The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
AFA members can log in to view full-text articles below.
View past issues
Search the Journal of Finance:
Search results: 3.
Foreign Safe Asset Demand and the Dollar Exchange Rate
Published: 02/02/2021 | DOI: 10.1111/jofi.13003
ZHENGYANG JIANG, ARVIND KRISHNAMURTHY, HANNO LUSTIG
We develop a theory that links the U.S. dollar's valuation in FX markets to the convenience yield that foreign investors derive from holding U.S. safe assets. We show that this convenience yield can be inferred from the Treasury basis, the yield gap between U.S. government and currency‐hedged foreign government bonds. Consistent with the theory, a widening of the basis coincides with an immediate appreciation and a subsequent depreciation of the dollar. Our results lend empirical support to models that impute a special role to the United States as the world's provider of safe assets and the dollar as the world's reserve currency.
A Portfolio Approach to Global Imbalances
Published: 04/09/2024 | DOI: 10.1111/jofi.13333
ZHENGYANG JIANG, ROBERT J. RICHMOND, TONY ZHANG
We use a portfolio‐based framework to understand what drives the decline of the U.S. net foreign asset (NFA) position and the reversal in returns earned on the U.S. NFA (exorbitant privilege). We show that global savings gluts and monetary policies widened the U.S. NFA position, while investor demand shifts partially offset this widening. Moreover, U.S. privilege declined after 2010, in line with increasing foreign demand for U.S. equity. We also highlight a quantity dimension of the U.S. privilege: The U.S. can issue substantially more debt than other countries for a given yield increase.
What Drives Variation in the U.S. Debt‐to‐Output Ratio? The Dogs that Did not Bark
Published: 06/11/2024 | DOI: 10.1111/jofi.13363
ZHENGYANG JIANG, HANNO LUSTIG, STIJN VAN NIEUWERBURGH, MINDY Z. XIAOLAN
A higher U.S. government debt‐to‐output (D‐O) ratio does not forecast higher surpluses or lower returns on Treasurys in the future. Neither future cash flows nor discount rates account for the variation in the current D‐O ratio. The market valuation of Treasurys is surprisingly insensitive to macro fundamentals. Instead, the future D‐O ratio accounts for most of the variation because the D‐O ratio is highly persistent. Systematic surplus forecast errors may help account for these findings. Since the start of the Global Financial Crisis, surplus projections have anticipated a large fiscal correction that failed to materialize.