Pages: 1-3 | Published: 1/2019 | DOI: 10.1111/jofi.12624 | Cited by: 0
Pages: 5-53 | Published: 11/2018 | DOI: 10.1111/jofi.12740 | Cited by: 1
SHAI BERNSTEIN, EMANUELE COLONNELLI, BENJAMIN IVERSON
This paper investigates the consequences of liquidation and reorganization on the allocation and subsequent utilization of assets in bankruptcy. Using the random assignment of judges to bankruptcy cases as a natural experiment that forces some firms into liquidation, we find that the long‐run utilization of assets of liquidated firms is lower relative to assets of reorganized firms. These effects are concentrated in thin markets with few potential users and in areas with low access to finance. These findings suggest that when search frictions are large, liquidation can lead to inefficient allocation of assets in bankruptcy.
Pages: 55-90 | Published: 1/2019 | DOI: 10.1111/jofi.12735 | Cited by: 2
BERNARDO MORAIS, JOSÉ-LUIS PEYDRÓ, JESSICA ROLDÁN-PEÑA, CLAUDIA RUIZ-ORTEGA
We identify the international credit channel by exploiting Mexican supervisory data sets and foreign monetary policy shocks in a country with a large presence of European and U.S. banks. A softening of foreign monetary policy expands credit supply of foreign banks (e.g., U.K. policy affects credit supply in Mexico via U.K. banks), inducing strong firm‐level real effects. Results support an international risk‐taking channel and spillovers of core countries’ monetary policies to emerging markets, both in the foreign monetary softening part (with higher credit and liquidity risk‐taking by foreign banks) and in the tightening part (with negative local firm‐level real effects).
Pages: 91-144 | Published: 11/2018 | DOI: 10.1111/jofi.12728 | Cited by: 0
DAN LI, NORMAN SCHÜRHOFF
Dealers in the over‐the‐counter municipal bond market form trading networks with other dealers to mitigate search frictions. Regulatory data show that this network has a core‐periphery structure with 10 to 30 hubs and over 2,000 peripheral broker‐dealers in which bonds flow from periphery to core and partially back. Central dealers charge investors up to double the round‐trip markups compared to peripheral dealers. In turn, central dealers provide immediacy by matching buyers with sellers more directly and prearranging fewer trades, especially during stress times. Investors thus face a trade‐off between execution cost and speed, consistent with network models of decentralized trade.
Pages: 145-192 | Published: 12/2018 | DOI: 10.1111/jofi.12739 | Cited by: 2
LEIF ANDERSEN, DARRELL DUFFIE, YANG SONG
Pages: 193-238 | Published: 11/2018 | DOI: 10.1111/jofi.12732 | Cited by: 0
DAVID S. BATES
This paper explores whether affine models with volatility jumps estimated on intradaily S&P 500 futures data over 1983 to 2008 can capture major daily outliers such as the 1987 stock market crash. Intradaily jumps in futures prices are typically small; self‐exciting but short‐lived volatility spikes capture intradaily and daily returns better. Multifactor models of the evolution of diffusive variance and jump intensities improve fits substantially, including out‐of‐sample over 2009 to 2016. The models capture reasonably well the conditional distributions of daily returns and realized variance outliers, but underpredict realized variance inliers. I also examine option pricing implications.
Pages: 239-279 | Published: 11/2018 | DOI: 10.1111/jofi.12738 | Cited by: 0
MARTIJN BOONS, MELISSA PORRAS PRADO
We introduce a return predictor related to the slope and curvature of the futures term structure: basis‐momentum. Basis‐momentum strongly outperforms benchmark characteristics in predicting commodity spot and term premiums in both the time series and the cross section. Exposure to basis‐momentum is priced among commodity‐sorted portfolios and individual commodities. We argue that basis‐momentum captures imbalances in the supply and demand of futures contracts that materialize when the market‐clearing ability of speculators and intermediaries is impaired, and that it represents compensation for priced risk. Our findings are inconsistent with alternative explanations based on storage, inventory, and hedging pressure.
Pages: 281-321 | Published: 12/2018 | DOI: 10.1111/jofi.12730 | Cited by: 0
GIAN LUCA CLEMENTI, BERARDINO PALAZZO
The data show that, upon being hit by adverse profitability shocks, large public firms have ample latitude to divest their least productive assets, reducing the risk faced by shareholders and the returns that they are likely to demand. In the one‐factor production‐based asset pricing model, when the frictions to capital adjustment are shaped to respect the evidence on investment, the model‐generated cross‐sectional dispersion of returns is only a small fraction of that documented in the data. Our conclusions hold even when operating or labor leverage is modeled in ways shown to be promising in the extant literature.
Pages: 323-370 | Published: 11/2018 | DOI: 10.1111/jofi.12737 | Cited by: 1
PAUL SCHNEIDER, FABIO TROJANI
Under mild assumptions, we recover the model‐free conditional minimum variance projection of the pricing kernel on various tradeable realized moments of market returns. Recovered conditional moments predict future realizations and give insight into the cyclicality of equity premia, variance risk premia, and the highest attainable Sharpe ratios under the minimum variance probability. The pricing kernel projections are often U‐shaped and give rise to optimal conditional portfolio strategies with plausible market timing properties, moderate countercyclical exposures to higher realized moments, and favorable out‐of‐sample Sharpe ratios.
Pages: 371-399 | Published: 10/2018 | DOI: 10.1111/jofi.12729 | Cited by: 2
ERIK EYSTER, MATTHEW RABIN, DIMITRI VAYANOS
We model a financial market where some traders of a risky asset do not fully appreciate what prices convey about others' private information. Markets comprising solely such “cursed” traders generate more trade than those comprising solely rationals. Because rationals arbitrage away distortions caused by cursed traders, mixed markets can generate even more trade. Per‐trader volume in cursed markets increases with market size; volume may instead disappear when traders infer others' information from prices, even when they dismiss it as noisier than their own. Making private information public raises rational and “dismissive” volume, but reduces cursed volume given moderate noninformational trading motives.
Pages: 401-448 | Published: 12/2018 | DOI: 10.1111/jofi.12731 | Cited by: 1
RAVI JAGANNATHAN, BINYING LIU
We present a latent variable model of dividends that predicts, out‐of‐sample, 39.5% to 41.3% of the variation in annual dividend growth rates between 1975 and 2016. Further, when learning about dividend dynamics is incorporated into a long‐run risks model, the model predicts, out‐of‐sample, 25.3% to 27.1% of the variation in annual stock index returns over the same time horizon, with learning contributing approximately half of the predictability in returns. These findings support the view that investors' aversion to long‐run risks and their learning about these risks are important in determining stock index prices and expected returns.
Pages: 449-492 | Published: 11/2018 | DOI: 10.1111/jofi.12733 | Cited by: 0
ALEX CHINCO, ADAM D. CLARK-JOSEPH, MAO YE
This paper applies the Least Absolute Shrinkage and Selection Operator (LASSO) to make rolling one‐minute‐ahead return forecasts using the entire cross‐section of lagged returns as candidate predictors. The LASSO increases both out‐of‐sample fit and forecast‐implied Sharpe ratios. This out‐of‐sample success comes from identifying predictors that are unexpected, short‐lived, and sparse. Although the LASSO uses a statistical rule rather than economic intuition to identify predictors, the predictors it identifies are nevertheless associated with economically meaningful events: the LASSO tends to identify as predictors stocks with news about fundamentals.
Pages: 531-532 | Published: 1/2019 | DOI: 10.1111/jofi.12621 | Cited by: 0
Pages: 533-533 | Published: 1/2019 | DOI: 10.1111/jofi.12622 | Cited by: 0
Pages: 535-535 | Published: 1/2019 | DOI: 10.1111/jofi.12623 | Cited by: 0
Pages: 537-538 | Published: 1/2019 | DOI: 10.1111/jofi.12625 | Cited by: 0