Pub Date : 2024-12-20DOI: 10.1016/j.frl.2024.106679
Serkan Aras, Mehmet Ozan Özdemir, Cihan Çılgın
While monthly and weekly indices are commonly used for long-term Bitcoin volatility modelling, this study examines the role of daily indices in forecasting. Additionally, we evaluate the incremental contribution of daily indices when combined with the more frequently employed monthly and weekly indices. The findings reveal that daily Economic Policy Uncertainty (EPU) and Geopolitical Risk (GPR) indices outperform their monthly counterparts in both in-sample explanatory power and out-of-sample forecast accuracy. Moreover, it has been observed that using indices at different frequencies together significantly improves predictive performance. This study, therefore, demonstrates that mixed-frequency indices offer complementary insights for modelling Bitcoin volatility.
{"title":"Can joint modelling of external variables sampled at different frequencies enhance long-term Bitcoin volatility forecasts?","authors":"Serkan Aras, Mehmet Ozan Özdemir, Cihan Çılgın","doi":"10.1016/j.frl.2024.106679","DOIUrl":"https://doi.org/10.1016/j.frl.2024.106679","url":null,"abstract":"While monthly and weekly indices are commonly used for long-term Bitcoin volatility modelling, this study examines the role of daily indices in forecasting. Additionally, we evaluate the incremental contribution of daily indices when combined with the more frequently employed monthly and weekly indices. The findings reveal that daily Economic Policy Uncertainty (EPU) and Geopolitical Risk (GPR) indices outperform their monthly counterparts in both in-sample explanatory power and out-of-sample forecast accuracy. Moreover, it has been observed that using indices at different frequencies together significantly improves predictive performance. This study, therefore, demonstrates that mixed-frequency indices offer complementary insights for modelling Bitcoin volatility.","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"93 1","pages":""},"PeriodicalIF":10.4,"publicationDate":"2024-12-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142911677","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-12-19DOI: 10.1016/j.frl.2024.106597
Yu Ren, Xiongfei Liu, Yi Zhu
This study analyzes data from A-share listed companies from 2012 to 2022 to investigate the impact of digital finance development and information transparency on corporate investment efficiency. Findings indicate that digital finance development and information transparency can enhance corporate investment efficiency. Moreover, financing constraints play a significant moderating role in the relationship between digital finance development and corporate investment efficiency. Finally, the impact of digital finance development on the investment efficiency of state-owned and non-state-owned enterprises varies, with a more pronounced effect on state-owned enterprises.
{"title":"Can the development of digital finance and information transparency improve enterprise investment efficiency?","authors":"Yu Ren, Xiongfei Liu, Yi Zhu","doi":"10.1016/j.frl.2024.106597","DOIUrl":"https://doi.org/10.1016/j.frl.2024.106597","url":null,"abstract":"This study analyzes data from A-share listed companies from 2012 to 2022 to investigate the impact of digital finance development and information transparency on corporate investment efficiency. Findings indicate that digital finance development and information transparency can enhance corporate investment efficiency. Moreover, financing constraints play a significant moderating role in the relationship between digital finance development and corporate investment efficiency. Finally, the impact of digital finance development on the investment efficiency of state-owned and non-state-owned enterprises varies, with a more pronounced effect on state-owned enterprises.","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"115 1","pages":""},"PeriodicalIF":10.4,"publicationDate":"2024-12-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142911679","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-12-18DOI: 10.1016/j.frl.2024.106499
John Chalmers, Z. Jay Wang, Jingyun Yang
This paper studies how the organizational forms of open- and closed-end funds affect their ability to manage illiquid assets. We use a sample of municipal bond funds from 2002 to 2015 to compare the portfolio liquidity and performance of open- and closed-end funds. We find that immunity to redemption risk allows closed-end funds to hold more illiquid municipal bonds than open-end funds, and they charge higher management fees for such liquidity provision. Closed-end funds earn liquidity premiums from their illiquid holdings. They significantly underperform peer open-end funds after controlling for their exposure to liquidity risk. Highly leveraged closed-end funds are subject to systematic liquidity risk. We find that closed-end funds with higher leverage hold more liquid municipal bonds. They trade more liquid municipal bonds to reduce the potential costs at forced deleverage.
{"title":"Organizational form and liquidity management: Evidence from open- vs. closed-end municipal bond funds","authors":"John Chalmers, Z. Jay Wang, Jingyun Yang","doi":"10.1016/j.frl.2024.106499","DOIUrl":"https://doi.org/10.1016/j.frl.2024.106499","url":null,"abstract":"This paper studies how the organizational forms of open- and closed-end funds affect their ability to manage illiquid assets. We use a sample of municipal bond funds from 2002 to 2015 to compare the portfolio liquidity and performance of open- and closed-end funds. We find that immunity to redemption risk allows closed-end funds to hold more illiquid municipal bonds than open-end funds, and they charge higher management fees for such liquidity provision. Closed-end funds earn liquidity premiums from their illiquid holdings. They significantly underperform peer open-end funds after controlling for their exposure to liquidity risk. Highly leveraged closed-end funds are subject to systematic liquidity risk. We find that closed-end funds with higher leverage hold more liquid municipal bonds. They trade more liquid municipal bonds to reduce the potential costs at forced deleverage.","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"13 1","pages":""},"PeriodicalIF":10.4,"publicationDate":"2024-12-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142884057","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-12-18DOI: 10.1016/j.frl.2024.106668
Li Gao, Yuan Shi, Yi Zheng
This study examines the relationship between a company's exposure to cryptocurrency and its cost of debt. Using hand-collected data on cryptocurrency holdings for U.S. firms from 2013 to 2023, we find that firms engaged in cryptocurrency incur higher effective interest costs on their debt financing. This finding supports our hypothesis that cryptocurrency represents a high-risk investment, thereby increasing a firm's overall risk. Consequently, creditors demand higher lending costs. Given that debt financing is a crucial source of external funding, our results carry significant implications for understanding the investment behavior of public companies as they explore emerging domains like cryptocurrency.
{"title":"Cryptocurrency exposure and the cost of debt","authors":"Li Gao, Yuan Shi, Yi Zheng","doi":"10.1016/j.frl.2024.106668","DOIUrl":"https://doi.org/10.1016/j.frl.2024.106668","url":null,"abstract":"This study examines the relationship between a company's exposure to cryptocurrency and its cost of debt. Using hand-collected data on cryptocurrency holdings for U.S. firms from 2013 to 2023, we find that firms engaged in cryptocurrency incur higher effective interest costs on their debt financing. This finding supports our hypothesis that cryptocurrency represents a high-risk investment, thereby increasing a firm's overall risk. Consequently, creditors demand higher lending costs. Given that debt financing is a crucial source of external funding, our results carry significant implications for understanding the investment behavior of public companies as they explore emerging domains like cryptocurrency.","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"8 1","pages":""},"PeriodicalIF":10.4,"publicationDate":"2024-12-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142884056","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-12-17DOI: 10.1016/j.frl.2024.106664
Yanyan Liang, Shuo Zhang
This study examines how executives’ legal backgrounds impact audit quality in the A-share markets of Shanghai and Shenzhen, focusing on non-financial listed companies. Findings show that having legal expertise among executives significantly improves audit quality. Robustness tests support these findings, and further analysis reveals that this effect varies depending on the company's ownership structure and its internal controls’ quality. Notably, the positive effect is more pronounced in private companies and those with lax internal controls.
{"title":"Legal background of corporate management and corporate audit quality","authors":"Yanyan Liang, Shuo Zhang","doi":"10.1016/j.frl.2024.106664","DOIUrl":"https://doi.org/10.1016/j.frl.2024.106664","url":null,"abstract":"This study examines how executives’ legal backgrounds impact audit quality in the A-share markets of Shanghai and Shenzhen, focusing on non-financial listed companies. Findings show that having legal expertise among executives significantly improves audit quality. Robustness tests support these findings, and further analysis reveals that this effect varies depending on the company's ownership structure and its internal controls’ quality. Notably, the positive effect is more pronounced in private companies and those with lax internal controls.","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"731 1","pages":""},"PeriodicalIF":10.4,"publicationDate":"2024-12-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142911681","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-12-16DOI: 10.1016/j.frl.2024.106631
Szabolcs Blazsek, Dejun Kong, Samantha R. Shadoff
We study the novel Markov-switching (MS) Beta-t-EGARCH (exponential generalized autoregressive conditional heteroscedasticity) model, using within-regime volatility dynamics, similar to the recent observable-switching (OS) Beta-t-EGARCH model. We report in-sample results on the Standard & Poor’s 500 (S&P 500) and a random sample of 50 firms from the S&P 500 from March 1986 to July 2024. We compare the out-of-sample forecasting performances of OS-Beta-t-EGARCH and MS-Beta-t-EGARCH from May 2005 to July 2024 and confirm that OS-Beta-t-EGARCH is superior to MS-Beta-t-EGARCH.
{"title":"Within-regime volatility dynamics for observable- and Markov-switching score-driven models","authors":"Szabolcs Blazsek, Dejun Kong, Samantha R. Shadoff","doi":"10.1016/j.frl.2024.106631","DOIUrl":"https://doi.org/10.1016/j.frl.2024.106631","url":null,"abstract":"We study the novel Markov-switching (MS) Beta-<mml:math altimg=\"si414.svg\" display=\"inline\"><mml:mi>t</mml:mi></mml:math>-EGARCH (exponential generalized autoregressive conditional heteroscedasticity) model, using within-regime volatility dynamics, similar to the recent observable-switching (OS) Beta-<mml:math altimg=\"si414.svg\" display=\"inline\"><mml:mi>t</mml:mi></mml:math>-EGARCH model. We report in-sample results on the Standard & Poor’s 500 (S&P 500) and a random sample of 50 firms from the S&P 500 from March 1986 to July 2024. We compare the out-of-sample forecasting performances of OS-Beta-<mml:math altimg=\"si414.svg\" display=\"inline\"><mml:mi>t</mml:mi></mml:math>-EGARCH and MS-Beta-<mml:math altimg=\"si414.svg\" display=\"inline\"><mml:mi>t</mml:mi></mml:math>-EGARCH from May 2005 to July 2024 and confirm that OS-Beta-<mml:math altimg=\"si414.svg\" display=\"inline\"><mml:mi>t</mml:mi></mml:math>-EGARCH is superior to MS-Beta-<mml:math altimg=\"si414.svg\" display=\"inline\"><mml:mi>t</mml:mi></mml:math>-EGARCH.","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"81 1","pages":""},"PeriodicalIF":10.4,"publicationDate":"2024-12-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142841956","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-12-16DOI: 10.1016/j.frl.2024.106542
Seungho Baek, Moonsoo Kang
This study examines the impact of Environmental, Social, and Governance (ESG) practices on asset quality and funding cost management within the global banking sector, focusing on the role of income diversification. Motivated by the increasing importance of sustainability in finance, this research explores how ESG performance influences banks’ loan portfolio quality and funding costs, particularly through a focus on classical interest income from lending activities versus non-traditional non-interest income. Utilizing a dataset of 1,865 banks across both developed and emerging markets from 2005 to 2022, this study employs panel fixed-effect regression models to assess the relationship between ESG integration, income diversification, and financial outcomes. The findings reveal that banks with stronger ESG performance experience enhanced asset quality and reduced funding costs due to a greater reliance on interest income activities. However, over-diversification into non-interest income activities is associated with deteriorating asset quality and increased credit costs. These results have significant implications for financial risk management, regulatory policy, and the development of sustainable banking practices in both mature and developing financial markets. The study provides a foundation for guiding banking sector policies that balance revenue diversification and ESG sustainability, ultimately enhancing banks’ asset quality and funding cost management.
{"title":"Does ESG enhance asset quality and funding cost management in banking diversification?","authors":"Seungho Baek, Moonsoo Kang","doi":"10.1016/j.frl.2024.106542","DOIUrl":"https://doi.org/10.1016/j.frl.2024.106542","url":null,"abstract":"This study examines the impact of Environmental, Social, and Governance (ESG) practices on asset quality and funding cost management within the global banking sector, focusing on the role of income diversification. Motivated by the increasing importance of sustainability in finance, this research explores how ESG performance influences banks’ loan portfolio quality and funding costs, particularly through a focus on classical interest income from lending activities versus non-traditional non-interest income. Utilizing a dataset of 1,865 banks across both developed and emerging markets from 2005 to 2022, this study employs panel fixed-effect regression models to assess the relationship between ESG integration, income diversification, and financial outcomes. The findings reveal that banks with stronger ESG performance experience enhanced asset quality and reduced funding costs due to a greater reliance on interest income activities. However, over-diversification into non-interest income activities is associated with deteriorating asset quality and increased credit costs. These results have significant implications for financial risk management, regulatory policy, and the development of sustainable banking practices in both mature and developing financial markets. The study provides a foundation for guiding banking sector policies that balance revenue diversification and ESG sustainability, ultimately enhancing banks’ asset quality and funding cost management.","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"32 1","pages":""},"PeriodicalIF":10.4,"publicationDate":"2024-12-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142884059","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-12-16DOI: 10.1016/j.frl.2024.106652
Huilin Wang, Jiliang Liu
Based on panel data from 2011 to 2022, this paper explores the correlation between the aging of population and public education expenditure. The baseline regression indicates that the intensification of the aging population suppresses the intensity of public education expenditure. Mechanism analysis confirms that digital inclusive finance and urbanization can mitigate this suppressive effect. Additionally, heterogeneity analysis reveals that differences in social consumption levels and geographical locations lead to variations in the suppressive effect of the aging population.
{"title":"Aging of population, digital financial inclusion, and public education expenditure","authors":"Huilin Wang, Jiliang Liu","doi":"10.1016/j.frl.2024.106652","DOIUrl":"https://doi.org/10.1016/j.frl.2024.106652","url":null,"abstract":"Based on panel data from 2011 to 2022, this paper explores the correlation between the aging of population and public education expenditure. The baseline regression indicates that the intensification of the aging population suppresses the intensity of public education expenditure. Mechanism analysis confirms that digital inclusive finance and urbanization can mitigate this suppressive effect. Additionally, heterogeneity analysis reveals that differences in social consumption levels and geographical locations lead to variations in the suppressive effect of the aging population.","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"293 1","pages":""},"PeriodicalIF":10.4,"publicationDate":"2024-12-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142884058","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-12-16DOI: 10.1016/j.frl.2024.106590
Pascal François, Geneviève Gauthier, Frédéric Godin, Carlos Octavio Pérez Mendoza
Horikawa and Nakagawa (2024) claim that in a complete market admitting statistical arbitrage, the difference between the deep hedging and the replicating portfolio hedging positions is a statistical arbitrage. Deep hedging can thus include an undesirable speculative component. We test whether this remains true in a GARCH-based incomplete market dynamics. We observe that the difference between deep hedging and delta hedging is a speculative overlay if the risk measure considered does not put sufficient relative weight on adverse outcomes. Nevertheless, a suitable choice of risk measure can prevent the deep hedging agent from engaging in speculation.
{"title":"Is the difference between deep hedging and delta hedging a statistical arbitrage?","authors":"Pascal François, Geneviève Gauthier, Frédéric Godin, Carlos Octavio Pérez Mendoza","doi":"10.1016/j.frl.2024.106590","DOIUrl":"https://doi.org/10.1016/j.frl.2024.106590","url":null,"abstract":"Horikawa and Nakagawa (2024) claim that in a complete market admitting statistical arbitrage, the difference between the deep hedging and the replicating portfolio hedging positions is a statistical arbitrage. Deep hedging can thus include an undesirable speculative component. We test whether this remains true in a GARCH-based incomplete market dynamics. We observe that the difference between deep hedging and delta hedging is a speculative overlay if the risk measure considered does not put sufficient relative weight on adverse outcomes. Nevertheless, a suitable choice of risk measure can prevent the deep hedging agent from engaging in speculation.","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"1 1","pages":""},"PeriodicalIF":10.4,"publicationDate":"2024-12-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142841957","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-12-16DOI: 10.1016/j.frl.2024.106658
Noel Pavel Jeutang, Kwabena Kesse, Brian C. Payne
Using a unique and comprehensive measure of political stability, we evaluate the relationship between countries’ political stability and stock market performance around the world from 2000 to 2022. We find this risk factor is unique relative to other well-established risk factors across emerging and developed markets and that it is a priced risk factor in emerging countries.
{"title":"Political stability as a risk factor in global markets","authors":"Noel Pavel Jeutang, Kwabena Kesse, Brian C. Payne","doi":"10.1016/j.frl.2024.106658","DOIUrl":"https://doi.org/10.1016/j.frl.2024.106658","url":null,"abstract":"Using a unique and comprehensive measure of political stability, we evaluate the relationship between countries’ political stability and stock market performance around the world from 2000 to 2022. We find this risk factor is unique relative to other well-established risk factors across emerging and developed markets and that it is a priced risk factor in emerging countries.","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"68 1","pages":""},"PeriodicalIF":10.4,"publicationDate":"2024-12-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142911680","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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