International Asset Pricing with Recursive Preferences
Published: 11/12/2013, Volume: 68, Issue: 6 | DOI: 10.1111/jofi.12088 | Cited by: 158
RICCARDO COLACITO, MARIANO M. CROCE
Focusing on data from the United States and the United Kingdom, we document that both the anomaly identified by Backus and Smith, which concerns the low correlation between consumption differentials and exchange rates, and the forward premium anomaly, which concerns the tendency of high interest rate currencies to appreciate, have become more severe over time. Taking into account different capital mobility regimes, we show that these anomalies turn into general equilibrium regularities in a two‐country and two‐good economy with Epstein and Zin preferences, frictionless markets, and correlated long‐run growth prospects.
Currency Risk Factors in a Recursive Multicountry Economy
Published: 9/14/2018, Volume: 73, Issue: 6 | DOI: 10.1111/jofi.12720 | Cited by: 116
RIC COLACITO, MARIANO M. CROCE, FEDERICO GAVAZZONI, ROBERT READY
Focusing on the 10 most traded currencies, we provide empirical evidence regarding a significant heterogeneous exposure to global growth news shocks. We incorporate this empirical fact in a frictionless risk‐sharing model with recursive preferences, multiple countries, and multiple consumption goods whose supply features both global and local short‐ and long‐run shocks. Since news shocks are priced, heterogeneous exposure to long‐lasting global growth shocks results in a relevant reallocation of international resources and currency adjustments. Our unified framework replicates the properties of the HML‐FX and HML‐NFA carry‐trade strategies studied by Lustig, Roussanov, and Verdelhan and Della Corte, Riddiough, and Sarno.
Creditor Control Rights and Board Independence
Published: 7/12/2018, Volume: 73, Issue: 5 | DOI: 10.1111/jofi.12692 | Cited by: 115
DANIEL FERREIRA, MIGUEL A. FERREIRA, BEATRIZ MARIANO
We find that the number of independent directors on corporate boards increases by approximately 24% following financial covenant violations in credit agreements. Most of these new directors have links to creditors. Firms that appoint new directors after violations are more likely to issue new equity, and to decrease payout, operational risk, and CEO cash compensation, than firms without such appointments. We conclude that a firm's board composition, governance, and policies are shaped by current and past credit agreements.