The paper investigates the reasons why easy monetary policy in the US, Euro area and Japan doesn’t promote economic growth. The paper argues that (i) ineffectiveness of easing monetary policy is caused by cash hoarding caused by excess of deposits over loans and (ii) cash hoarding is caused by over-indebtedness of private sector. It is argued that to increase the efficiency of monetary policy reduction in private sector’s debt burden is necessary that can be achieved through the growth of non-debt financing. For that, it is proposed to increase the attractiveness of trust funds, in particular, to extend the deposit insurance program to funds transferred to trust.
{"title":"Private Sector's Over-Indebtedness as a Cause of Inefficiency of Monetary Policy","authors":"S. Najafov","doi":"10.2139/ssrn.2940937","DOIUrl":"https://doi.org/10.2139/ssrn.2940937","url":null,"abstract":"The paper investigates the reasons why easy monetary policy in the US, Euro area and Japan doesn’t promote economic growth. The paper argues that (i) ineffectiveness of easing monetary policy is caused by cash hoarding caused by excess of deposits over loans and (ii) cash hoarding is caused by over-indebtedness of private sector. It is argued that to increase the efficiency of monetary policy reduction in private sector’s debt burden is necessary that can be achieved through the growth of non-debt financing. For that, it is proposed to increase the attractiveness of trust funds, in particular, to extend the deposit insurance program to funds transferred to trust.","PeriodicalId":269529,"journal":{"name":"Swiss Finance Institute Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-03-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123753021","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 find that the degree and dynamics of sovereign bond market integration across 21 developed and 18 emerging countries is significantly heterogeneous. We show that better spanning can significantly enhance market integration through dissipating local risk premiums. Integration of the sovereign bond markets increases by about 10% on average, when a country moves from the 25th to the 75th percentile as a result of higher political stability and credit quality, lower inflation and inflation risk, and lower illiquidity. The 10% increase in integration leads to, on average, a decrease in the sovereign cost of funding of about 1% per annum. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.
{"title":"Measuring Sovereign Bond Market Integration","authors":"I. Chaieb, V. Errunza, Rajna Gibson","doi":"10.2139/ssrn.2818266","DOIUrl":"https://doi.org/10.2139/ssrn.2818266","url":null,"abstract":"\u0000 We find that the degree and dynamics of sovereign bond market integration across 21 developed and 18 emerging countries is significantly heterogeneous. We show that better spanning can significantly enhance market integration through dissipating local risk premiums. Integration of the sovereign bond markets increases by about 10% on average, when a country moves from the 25th to the 75th percentile as a result of higher political stability and credit quality, lower inflation and inflation risk, and lower illiquidity. The 10% increase in integration leads to, on average, a decrease in the sovereign cost of funding of about 1% per annum.\u0000 Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.","PeriodicalId":269529,"journal":{"name":"Swiss Finance Institute Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-03-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124815272","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 revisit the relation between equity returns and financial leverage through the lens of a trade-off model with costly capital structure rebalancing. The model provides a “lookalike” Modigliani-Miller equation that predicts that expected equity returns depend on whether a firm’s leverage is above or below its target leverage. The data support the model predictions. Controlling for leverage, overlevered (underlevered) firms earn higher (lower) returns. Controlling for target leverage the textbook positive relationship between leverage and returns is restored, while target leverage is negatively related to returns.
{"title":"Levered Returns and Capital Structure Imbalances","authors":"Filippo Ippolito, R. Steri, C. Tebaldi","doi":"10.2139/ssrn.2903515","DOIUrl":"https://doi.org/10.2139/ssrn.2903515","url":null,"abstract":"We revisit the relation between equity returns and financial leverage through the lens of a trade-off model with costly capital structure rebalancing. The model provides a “lookalike” Modigliani-Miller equation that predicts that expected equity returns depend on whether a firm’s leverage is above or below its target leverage. The data support the model predictions. Controlling for leverage, overlevered (underlevered) firms earn higher (lower) returns. Controlling for target leverage the textbook positive relationship between leverage and returns is restored, while target leverage is negatively related to returns.","PeriodicalId":269529,"journal":{"name":"Swiss Finance Institute Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-03-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132094154","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}
Bulgarian Abstract: Членството в ЕС е израз на политическа воля и национален и блоков консенсус. С развитието на съюза в посока разширяване до сегашния мащаб от ЕС-28 икономическите измерения на процеса водят до противоположни тенденции. Практически с вълната на разширяване от 2004 г., 2007 и 2014 г., се отчитат два тренда: първо, тренд на повишаване мащабите на съюза в посока население, територия и блоков БВП и второ, тренд на понижение в средното ниво на доходите в ЕС, измерено per capita. Последното се дължи най-вече на включването в Европейския съюз на страни, които имат силна потребности от ресурси за подкрепа на процесите на конвергенция и изравняване на стандартите за производителност на труда и доходи. На този фон настоящата статия си поставя за цел да оцени от позицията на конвергенцията проблемите, резултатите и тенденциите от членството в ЕС в процеса на разширяване и посткризисно икономическо възстановяване. Статията е развита в пет отделни компонента, допълнени със заключение с основни изводи и препоръки. English Abstract: The new EU members after 2004, generates two unmistakable trends: first, the trend of increasing the size of the Union in the direction of population, territory, cultural diversity and block GDP, and second, trend of decrease in the average level of income in the EU, measured per capita. The latter is mostly due to the inclusion in the European Union of countries which have strong net needs for resources to support the process of convergence, leading to a levelling of standards for labour productivity and income. This article aims, from a position of convergence process, to assess problems, results and trends of EU membership in the enlargement process and the post crisis economic recovery. The article is structured into five separate components, supplemented by closing with key conclusions and recommendations.
{"title":"Членството в ЕС - конвергентни резултати, проблеми и тенденции (EU Membership – Convergent Results, Problems and Trends)","authors":"A. Zahariev, D. Kostov, Martin Dimitrov","doi":"10.2139/SSRN.2917016","DOIUrl":"https://doi.org/10.2139/SSRN.2917016","url":null,"abstract":"Bulgarian Abstract: Членството в ЕС е израз на политическа воля и национален и блоков консенсус. С развитието на съюза в посока разширяване до сегашния мащаб от ЕС-28 икономическите измерения на процеса водят до противоположни тенденции. Практически с вълната на разширяване от 2004 г., 2007 и 2014 г., се отчитат два тренда: първо, тренд на повишаване мащабите на съюза в посока население, територия и блоков БВП и второ, тренд на понижение в средното ниво на доходите в ЕС, измерено per capita. Последното се дължи най-вече на включването в Европейския съюз на страни, които имат силна потребности от ресурси за подкрепа на процесите на конвергенция и изравняване на стандартите за производителност на труда и доходи. На този фон настоящата статия си поставя за цел да оцени от позицията на конвергенцията проблемите, резултатите и тенденциите от членството в ЕС в процеса на разширяване и посткризисно икономическо възстановяване. Статията е развита в пет отделни компонента, допълнени със заключение с основни изводи и препоръки. \u0000 \u0000English Abstract: The new EU members after 2004, generates two unmistakable trends: first, the trend of increasing the size of the Union in the direction of population, territory, cultural diversity and block GDP, and second, trend of decrease in the average level of income in the EU, measured per capita. The latter is mostly due to the inclusion in the European Union of countries which have strong net needs for resources to support the process of convergence, leading to a levelling of standards for labour productivity and income. This article aims, from a position of convergence process, to assess problems, results and trends of EU membership in the enlargement process and the post crisis economic recovery. The article is structured into five separate components, supplemented by closing with key conclusions and recommendations.","PeriodicalId":269529,"journal":{"name":"Swiss Finance Institute Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-02-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114609110","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}
Given the frequency and value implications of post-IPO merger and acquisition activity, we investigate empirically whether investors can utilize information based on IPO deal structure to predict merger and acquisition activity among newly public firms. Consistent with the hypothesis that some firms conduct IPOs to facilitate future M&A activity, we find that aspects of IPO deal structure predict whether a newly public firm subsequently becomes a bidder or target. These characteristics include underwriter quality, promotional activity, pricing, proceeds, ownership structure, and issuance activity suggestive of market timing. Investors appear to rely on these observable aspects of a firm's going public process to anticipate the implications of M&A activity for security valuation. Specifically, when newly public firms with IPO deal structures predictive of acquisition activity announce an acquisition their stock returns are indistinguishable from zero. In contrast, abnormal returns to acquisition announcements by unlikely or surprise bidders are positive on average. These results suggest that the going public process has important implications for future M&A activity and valuation.
{"title":"Can Investors Anticipate Post-IPO Mergers and Acquisitions?","authors":"C. W. Anderson, Jian Huang, Gokhan Torna","doi":"10.2139/ssrn.2922046","DOIUrl":"https://doi.org/10.2139/ssrn.2922046","url":null,"abstract":"Given the frequency and value implications of post-IPO merger and acquisition activity, we investigate empirically whether investors can utilize information based on IPO deal structure to predict merger and acquisition activity among newly public firms. Consistent with the hypothesis that some firms conduct IPOs to facilitate future M&A activity, we find that aspects of IPO deal structure predict whether a newly public firm subsequently becomes a bidder or target. These characteristics include underwriter quality, promotional activity, pricing, proceeds, ownership structure, and issuance activity suggestive of market timing. Investors appear to rely on these observable aspects of a firm's going public process to anticipate the implications of M&A activity for security valuation. Specifically, when newly public firms with IPO deal structures predictive of acquisition activity announce an acquisition their stock returns are indistinguishable from zero. In contrast, abnormal returns to acquisition announcements by unlikely or surprise bidders are positive on average. These results suggest that the going public process has important implications for future M&A activity and valuation.","PeriodicalId":269529,"journal":{"name":"Swiss Finance Institute Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127974396","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}
Urs W. Birchler, René Hegglin, Michael R Reichenecker, A. Wagner
Wealth management constitutes an important aspect of today's banking world, but very little is known about what explains the differences among banks in their ability to attract new assets under management. Using a unique panel database of Swiss private banks, we test the hypothesis that the performance of a bank in attracting new money depends on two input factors: skill and reputation. We first estimate the unobservable skill of a bank as a deviation of observed cost efficiency from expected efficiency. In a second step, we find that relatively skilled banks -- that is, banks that are more cost-efficient than predicted by their input factors -- also perform better in attracting net new money. We also find that negative media coverage (such as in the context of fraudulent business practices related to tax evasion) strongly diminishes the future ability to attract assets under management, especially at small banks. Thus, adding to the explicit fines that many Swiss banks had to pay in the course of the U.S. Department of Justice's investigations, there are substantial implicit and reputational costs to banks. Consistent with the notion that trust plays an important role, banks with a higher service intensity (number of employees per assets under management) attract more future funds; by contrast, investment performance for clients seems not to explain future net new money growth.
{"title":"Which Swiss Gnomes Attract Money? Efficiency and Reputation as Performance Drivers of Wealth Management Banks","authors":"Urs W. Birchler, René Hegglin, Michael R Reichenecker, A. Wagner","doi":"10.2139/ssrn.2738806","DOIUrl":"https://doi.org/10.2139/ssrn.2738806","url":null,"abstract":"Wealth management constitutes an important aspect of today's banking world, but very little is known about what explains the differences among banks in their ability to attract new assets under management. Using a unique panel database of Swiss private banks, we test the hypothesis that the performance of a bank in attracting new money depends on two input factors: skill and reputation. We first estimate the unobservable skill of a bank as a deviation of observed cost efficiency from expected efficiency. In a second step, we find that relatively skilled banks -- that is, banks that are more cost-efficient than predicted by their input factors -- also perform better in attracting net new money. We also find that negative media coverage (such as in the context of fraudulent business practices related to tax evasion) strongly diminishes the future ability to attract assets under management, especially at small banks. Thus, adding to the explicit fines that many Swiss banks had to pay in the course of the U.S. Department of Justice's investigations, there are substantial implicit and reputational costs to banks. Consistent with the notion that trust plays an important role, banks with a higher service intensity (number of employees per assets under management) attract more future funds; by contrast, investment performance for clients seems not to explain future net new money growth.","PeriodicalId":269529,"journal":{"name":"Swiss Finance Institute Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-12-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125743845","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}
Over two decades, ETFs have become one of the most popular investment vehicle among retail and professional investors due to their low transaction costs and high liquidity, taking market share from traditional investment vehicles such as mutual funds and index futures. Research has shown that in addition to the benefits of enhanced price discovery, ETFs add noise to the market: prices of underlying securities have higher volatility, greater price reversals, and higher correlation with the index. Arbitrage activity is a necessary component in minimizing the price discrepancy between ETFs and the underlying securities. During turbulent market episodes, however, arbitrage is limited and ETF prices diverge from those of the underlying securities.
{"title":"Exchange Traded Funds (ETFs)","authors":"Itzhak Ben-David, Francesco Franzoni, R. Moussawi","doi":"10.2139/ssrn.2865734","DOIUrl":"https://doi.org/10.2139/ssrn.2865734","url":null,"abstract":"Over two decades, ETFs have become one of the most popular investment vehicle among retail and professional investors due to their low transaction costs and high liquidity, taking market share from traditional investment vehicles such as mutual funds and index futures. Research has shown that in addition to the benefits of enhanced price discovery, ETFs add noise to the market: prices of underlying securities have higher volatility, greater price reversals, and higher correlation with the index. Arbitrage activity is a necessary component in minimizing the price discrepancy between ETFs and the underlying securities. During turbulent market episodes, however, arbitrage is limited and ETF prices diverge from those of the underlying securities.","PeriodicalId":269529,"journal":{"name":"Swiss Finance Institute Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124154078","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}
Poor corporate governance permits unreliable financial reporting by a firm's management. The AGR governance rating is based on the premise that a more accurate assessment of the effects of corporate governance can be formulated by taking this output of corporate governance into account in addition to traditional governance inputs such as board structure. We document that the time series variation in a firm's AGR score reliably forecasts the firm's Return on Assets (ROA) and other measures of firm performance. A portfolio going long shares of better governed firms with high AGR scores and shorting shares of poorly governed firms with low AGR scores generates a risk-adjusted return of approximately 5% per year. Most of this return differential originates with firms having poor corporate governance. Overall, our results are consistent with a causal link between corporate governance and future firm and stock price performance.
{"title":"Does Corporate Governance Matter? Evidence from the AGR Governance Rating","authors":"Alberto Plazzi, W. Torous, Umit Yilmaz","doi":"10.2139/ssrn.2836370","DOIUrl":"https://doi.org/10.2139/ssrn.2836370","url":null,"abstract":"Poor corporate governance permits unreliable financial reporting by a firm's management. The AGR governance rating is based on the premise that a more accurate assessment of the effects of corporate governance can be formulated by taking this output of corporate governance into account in addition to traditional governance inputs such as board structure. We document that the time series variation in a firm's AGR score reliably forecasts the firm's Return on Assets (ROA) and other measures of firm performance. A portfolio going long shares of better governed firms with high AGR scores and shorting shares of poorly governed firms with low AGR scores generates a risk-adjusted return of approximately 5% per year. Most of this return differential originates with firms having poor corporate governance. Overall, our results are consistent with a causal link between corporate governance and future firm and stock price performance.","PeriodicalId":269529,"journal":{"name":"Swiss Finance Institute Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-09-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121632172","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}
Classical option pricing theories are usually built on the law of one price, neglecting the impact of market liquidity that may contribute to significant bid-ask spreads. Within the framework of conic finance, we develop a stochastic liquidity model, extending the discrete-time constant liquidity model of Madan (2010). With this extension, we can replicate the term and skew structures of bid-ask spreads typically observed in option markets. We show how to implement such a stochastic liquidity model within our framework using multidimensional binomial trees and we calibrate it to call and put options on the S&P 500.
{"title":"Discrete-Time Option Pricing with Stochastic Liquidity","authors":"Markus Leippold, Steven Schaerer","doi":"10.2139/ssrn.2744493","DOIUrl":"https://doi.org/10.2139/ssrn.2744493","url":null,"abstract":"Classical option pricing theories are usually built on the law of one price, neglecting the impact of market liquidity that may contribute to significant bid-ask spreads. Within the framework of conic finance, we develop a stochastic liquidity model, extending the discrete-time constant liquidity model of Madan (2010). With this extension, we can replicate the term and skew structures of bid-ask spreads typically observed in option markets. We show how to implement such a stochastic liquidity model within our framework using multidimensional binomial trees and we calibrate it to call and put options on the S&P 500.","PeriodicalId":269529,"journal":{"name":"Swiss Finance Institute Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-09-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124296406","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 investigate the evolution from 2000 to 2015 in the proportion of papers published by authors with a European affiliation in the three main international real estate journals. Then, we analyze papers with at least one European author and/or concentrating on Europe published from 2008 to 2015 in the two main European real estate journals by authors’ country of affiliation, by country of study and by theme. Finally, we analyze linkages between country of affiliation and country of study and theme, respectively. Our results show that the proportion of papers published by European authors in the three main international real estate journals has increased during the 2000-2015 period. Our analyses of papers published in the two European real estate journals suggest that U.K.-based researchers are the most prolific. There is also a strong ‘home bias’ in that authors largely focus on the country in which they are based. The interest in housing and valuation increased markedly during the period. Finally, we report linkages between country of affiliation and theme.
{"title":"Real Estate Research in Europe","authors":"Martin Hoesli","doi":"10.2139/ssrn.2796202","DOIUrl":"https://doi.org/10.2139/ssrn.2796202","url":null,"abstract":"We investigate the evolution from 2000 to 2015 in the proportion of papers published by authors with a European affiliation in the three main international real estate journals. Then, we analyze papers with at least one European author and/or concentrating on Europe published from 2008 to 2015 in the two main European real estate journals by authors’ country of affiliation, by country of study and by theme. Finally, we analyze linkages between country of affiliation and country of study and theme, respectively. Our results show that the proportion of papers published by European authors in the three main international real estate journals has increased during the 2000-2015 period. Our analyses of papers published in the two European real estate journals suggest that U.K.-based researchers are the most prolific. There is also a strong ‘home bias’ in that authors largely focus on the country in which they are based. The interest in housing and valuation increased markedly during the period. Finally, we report linkages between country of affiliation and theme.","PeriodicalId":269529,"journal":{"name":"Swiss Finance Institute Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-06-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115395355","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}
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