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Slow Moving Capital
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Book Synopsis Slow Moving Capital by : Mark Mitchell
Download or read book Slow Moving Capital written by Mark Mitchell and published by . This book was released on 2007 with total page 15 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study three cases in which specialized arbitrageurs lost significant amounts of capital and, as a result, became liquidity demanders rather than providers. The effects on security markets were large and persistent: Prices dropped relative to fundamentals and the rebound took months. While multi-strategy hedge funds who were not capital constrained increased their positions, a large fraction of these funds actually acted as net sellers consistent with the view that information barriers within a firm (not just relative to outside investors) can lead to capital constraints for trading desks with mark-to-market losses. Our findings suggest that real world frictions impede arbitrage capital.
Book Synopsis Slow Moving Capital by : Mark L. Mitchell
Download or read book Slow Moving Capital written by Mark L. Mitchell and published by . This book was released on 2010 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study three cases in which specialized arbitrageurs lost significant amounts of capital and, as a result, became liquidity demanders rather than providers. The effects on security markets were large and persistent: Prices dropped relative to fundamentals and the rebound took months. While multi-strategy hedge funds who were not capital constrained increased their positions, a large fraction of these funds actually acted as net sellers consistent with the view that information barriers within a firm (not just relative to outside investors) can lead to capital constraints for trading desks with mark-to-market losses. Our findings suggest that real world frictions impede arbitrage capital.
Book Synopsis A Theory of Slow-moving Capital and Contagion by : Viral V. Acharya
Download or read book A Theory of Slow-moving Capital and Contagion written by Viral V. Acharya and published by . This book was released on 2009 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Slow Moving Capital by : Mark Mitchell
Download or read book Slow Moving Capital written by Mark Mitchell and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study three cases in which specialized arbitrageurs lost significant amounts of capital and, as a result, became liquidity demanders rather than providers. The effects on security markets were large and persistent: Prices dropped relative to fundamentals and the rebound took months. While multi-strategy hedge funds who were not capital constrained increased their positions, a large fraction of these funds actually acted as net sellers consistent with the view that information barriers within a firm (not just relative to outside investors) can lead to capital constraints for trading desks with mark-to-market losses. Our findings suggest that real world frictions impede arbitrage capital.
Book Synopsis Slow-Moving Capital and Stock Returns by : Sergey Isaenko
Download or read book Slow-Moving Capital and Stock Returns written by Sergey Isaenko and published by . This book was released on 2019 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the effects that delays in capital allocations in the stock market and high short-term trading incentives have on returns of this market. We report that capital inertia makes the Sharpe ratio and the volatility of the stock returns many times higher than in an economy with no capital delays. Furthermore, in agreement with empirical literature, the stock price displays short-term overreaction and high volatility of the conditional Sharpe ratio.
Book Synopsis Trading Fees and Slow-Moving Capital by : Adrian Buss
Download or read book Trading Fees and Slow-Moving Capital written by Adrian Buss and published by . This book was released on 2015 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: In some situations, investment capital seems to move slowly towards profitable trades. We develop a model of a financial market in which capital moves slowly simply because there is a proportional cost to moving capital. We incorporate trading fees in an infinite-horizon dynamic general-equilibrium model in which investors optimally and endogenously decide when and how much to trade. We determine the steady-state equilibrium no-trade zone, study the dynamics of equilibrium trades and prices and compare, for the same shocks, the impulse responses of this model to those of a model in which trading is infrequent because of investor inattention.
Book Synopsis Stock Price Crashes: Role of Slow-moving Capital by : Mila Getmansky
Download or read book Stock Price Crashes: Role of Slow-moving Capital written by Mila Getmansky and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the role of various trader types in providing liquidity in spot and futures markets based on complete order-book and transactions data as well as cross-market trader identifiers from the National Stock Exchange of India for a single large stock. During normal times, short-term traders who carry little inventory overnight are the primary intermediaries in both spot and futures markets, and changes in futures prices Granger-cause changes in spot prices. However, during two days of fast crashes, Granger-causality ran both ways. Both crashes were due to large-scale selling by foreign institutional investors in the spot market. Buying by short-term traders and cross-market traders was insufficient to stop the crashes. Mutual funds, patient traders with better trade-execution quality who were initially slow to move in, eventually bought sufficient quantities leading to price recovery in both markets. Our findings suggest that market stability requires the presence of well-capitalized standby liquidity providers.
Book Synopsis Entry and Slow-moving Capital by : Paymon Khorrami
Download or read book Entry and Slow-moving Capital written by Paymon Khorrami and published by . This book was released on 2018 with total page 75 pages. Available in PDF, EPUB and Kindle. Book excerpt: Risk concentration is a major outstanding explanation for crisis dynamics of asset prices and macroeconomic quantities. Apparently, capital flows are slow to correct these crises. By considering costly entry in a canonical limited participation model, I illustrate how asset prices encode costs of risk concentration. These costs must be enormous to match risk premia levels and variability. This finding is robust: auxiliary features that increase risk premia levels mitigate their dynamics, through endogenous entry. In short, either entry costs are large, or limited risk-sharing arises for other reasons. One appealing possibility is extrapolative expectations, which complements entry well.
Book Synopsis Reputation Concerns and Slow-Moving Capital by : Steven G. Malliaris
Download or read book Reputation Concerns and Slow-Moving Capital written by Steven G. Malliaris and published by . This book was released on 2020 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze fund managers' reputation concerns in an equilibrium model, tying together a number of seemingly unrelated phenomena. The model implies that, due to reputation concerns, hedge fund managers -- especially those with average reputation levels -- prefer strategies with negatively skewed return distributions. One subtle consequence of this preference is that capital sometimes appears slow moving, leaving profitable investment opportunities unexploited, yet other times appears fast moving, causing large capital relocation and price fluctuations in the absence of fundamental news. More broadly, the analysis demonstrates a limitation of market discipline: fund managers may distort their investments precisely because of market discipline.
Book Synopsis Capitalism without Capital by : Jonathan Haskel
Download or read book Capitalism without Capital written by Jonathan Haskel and published by Princeton University Press. This book was released on 2018-10-16 with total page 292 pages. Available in PDF, EPUB and Kindle. Book excerpt: Early in the twenty-first century, a quiet revolution occurred. For the first time, the major developed economies began to invest more in intangible assets, like design, branding, and software, than in tangible assets, like machinery, buildings, and computers. For all sorts of businesses, the ability to deploy assets that one can neither see nor touch is increasingly the main source of long-term success. But this is not just a familiar story of the so-called new economy. Capitalism without Capital shows that the growing importance of intangible assets has also played a role in some of the larger economic changes of the past decade, including the growth in economic inequality and the stagnation of productivity. Jonathan Haskel and Stian Westlake explore the unusual economic characteristics of intangible investment and discuss how an economy rich in intangibles is fundamentally different from one based on tangibles. Capitalism without Capital concludes by outlining how managers, investors, and policymakers can exploit the characteristics of an intangible age to grow their businesses, portfolios, and economies.
Book Synopsis Adverse Selection, Slow Moving Capital and Misallocation by : William Fuchs
Download or read book Adverse Selection, Slow Moving Capital and Misallocation written by William Fuchs and published by . This book was released on 2015 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: We embed adverse selection into a dynamic, general equilibrium model with heterogeneous capital and study its implications for aggregate dynamics. The friction leads to delays in firms' divestment decisions and thus slow recoveries from shocks, even when these shocks do not affect the economy's potential output. The impediments to reallocation increase with the dispersion in productivity and decrease with the interest rate, the frequency of sectoral shocks, and households' consumption smoothing motives. When households are risk averse, delaying reallocation serves as a hedge against future shocks, which can lead to persistent misallocation. Our model also provides a micro-foundation for convex adjustment costs and a link between the nature of these costs and the underlying economic environment.
Book Synopsis Asset Pricing, Slow-moving Capital, Monetary Policy, and Inflation by : Matthias Fleckenstein
Download or read book Asset Pricing, Slow-moving Capital, Monetary Policy, and Inflation written by Matthias Fleckenstein and published by . This book was released on 2013 with total page 259 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation focuses on a major challenge to neoclassical asset pricing theory - the existence of persistent arbitrage mispricing in financial markets. Many scholars, e.g. Liu and Longstaff (2004) and Shleifer and Vishny (2007), have challenged the neoclassical no-arbitrage paradigm. However, the nature of arbitrage mispricing is not yet fully understood and requires further study. The first chapter 'The TIPS--Treasury Bond Puzzle', jointly written with Francis A. Longstaff and Hanno Lustig, analyzes the relative pricing between U.S. Treasury Bonds and Treasury Inflation-Protected Securities (TIPS). We document that Treasury bonds are consistently overpriced relative to TIPS. The price of a Treasury bond can exceed that of an inflation swapped TIPS issue exactly matching the cash flows of the Treasury bond by more than $20 per $100 notional amount. The relative mispricing of TIPS and Treasury bonds represents one of the largest examples of arbitrage ever documented and poses a major puzzle to classical asset pricing theory. We find direct evidence that the mispricing narrows as additional capital flows into the markets. This provides strong support for the slow-moving-capital explanation of arbitrage persistence. In the second chapter, I extend the analysis in the first chapter to the G7 government bond markets and document new stylized facts about the dynamics and determinants of arbitrage mispricing in and across financial markets. The new insight for the slow-moving capital theory is that capital available to specific types of arbitrageurs is significantly related to the inflation-linked-nominal bond mispricing (ILB mispricing). Specifically, returns of hedge funds following fixed income strategies strongly predict subsequent changes in ILB mispricing, whereas other hedge fund categories lack statistically significant forecasting power. Furthermore, I analyze the effects of monetary policy on arbitrage mispricing and find that central banks have exacerbated mispricing through large-scale asset purchase programs. The third chapter extends the analysis of inflation-linked securities markets. The magnitude of deflation risk and the economic and financial factors that contribute to deflation risk are not well studied. This chapter, jointly written with Francis A. Longstaff and Hanno Lustig, presents a new market-based approach for measuring deflation risk. This approach allows us to solve directly for the market's assessment of the probability of deflation for horizons of up to 30 years using the prices of inflation swaps and options. We find that the market prices the economic tail risk of deflation very similarly to other types of tail risks such as catastrophic insurance losses. In contrast, inflation tail risk has only a relatively small premium.
Book Synopsis Moving Beyond Modern Portfolio Theory by : Jon Lukomnik
Download or read book Moving Beyond Modern Portfolio Theory written by Jon Lukomnik and published by Routledge. This book was released on 2021-04-29 with total page 175 pages. Available in PDF, EPUB and Kindle. Book excerpt: Moving Beyond Modern Portfolio Theory: Investing That Matters tells the story of how Modern Portfolio Theory (MPT) revolutionized the investing world and the real economy, but is now showing its age. MPT has no mechanism to understand its impacts on the environmental, social and financial systems, nor any tools for investors to mitigate the havoc that systemic risks can wreck on their portfolios. It’s time for MPT to evolve. The authors propose a new imperative to improve finance’s ability to fulfil its twin main purposes: providing adequate returns to individuals and directing capital to where it is needed in the economy. They show how some of the largest investors in the world focus not on picking stocks, but on mitigating systemic risks, such as climate change and a lack of gender diversity, so as to improve the risk/return of the market as a whole, despite current theory saying that should be impossible. "Moving beyond MPT" recognizes the complex relations between investing and the systems on which capital markets rely, "Investing that matters" embraces MPT’s focus on diversification and risk adjusted return, but understands them in the context of the real economy and the total return needs of investors. Whether an investor, an MBA student, a Finance Professor or a sustainability professional, Moving Beyond Modern Portfolio Theory: Investing That Matters is thought-provoking and relevant. Its bold critique shows how the real world already is moving beyond investing orthodoxy.
Book Synopsis Capital in the Twenty-First Century by : Thomas Piketty
Download or read book Capital in the Twenty-First Century written by Thomas Piketty and published by Harvard University Press. This book was released on 2017-08-14 with total page 817 pages. Available in PDF, EPUB and Kindle. Book excerpt: What are the grand dynamics that drive the accumulation and distribution of capital? Questions about the long-term evolution of inequality, the concentration of wealth, and the prospects for economic growth lie at the heart of political economy. But satisfactory answers have been hard to find for lack of adequate data and clear guiding theories. In this work the author analyzes a unique collection of data from twenty countries, ranging as far back as the eighteenth century, to uncover key economic and social patterns. His findings transform debate and set the agenda for the next generation of thought about wealth and inequality. He shows that modern economic growth and the diffusion of knowledge have allowed us to avoid inequalities on the apocalyptic scale predicted by Karl Marx. But we have not modified the deep structures of capital and inequality as much as we thought in the optimistic decades following World War II. The main driver of inequality--the tendency of returns on capital to exceed the rate of economic growth--today threatens to generate extreme inequalities that stir discontent and undermine democratic values if political action is not taken. But economic trends are not acts of God. Political action has curbed dangerous inequalities in the past, the author says, and may do so again. This original work reorients our understanding of economic history and confronts us with sobering lessons for today.
Book Synopsis Capital as Power by : Jonathan Nitzan
Download or read book Capital as Power written by Jonathan Nitzan and published by Routledge. This book was released on 2009-06-02 with total page 853 pages. Available in PDF, EPUB and Kindle. Book excerpt: Conventional theories of capitalism are mired in a deep crisis: after centuries of debate, they are still unable to tell us what capital is. Liberals and Marxists both think of capital as an ‘economic’ entity that they count in universal units of ‘utils’ or ‘abstract labour’, respectively. But these units are totally fictitious. Nobody has ever been able to observe or measure them, and for a good reason: they don’t exist. Since liberalism and Marxism depend on these non-existing units, their theories hang in suspension. They cannot explain the process that matters most – the accumulation of capital. This book offers a radical alternative. According to the authors, capital is not a narrow economic entity, but a symbolic quantification of power. It has little to do with utility or abstract labour, and it extends far beyond machines and production lines. Capital, the authors claim, represents the organized power of dominant capital groups to reshape – or creorder – their society. Written in simple language, accessible to lay readers and experts alike, the book develops a novel political economy. It takes the reader through the history, assumptions and limitations of mainstream economics and its associated theories of politics. It examines the evolution of Marxist thinking on accumulation and the state. And it articulates an innovative theory of ‘capital as power’ and a new history of the ‘capitalist mode of power’.
Download or read book Fully Grown written by Dietrich Vollrath and published by University of Chicago Press. This book was released on 2022-06-24 with total page 273 pages. Available in PDF, EPUB and Kindle. Book excerpt: Vollrath challenges our long-held assumption that growth is the best indicator of an economy’s health. Most economists would agree that a thriving economy is synonymous with GDP growth. The more we produce and consume, the higher our living standard and the more resources available to the public. This means that our current era, in which growth has slowed substantially from its postwar highs, has raised alarm bells. But should it? Is growth actually the best way to measure economic success—and does our slowdown indicate economic problems? The counterintuitive answer Dietrich Vollrath offers is: No. Looking at the same facts as other economists, he offers a radically different interpretation. Rather than a sign of economic failure, he argues, our current slowdown is, in fact, a sign of our widespread economic success. Our powerful economy has already supplied so much of the necessary stuff of modern life, brought us so much comfort, security, and luxury, that we have turned to new forms of production and consumption that increase our well-being but do not contribute to growth in GDP. In Fully Grown, Vollrath offers a powerful case to support that argument. He explores a number of important trends in the US economy: including a decrease in the number of workers relative to the population, a shift from a goods-driven economy to a services-driven one, and a decline in geographic mobility. In each case, he shows how their economic effects could be read as a sign of success, even though they each act as a brake of GDP growth. He also reveals what growth measurement can and cannot tell us—which factors are rightly correlated with economic success, which tell us nothing about significant changes in the economy, and which fall into a conspicuously gray area. Sure to be controversial, Fully Grown will reset the terms of economic debate and help us think anew about what a successful economy looks like.
Book Synopsis Bowling Alone: Revised and Updated by : Robert D. Putnam
Download or read book Bowling Alone: Revised and Updated written by Robert D. Putnam and published by Simon & Schuster. This book was released on 2020-10-13 with total page 592 pages. Available in PDF, EPUB and Kindle. Book excerpt: Updated to include a new chapter about the influence of social media and the Internet—the 20th anniversary edition of Bowling Alone remains a seminal work of social analysis, and its examination of what happened to our sense of community remains more relevant than ever in today’s fractured America. Twenty years, ago, Robert D. Putnam made a seemingly simple observation: once we bowled in leagues, usually after work; but no longer. This seemingly small phenomenon symbolized a significant social change that became the basis of the acclaimed bestseller, Bowling Alone, which The Washington Post called “a very important book” and Putnam, “the de Tocqueville of our generation.” Bowling Alone surveyed in detail Americans’ changing behavior over the decades, showing how we had become increasingly disconnected from family, friends, neighbors, and social structures, whether it’s with the PTA, church, clubs, political parties, or bowling leagues. In the revised edition of his classic work, Putnam shows how our shrinking access to the “social capital” that is the reward of communal activity and community sharing still poses a serious threat to our civic and personal health, and how these consequences have a new resonance for our divided country today. He includes critical new material on the pervasive influence of social media and the internet, which has introduced previously unthinkable opportunities for social connection—as well as unprecedented levels of alienation and isolation. At the time of its publication, Putnam’s then-groundbreaking work showed how social bonds are the most powerful predictor of life satisfaction, and how the loss of social capital is felt in critical ways, acting as a strong predictor of crime rates and other measures of neighborhood quality of life, and affecting our health in other ways. While the ways in which we connect, or become disconnected, have changed over the decades, his central argument remains as powerful and urgent as ever: mending our frayed social capital is key to preserving the very fabric of our society.
