies to avoid liquidity crises. It consists of three chapters focusing on diverse aspects of this topic. The first chapter, co-authored with Katerina-Chara Papioti, provides a new way to measure liquidity risk in the financial sector using the bidding behavior of banks in the bond auctions conducted by central banks. The second chapter examines risk-sharing between agents prone to liquidity shocks obtained through generational and intergenerational coalitions and asset trading in overlapping generation economies. Various institutional arrangements including financial intermediaries, stock markets and government interventions are studied in order to compare their risk sharing performance and optimality. The third chapter examines the international dimension of the liquidity issue and studies theoretically what combination of exchange rate regime and central bank policy is less vulnerable to a combined currency and banking crisis focusing on the sudden stop of capital flows as an underlying source of instability.
Author : Davide Porcellacchia
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (18 download)
Download or read book Three Essays on Money and Banking written by Davide Porcellacchia and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Hon Sing Lee
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (565 download)
Download or read book Three Essays on Financial Intermediation written by Hon Sing Lee and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis is a collection of three essays, analyzing how banks intermediate credit flow over different friction.
Author : Andrei I. Nikiforov
Publisher :
ISBN 13 :
Total Pages : 136 pages
Book Rating : 4.:/5 (67 download)
Download or read book Three Essays on Stock Market Liquidity and Earnings Seasons written by Andrei I. Nikiforov and published by . This book was released on 2009 with total page 136 pages. Available in PDF, EPUB and Kindle. Book excerpt: In these essays, I identify the effects of earnings seasons (i.e., the clustering of earnings releases), on stock market liquidity and asset pricing. In the first essay, I document strong seasonal regularities associated with aggregate earnings announcements. Applying the large body of literature linking earnings announcements to liquidity effects, I argue that these earnings seasons create market-wide liquidity shocks and I show that both liquidity betas and liquidity risk change during earnings seasons In the second essay, I test the impact of earnings seasons on commonality in liquidity as measured by both spreads and depths. I find that commonality significantly decreases during the four weeks of each calendar quarter when most companies release their earnings. These findings contribute to the literature by identifying and examining the clustering effect of firm-specific information on commonality in liquidity. In the third essay, I extend the study of the liquidity effects of earnings seasons to a sample of 20 countries. I find that the international data corroborate both hypotheses. I also find that the aggregate quality of accounting information, and the duration and frequency of interim reporting periods are important determinants of the liquidity effects (both liquidity betas and commonality in liquidity) during earnings seasons.
Author : Long Chen
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (133 download)
Download or read book Three Essays on the Basis Risk of Fixed Income Securities written by Long Chen and published by . This book was released on 2001 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The three essays can be regarded as studies on the basis risk of fixed income securities. They investigate the spreads among different bonds. The first essay, Market Risk and Credit Risk in a General Equilibrium Model, assumes perfect liquidity and focuses on the credit spread. By incorporating credit risk into the standard asset pricing models, it provides one of the first studies on how credit spread relates to market risk, including equity risk, interest risk, and inflation risk. The second essay, Illiquidity and Expected Return of Treasury Securities, focuses on Treasury bonds with zero default risk. The yield spreads among the bonds are solely due to liquidity difference. We derive, quantitatively, how this spread is related to the bid-ask spread, brokerage fee, bond maturity, and investors? expected holding period. It is one of the first theoretical models on the liquidity of treasury securities. The third essay, An Indirect Estimation of the Transaction Costs of Corporate Bonds, is an empirical estimation of the transaction costs of corporate bonds. It is observed that bonds with less liquidity tend to be the ones with lower credit rating quality. Liquidity risk and credit risk are thus intertwined. We are able to separate their effects and obtain estimates for liquidity spreads and credit spreads. In summary, the first essay studies credit risk; the second studies liquidity risk, and the third, as an empirical study, investigates both issues. They jointly contribute to the understanding of the basis risk of fixed income securities.
Author : Alan Picard
Publisher :
ISBN 13 :
Total Pages : 165 pages
Book Rating : 4.:/5 (111 download)
Download or read book Three Essays in Asset Pricing written by Alan Picard and published by . This book was released on 2015 with total page 165 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract This dissertation consists of three essays. My first paper re-examines the link between idiosyncratic risk and expected returns for a large sample of firms in both developed and emerging markets. Recent studies using Fama-French three factor models have shown a negative relationship between idiosyncratic volatility and expected returns for developed markets. This relationship has not been studied to date for emerging markets. This study relates the current-month’s idiosyncratic volatility to the subsequent month’s returns for a sample of both developed and emerging markets expanding benchmark factors by including both a momentum and a systematic liquidity risk component. My second essay contributes to the important literature on the topic of the small capitalization stocks historical outperformance over large capitalization stocks by investigating the hypothesis that the small firm premium is related to macroeconomic and financial variables and that relationship is driven by the economic cycle in the United States and Canada. More specifically, this study employs recent advances in nonlinear time series models to explore the relationship between the small firm premium, and financial and macroeconomic variables in the Canadian and U.S. economies. My third paper re-examines the findings of a recent research paper that suggested that market wide liquidity may act as a leading indicator to the economic cycle. Using several liquidity measures and various macroeconomic variables to proxy for the economic conditions, the paper presents evidence that stock market liquidity could forecast business cycles: A major decrease in the overall level of market liquidity could indicate weak economic growth in the subsequent months. However, the drawback in the analysis is that the relationship is investigated in a linear approach even though it has been proven that most macroeconomic variables follow non-linear dynamics. Employing similar liquidity measures and macroeconomic proxies, and two popular econometrics models that account for non-linear behavior, this study hence re-investigates the relationship between stock market liquidity and business cycles.
Author : Marco Seruset
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (136 download)
Download or read book Three Essays on Price Discovery, Stock Liquidity, and Crash Risk written by Marco Seruset and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Mehdi Karoui
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (921 download)
Download or read book Three Essays in Asset Pricing written by Mehdi Karoui and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: "This thesis consists of three essays that explore alternative approaches to extracting information from option data, and, along somewhat different lines, examine the channels through which liquidity is priced in equity options.The first essay proposes a novel approach to extracting option-implied equity premia, and empirically examines the information content of these risk premia for forecasting the stock market return. Our approach does not require specifying the functional form of the pricing kernel, and does not impose any restrictions on investors' preferences. We only assume the existence of put and call options which complete the market, and show that the implied equity premium can be inferred from expected excess returns on a portfolio of options. An empirical investigation of S&P 500 index options yields the following conclusions: (i) the implied equity premium predicts stock market returns; (ii) the implied equity premium consistently outperforms variables commonly used in the forecasting literature both in- and out-of-sample; (iii) the implied equity premium is positively related to future returns and negatively related to current returns, as theoretically expected.The second essay studies the effect of illiquidity on equity option returns. Illiquidity is well-known to be a significant determinant of stock and bond returns. We are the first to report on illiquidity premia in equity option markets using a large cross-section of firms. An increase in option illiquidity decreases the current option price and predicts higher expected delta-hedged option returns. This effect is statistically and economically significant, and it is consistent with existing evidence that market makers in the equity options market hold net long positions. The illiquidity premium is robust across puts and calls, across maturities and moneyness, as well as across different empirical approaches. It is also robust when controlling for various firm-specific variables including a standard measure of illiquidity of the underlying stock. For long term options, we find evidence of a liquidity risk factor. In the third essay, we demonstrate that in multifactor asset pricing models, prices of risk for factors that are nonlinear functions of the market return can be readily obtained using data on index returns and index options. We apply this general result to the measurement of the conditional price of coskewness and cokurtosis risk. The price of coskewness risk corresponds to the spread between the physical and the risk-neutral second moments, and the price of cokurtosis risk corresponds to the spread between the physical and the risk-neutral third moments. Estimates of these prices of risk have the expected sign, and they lead to reasonable risk premia. An out-of-sample analysis of factor models with coskewness and cokurtosis risk indicates that the new estimates of the price of risk improve the models. performance. The models also robustly outperform competitors such as the CAPM and the Fama-French model." --
Author : Kimberly Fowler Luchtenberg
Publisher :
ISBN 13 :
Total Pages : 270 pages
Book Rating : 4.:/5 (875 download)
Download or read book Three Essays on Corporate Liquidity, Financial Crisis, and Real Estate written by Kimberly Fowler Luchtenberg and published by . This book was released on 2013 with total page 270 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Gökhan Cebiroglu
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (893 download)
Download or read book Three Essays on Hidden Liquidity in Financial Markets written by Gökhan Cebiroglu and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Three Essays on Corporate Liquidity, Financial Distress and Equity Returns written by and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Jung-Min Kim
Publisher :
ISBN 13 :
Total Pages : 169 pages
Book Rating : 4.:/5 (696 download)
Download or read book Three Essays on Hedge Funds and Distress Risk written by Jung-Min Kim and published by . This book was released on 2010 with total page 169 pages. Available in PDF, EPUB and Kindle. Book excerpt: The third essay studies the interaction between managed assets and share restrictions in the context of equity-oriented hedge funds. Small-cap/value oriented funds manage less liquid assets, take higher liquidity risk, and are more likely to use a lockup restriction than large-cap/growth oriented funds. Moreover, I find positive interaction effects of managed assets' illiquidity and share restrictions on fund performance. Small-cap/value funds with strong share restrictions outperform both small-cap/value funds with weak share restrictions and large-cap/growth funds with strong share restrictions. Empirical results suggest that the outperformance is mostly driven by two components: first, small-cap/value funds earn a higher risk premium from greater exposure to the SMB, HML, and liquidity risk factors, and second, strong share restrictions are helpful for small-cap/value funds by mitigating a fire-sale problem as these hedge funds suffer the most from low market liquidity.
Author : Nardos M. Beyene
Publisher :
ISBN 13 :
Total Pages : 72 pages
Book Rating : 4.:/5 (113 download)
Download or read book Three Essays on Liquidity Shocks and Their Implication for Asset Pricing and Valuation Models written by Nardos M. Beyene and published by . This book was released on 2019 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: The main objective of my three essays is to incorporate liquidity shocks and the linkages between the liquidity condition of financial markets into asset pricing and valuation models. The first essay focuses on the liquidity adjusted capital asset pricing model, while the second and the third essays examine the popular asset valuation model called the Fed model. The first essay investigates the pricing of the commonality risk in the U.S. stock market by using a more comprehensive market illiquidity measure that can reflect the liquidity condition of different asset markets. This measure is given by the yield difference between commercial paper and treasury bill. In addition, consistent with the definition of commonality risk, I form portfolios based on the sensitivity of each stock's illiquidity to the market-wide illiquidity. Using monthly data from January 1997 to December 2016 and the conditional version of the Liquidity-adjusted Capital Asset Pricing Model (LCAPM) estimated by the Dynamic Conditional Correlation approach, I find a significant commonality risk premium of 0.022% and 0.014% per year for 12-month and 24-month holding periods, respectively. This premium estimate is significantly higher than those found using the market illiquidity measure and estimation procedures from previous studies. These findings provide evidence that a security's easiness in terms of tradability at times of liquidity dry up is extremely important. It is also higher than the excess return associated with other forms of liquidity risk. In addition, the paper finds a variation in the estimated commonality risk premium over time, with values being higher during periods of market turmoil. Moreover, estimating the LCAPM with the yield difference between commercial paper and treasury bill as a measure of market illiquidity performs better in predicting returns for the low commonality risk portfolios. The second essay examines the inflation illusion hypothesis in explaining the high correlation between government bond yield and stock yield as implied by the Fed model. According to the inflation illusion hypothesis, there is mis-pricing in the stock market due to the failure of investors to adjust their cash flow expectation to inflation. This led to a co-movement in stock yield and government bond yield. I use the Gordon Growth model to determine the mis-pricing component in the stock market. In the next step, the correlation between bond yield and stock yield is estimated using the Asymmetric Generalized Dynamic Conditional Correlation (AG-DCC) model. Finally, I regress this correlation on mis-pricing and two other control variables, GDP and inflation. I use monthly data from January 1983 to December 2016. Consistent with the Fed model, the paper finds a significant positive correlation between the yield on government bonds and stock yield, with an average correlation of 0.942 - 0.997. However, in contrast to the inflation illusion hypothesis, mis-pricing in the stock market has an insignificant impact on this correlation. The third essay provides liquidity shocks contagion between the stock market and the corporate bond market as the driving force behind the high correlation between the yield on stocks and the yield on government bonds as implied by the Fed model. The idea is that when liquidity drops in the stock market, firms' credit risk rises because the deterioration in the liquidity of equities traded in the stock market increases the firms' default probability. Consequently, investors' preferences shift away from corporate bonds to government bonds. Higher demand for government bonds keeps their yield low, leading to a co-movement of government bond yield and stock yield. In order to test this liquidity-based explanation, the paper first examines the interdependence between liquidity in the stock and corporate bond markets using the Markov switching model, and a time series non-parametric technique called the Convergent Cross Mapping (CCM). In order to see the response of government bond yield and stock yield to liquidity shocks in the stock market, the study implements an Auto Regressive Distributed Lag (ARDL) model. Using monthly data from January 1997 to December 2016, the paper presents strong evidence of liquidity shocks transmission form the stock market to the corporate bond market. Furthermore, liquidity shocks in the stock market are found to have a significant impact on the stock yield. These findings support the illiquidity contagion explanation provided in this paper.
Download or read book Three Essays in Empirical Corporate Finance written by and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : SongTao Wang
Publisher :
ISBN 13 :
Total Pages : 145 pages
Book Rating : 4.:/5 (825 download)
Download or read book Three Essays on Asset Liquidity and Its Applications written by SongTao Wang and published by . This book was released on 2010 with total page 145 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Mingxin Li
Publisher :
ISBN 13 :
Total Pages : 96 pages
Book Rating : 4.:/5 (112 download)
Download or read book Essays on Liquidity and Risk Management written by Mingxin Li and published by . This book was released on 2017 with total page 96 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis consists of three independent essays on stock liquidity, corporate cash holdings, and financial institution earnings risk. The first study examines the relationship between stock liquidity and the difference in domestic and foreign market prices for a sample of 650 international firms cross-listed on a U.S. stock exchange. The study exploits the 2001 change to decimalization pricing and the 2003 U.S. dividend tax cut as quasi-natural experiments and finds that ADR liquidity decreases the absolute value of the ADR premium. The paper documents a positive relationship between liquidity and price discovery as well as a liquidity effect on the price convergence between the ADRs and their underlying shares. The second study focuses on corporate cash holdings as a mechanism of risk management. The paper documents a diversification effect on cash for a large sample of international firms, and examines the impact of agency costs, financial constraints and product market competition on the relationship between diversification and cash holdings. The results show that weak product market competition can weaken or even reverse the negative diversification effect on cash holdings. Weak country-level shareholder protection helps explain the weak diversification effect to a smaller degree, whereas financial constraints strengthen the diversification effect. Further, the competition effect is stronger for innovative, high R&D intensity firms and for firms with high uncertainty of sales and productivity growth. The third study analyzes the impact of deposit insurance design on the earnings uncertainty of financial cooperatives. The 2008 amendment to the Financial Institutions Act in the province of British Columbia resulted in an economically and statistically significant decrease in the credit unions' earnings uncertainties. The policy spurred deposit growth, but instead of an increase in lending, credit unions grew their capital-to-asset ratio. The results support the hypothesis that an unlimited insurance coverage boosts depositors' confidence and increases the flow of funds to the insured cooperatives. The paper does not find support for the moral hazard hypothesis where full deposit insurance increases risk-taking and creates liquidity risk by attracting wholesale funds.
