E. Carletti, S. Ongena, Jan-Peter Siedlarek, G. Spagnolo
We find that stricter merger control legislation increases abnormal announcement returns of targets in bank mergers by 7 percentage points. Analyzing potential explanations for this result, we document an increase in the pre-merger profitability of targets, a decrease in the size of acquirers, and a decreasing share of transactions in which banks are acquired by other banks. Other merger properties, including the size and risk profile of targets, the geographic overlap of merging banks, and the stock market response of rivals appear unaffected. The evidence suggests that the strengthening of merger control leads to more efficient and more competitive transactions.
{"title":"The Impact of Merger Legislation on Bank Mergers","authors":"E. Carletti, S. Ongena, Jan-Peter Siedlarek, G. Spagnolo","doi":"10.2139/ssrn.2782040","DOIUrl":"https://doi.org/10.2139/ssrn.2782040","url":null,"abstract":"We find that stricter merger control legislation increases abnormal announcement returns of targets in bank mergers by 7 percentage points. Analyzing potential explanations for this result, we document an increase in the pre-merger profitability of targets, a decrease in the size of acquirers, and a decreasing share of transactions in which banks are acquired by other banks. Other merger properties, including the size and risk profile of targets, the geographic overlap of merging banks, and the stock market response of rivals appear unaffected. The evidence suggests that the strengthening of merger control leads to more efficient and more competitive transactions.","PeriodicalId":269529,"journal":{"name":"Swiss Finance Institute Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-05-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132126607","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Vanessa Kummer, M. Meusel, Philipp Renner, K. Schmedders
In this paper we present some new results for the dynamic agent model by Iossa and Rey (2014, "Building Reputation for Contract Renewal: Implications for Performance Dynamics and Contract Duration,'' Journal of the European Economic Association, 12, 549−574) while also correcting some errors in that article. Iossa and Rey study the performance of an agent who repeatedly receives multi-period contracts and determine the optimal duration of such contracts in the context of an infinitely repeated multi-period agent model. We amend the characterization of the unique Markov perfect equilibrium for this model. In addition, we review the original welfare analysis of the model and either provide corrected proofs when possible or provide counterexamples. Our counterexamples overturn the main comparative statics results of the original analysis. We demonstrate that both the agent's optimal investment decision and the optimal contract duration depend non-monotonically on the information persistence and the agent's discount factor. In the final part of the analysis, we establish new results on the agent's optimal investment decision.
{"title":"New and Revised Results for 'Building Reputation for Contract Renewal: Implications for Performance Dynamics and Contract Duration'","authors":"Vanessa Kummer, M. Meusel, Philipp Renner, K. Schmedders","doi":"10.2139/ssrn.2779631","DOIUrl":"https://doi.org/10.2139/ssrn.2779631","url":null,"abstract":"In this paper we present some new results for the dynamic agent model by Iossa and Rey (2014, \"Building Reputation for Contract Renewal: Implications for Performance Dynamics and Contract Duration,'' Journal of the European Economic Association, 12, 549−574) while also correcting some errors in that article. Iossa and Rey study the performance of an agent who repeatedly receives multi-period contracts and determine the optimal duration of such contracts in the context of an infinitely repeated multi-period agent model. We amend the characterization of the unique Markov perfect equilibrium for this model. In addition, we review the original welfare analysis of the model and either provide corrected proofs when possible or provide counterexamples. Our counterexamples overturn the main comparative statics results of the original analysis. We demonstrate that both the agent's optimal investment decision and the optimal contract duration depend non-monotonically on the information persistence and the agent's discount factor. In the final part of the analysis, we establish new results on the agent's optimal investment decision.","PeriodicalId":269529,"journal":{"name":"Swiss Finance Institute Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-05-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134462035","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We show how a method that has been applied to commercial real estate markets can be used to produce high frequency house price indexes for a city and for submarkets within a city. Our application of this method involves estimating a set of annual robust repeat sales regressions staggered by start date and then undertaking an annual-to-monthly (ATM) transformation with a generalized inverse estimator. Using transactions data for Louisville, Kentucky, we show that the method substantially reduces the volatility of high frequency indexes at the city and submarket levels. We demonstrate that both volatility and the benefits from using the ATM method are related to sample size.
{"title":"High Frequency House Price Indexes with Scarce Data","authors":"Steven C. Bourassa, Martin Hoesli","doi":"10.2139/ssrn.2789585","DOIUrl":"https://doi.org/10.2139/ssrn.2789585","url":null,"abstract":"We show how a method that has been applied to commercial real estate markets can be used to produce high frequency house price indexes for a city and for submarkets within a city. Our application of this method involves estimating a set of annual robust repeat sales regressions staggered by start date and then undertaking an annual-to-monthly (ATM) transformation with a generalized inverse estimator. Using transactions data for Louisville, Kentucky, we show that the method substantially reduces the volatility of high frequency indexes at the city and submarket levels. We demonstrate that both volatility and the benefits from using the ATM method are related to sample size.","PeriodicalId":269529,"journal":{"name":"Swiss Finance Institute Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-03-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115972052","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Even though firms’ innovation efforts dwindle in reaction to weaker employment protection legislation (EPL), we show that the value of their investment opportunities actually increases. The reason is that weaker EPL discourages innovation efforts only in firms with little comparative advantage at innovation. At the same time, however, weaker EPL increases the financial and operating flexibility of firms. This flexibility gain can explain why Tobin’s q increases in reaction to weaker EPL.
{"title":"Employment Protection and Investment Opportunities","authors":"Claudio Loderer, Urs Waelchli, Jonas Zeller","doi":"10.2139/ssrn.2726588","DOIUrl":"https://doi.org/10.2139/ssrn.2726588","url":null,"abstract":"Even though firms’ innovation efforts dwindle in reaction to weaker employment protection legislation (EPL), we show that the value of their investment opportunities actually increases. The reason is that weaker EPL discourages innovation efforts only in firms with little comparative advantage at innovation. At the same time, however, weaker EPL increases the financial and operating flexibility of firms. This flexibility gain can explain why Tobin’s q increases in reaction to weaker EPL.","PeriodicalId":269529,"journal":{"name":"Swiss Finance Institute Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-02-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117108161","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We present a plausible micro-founded model for the previously postulated power law finite time singular form of the crash hazard rate in the Johansen-Ledoit-Sornette model of rational expectation bubbles. The model is based on a percolation picture of the network of traders and the concept that clusters of connected traders share the same opinion. The key ingredient is the notion that a shift of position from buyer to seller of a sufficiently large group of traders can trigger a crash. This provides a formula to estimate the crash hazard rate by summation over percolation clusters above a minimum size of a power $s^a$ (with $a>1$) of the cluster sizes $s$, similarly to a generalized percolation susceptibility. The power $s^a$ of cluster sizes emerges from the super-linear dependence of group activity as a function of group size, previously documented in the literature. The crash hazard rate exhibits explosive finite-time singular behaviors when the control parameter (fraction of occupied sites, or density of traders in the network) approaches the percolation threshold $p_c$. Realistic dynamics are generated by modelling the density of traders on the percolation network by an Ornstein-Uhlenbeck process, whose memory controls the spontaneous excursion of the control parameter close to the critical region of bubble formation. Our numerical simulations recover the main stylized properties of the JLS model with intermittent explosive super-exponential bubbles interrupted by crashes.
{"title":"Micro-Foundation Using Percolation Theory of the Finite-Time Singular Behavior of the Crash Hazard Rate in a Class of Rational Expectation Bubbles","authors":"Maximilian Seyrich, D. Sornette","doi":"10.2139/ssrn.2722383","DOIUrl":"https://doi.org/10.2139/ssrn.2722383","url":null,"abstract":"We present a plausible micro-founded model for the previously postulated power law finite time singular form of the crash hazard rate in the Johansen-Ledoit-Sornette model of rational expectation bubbles. The model is based on a percolation picture of the network of traders and the concept that clusters of connected traders share the same opinion. The key ingredient is the notion that a shift of position from buyer to seller of a sufficiently large group of traders can trigger a crash. This provides a formula to estimate the crash hazard rate by summation over percolation clusters above a minimum size of a power $s^a$ (with $a>1$) of the cluster sizes $s$, similarly to a generalized percolation susceptibility. The power $s^a$ of cluster sizes emerges from the super-linear dependence of group activity as a function of group size, previously documented in the literature. The crash hazard rate exhibits explosive finite-time singular behaviors when the control parameter (fraction of occupied sites, or density of traders in the network) approaches the percolation threshold $p_c$. Realistic dynamics are generated by modelling the density of traders on the percolation network by an Ornstein-Uhlenbeck process, whose memory controls the spontaneous excursion of the control parameter close to the critical region of bubble formation. Our numerical simulations recover the main stylized properties of the JLS model with intermittent explosive super-exponential bubbles interrupted by crashes.","PeriodicalId":269529,"journal":{"name":"Swiss Finance Institute Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-01-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125139545","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We consider a firm with no assets in place but an option to invest in a project. The investment is irreversible but delayable in a regime-switching economy. The firm issues equity, straight bonds (SBs) and contingent convertibles (CoCos). We provide the closed-form prices for the firm's securities and the pricing and timing of the option. Our numerical analyses discover that issuing CoCos instead of SBs induces much less agency cost of debt. The agency cost is higher in a boom economy than in recession though the difference is small. There is a unique CoCos' conversion ratio such that the agency cost arrives at the minimum value zero. The inefficiencies arising from asset substitution and debt overhang are much more significant in recession than in boom. Only if the conversion ratio is not too small, the two inefficiencies disappear during boom periods.
{"title":"Real Options and Contingent Convertibles with Regime Switching","authors":"Pengfei Luo, Zhaojun Yang","doi":"10.2139/ssrn.2721188","DOIUrl":"https://doi.org/10.2139/ssrn.2721188","url":null,"abstract":"We consider a firm with no assets in place but an option to invest in a project. The investment is irreversible but delayable in a regime-switching economy. The firm issues equity, straight bonds (SBs) and contingent convertibles (CoCos). We provide the closed-form prices for the firm's securities and the pricing and timing of the option. Our numerical analyses discover that issuing CoCos instead of SBs induces much less agency cost of debt. The agency cost is higher in a boom economy than in recession though the difference is small. There is a unique CoCos' conversion ratio such that the agency cost arrives at the minimum value zero. The inefficiencies arising from asset substitution and debt overhang are much more significant in recession than in boom. Only if the conversion ratio is not too small, the two inefficiencies disappear during boom periods.","PeriodicalId":269529,"journal":{"name":"Swiss Finance Institute Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-01-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122748869","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper introduces the Hawkes skeleton and the Hawkes graph. These objects summarize the branching structure of a multivariate Hawkes point process in a compact, yet meaningful way. We demonstrate how graph-theoretic vocabulary ('ancestor sets', 'parent sets', 'connectivity', 'walks', 'walk weights', ... ) is very convenient for the discussion of multivariate Hawkes processes. For example, we reformulate the classic eigenvalue-based subcriticality criterion of multitype branching processes in graph terms. Next to these more terminological contributions, we show how the graph view may be used for the specification and estimation of Hawkes models from large, multitype event streams. Based on earlier work, we give a nonparametric statistical procedure to estimate the Hawkes skeleton and the Hawkes graph from data. We show how the graph estimation may then be used for specifying and fitting parametric Hawkes models. Our estimation method avoids the a priori assumptions on the model from a straightforward MLE-approach and is numerically more flexible than the latter. Our method has two tuning parameters: one controlling numerical complexity, the other one controlling the sparseness of the estimated graph. A simulation study confirms that the presented procedure works as desired. We pay special attention to computational issues in the implementation. This makes our results applicable to high-dimensional event-stream data, such as dozens of event streams and thousands of events per component.
{"title":"Hawkes Graphs","authors":"P. Embrechts, Matthias Kirchner","doi":"10.2139/ssrn.3099022","DOIUrl":"https://doi.org/10.2139/ssrn.3099022","url":null,"abstract":"This paper introduces the Hawkes skeleton and the Hawkes graph. These objects summarize the branching structure of a multivariate Hawkes point process in a compact, yet meaningful way. We demonstrate how graph-theoretic vocabulary ('ancestor sets', 'parent sets', 'connectivity', 'walks', 'walk weights', ... ) is very convenient for the discussion of multivariate Hawkes processes. For example, we reformulate the classic eigenvalue-based subcriticality criterion of multitype branching processes in graph terms. Next to these more terminological contributions, we show how the graph view may be used for the specification and estimation of Hawkes models from large, multitype event streams. Based on earlier work, we give a nonparametric statistical procedure to estimate the Hawkes skeleton and the Hawkes graph from data. We show how the graph estimation may then be used for specifying and fitting parametric Hawkes models. Our estimation method avoids the a priori assumptions on the model from a straightforward MLE-approach and is numerically more flexible than the latter. Our method has two tuning parameters: one controlling numerical complexity, the other one controlling the sparseness of the estimated graph. A simulation study confirms that the presented procedure works as desired. We pay special attention to computational issues in the implementation. This makes our results applicable to high-dimensional event-stream data, such as dozens of event streams and thousands of events per component.","PeriodicalId":269529,"journal":{"name":"Swiss Finance Institute Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-01-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123515481","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Steven C. Bourassa, Martin Hoesli, Elias Oikarinen
Using data for six metropolitan housing markets in three countries, this paper provides a comparison of methods used to measure house price bubbles. We use an asset pricing approach to identify bubble periods retrospectively and then compare those results with results produced by six other methods. We also apply the various methods recursively to assess their ability to identify bubbles as they form. In view of the complexity of the asset pricing approach, we conclude that a simple price-rent ratio measure is a reliable method both ex post and in real time. Our results have important policy implications because a reliable signal that a bubble is forming could be used to avoid further house price increases.
{"title":"Measuring House Price Bubbles","authors":"Steven C. Bourassa, Martin Hoesli, Elias Oikarinen","doi":"10.2139/ssrn.2715632","DOIUrl":"https://doi.org/10.2139/ssrn.2715632","url":null,"abstract":"Using data for six metropolitan housing markets in three countries, this paper provides a comparison of methods used to measure house price bubbles. We use an asset pricing approach to identify bubble periods retrospectively and then compare those results with results produced by six other methods. We also apply the various methods recursively to assess their ability to identify bubbles as they form. In view of the complexity of the asset pricing approach, we conclude that a simple price-rent ratio measure is a reliable method both ex post and in real time. Our results have important policy implications because a reliable signal that a bubble is forming could be used to avoid further house price increases.","PeriodicalId":269529,"journal":{"name":"Swiss Finance Institute Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-01-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125756664","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We present a quantitative characterisation of the fluctuations of the annualized growth rate of the real US GDP per capita growth at many scales, using a wavelet transform analysis of two data sets, quarterly data from 1947 to 2015 and annual data from 1800 to 2010. Our main finding is that the distribution of GDP growth rates can be well approximated by a bimodal function associated to a series of switches between regimes of strong growth rate $rho_text{high}$ and regimes of low growth rate $rho_text{low}$. The succession of such two regimes compounds to produce a remarkably stable long term average real annualized growth rate of 1.6% from 1800 to 2010 and $approx 2.0%$ since 1950, which is the result of a subtle compensation between the high and low growth regimes that alternate continuously. Thus, the overall growth dynamics of the US economy is punctuated, with phases of strong growth that are intrinsically unsustainable, followed by corrections or consolidation until the next boom starts. We interpret these findings within the theory of "social bubbles" and argue as a consequence that estimations of the cost of the 2008 crisis may be misleading. We also interpret the absence of strong recovery since 2008 as a protracted low growth regime $rho_text{low}$ associated with the exceptional nature of the preceding large growth regime.
{"title":"Secular Bipolar Growth Rate of the Real US GDP Per Capita: Implications for Understanding Past and Future Economic Growth","authors":"S. Lera, D. Sornette","doi":"10.2139/ssrn.2703882","DOIUrl":"https://doi.org/10.2139/ssrn.2703882","url":null,"abstract":"We present a quantitative characterisation of the fluctuations of the annualized growth rate of the real US GDP per capita growth at many scales, using a wavelet transform analysis of two data sets, quarterly data from 1947 to 2015 and annual data from 1800 to 2010. Our main finding is that the distribution of GDP growth rates can be well approximated by a bimodal function associated to a series of switches between regimes of strong growth rate $rho_text{high}$ and regimes of low growth rate $rho_text{low}$. The succession of such two regimes compounds to produce a remarkably stable long term average real annualized growth rate of 1.6% from 1800 to 2010 and $approx 2.0%$ since 1950, which is the result of a subtle compensation between the high and low growth regimes that alternate continuously. Thus, the overall growth dynamics of the US economy is punctuated, with phases of strong growth that are intrinsically unsustainable, followed by corrections or consolidation until the next boom starts. We interpret these findings within the theory of \"social bubbles\" and argue as a consequence that estimations of the cost of the 2008 crisis may be misleading. We also interpret the absence of strong recovery since 2008 as a protracted low growth regime $rho_text{low}$ associated with the exceptional nature of the preceding large growth regime.","PeriodicalId":269529,"journal":{"name":"Swiss Finance Institute Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2015-12-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130394230","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We present a theory in which the key driver of short-term debt issued by the financial sector is the portfolio demand for safe and liquid assets by the nonfinancial sector. This demand drives a premium on safe and liquid assets that the financial sector exploits by owning risky and illiquid assets and writing safe and liquid claims against them. The central prediction of the theory is that safe and liquid government debt should crowd out financial sector lending financed by short-term debt. We verify this prediction with US data from 1875 to 2014. We take a series of approaches to rule out standard crowding out via real interest rates and to address potential endogeneity concerns.
{"title":"The Impact of Treasury Supply on Financial Sector Lending and Stability","authors":"A. Krishnamurthy, Annette Vissing-Jorgensen","doi":"10.2139/ssrn.2688957","DOIUrl":"https://doi.org/10.2139/ssrn.2688957","url":null,"abstract":"We present a theory in which the key driver of short-term debt issued by the financial sector is the portfolio demand for safe and liquid assets by the nonfinancial sector. This demand drives a premium on safe and liquid assets that the financial sector exploits by owning risky and illiquid assets and writing safe and liquid claims against them. The central prediction of the theory is that safe and liquid government debt should crowd out financial sector lending financed by short-term debt. We verify this prediction with US data from 1875 to 2014. We take a series of approaches to rule out standard crowding out via real interest rates and to address potential endogeneity concerns.","PeriodicalId":269529,"journal":{"name":"Swiss Finance Institute Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2015-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131075664","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
京公网安备 11010802042870号
京ICP备2023020795号-1
扫码关注我们
求助内容：
应助结果提醒方式：