Quarterly Review of Economics and Finance最新文献

We develop refined probability bounds for bank insolvency risk measures based on the Z-score, analogous to those given by Cantelli’s inequality under the additional assumption of unimodality of returns, drawing on the one-sided Vysochanskii-Petunin inequality. Illustrating empirically for US banks, we argue that (i) unimodality of returns is not an overly restrictive assumption in this context, and (ii) the refined measures provide a less conservative alternative to insolvency probability bounds drawing on the (two-sided) Vysochanskii-Petunin inequality, particularly for banks with higher levels of insolvency risk.

It is commonly believed that there exists a strong negative association between corporate social performance (CSP) and firm risk.¹ To investigate the structure of this relationship, we decompose the dynamics of large U.S. company stock returns into two components: Gaussian and non-Gaussian innovations. Our findings indicate that CSP affects firm risk mainly through the non-Gaussian risk channel. In particular, it significantly reduces the magnitude of extreme returns. We find no consistent nor robust effect of CSP on the frequency of price boom and crash probability as it varies widely across industries. Last, we find no statistically significant impact of CSP on standard Gaussian volatility risk.

With the adoption of the inflation targeting regime in Brazil, the Brazilian public debt indexation structure underwent major transformations. Furthermore, public debt management strategies changed even more radically after the 2008 global financial crisis. Thus, this paper investigates the relationship between the debt indexation strategy, the type of debt indexation structure and the maturity of public securities with public debt and public debt expectations in Brazil. Regarding the debt indexation strategy, we created an indicator that shows whether the debt indexation structure is tending towards a middle-ground composition with respect to the proportions of the indexers, or whether it is tending towards a divergent composition. This indicator enables verifying whether a partial debt indexation strategy is successful in controlling both the public debt and public debt expectations, as this strategy would have the capacity to mitigate risks. Estimates are made for the total sample and for a sub-sample that represents the new debt indexation profile. The results show that a middle-ground debt indexation structure is associated with lower public debt and lower public debt expectations. The findings also reveal that a strategy of replacing floating-rate debt securities with fixed-rate debt securities and price-index debt securities is associated with lower public debt and lower public debt expectations. For the period related to the new debt indexation profile, these associations of a strategy of replacing debt securities as well as a middle-ground composition strategy with public debt and public debt expectations become stronger.

We utilise measures of economic policy uncertainty (EPU) and geopolitical risk (GPR), as well as commitments of traders (COTs), to investigate the influence of uncertainty on commodity markets. We find that uncertainty has a significant influence on returns, but the direction of the response is due to whether uncertainty emanates from demand shocks (EPU) or supply shocks (GPR). Uncertainty is also positively related to volatility and trading volume. Importantly, we also find that the net positions of both commercial and non-commercial traders are influenced by uncertainty levels. Examination of high uncertainty and recessionary periods indicates that our results are state dependent.

This study investigates the time-frequency co-movement and cross-quantile connectedness of exchange rates. Using wavelet coherence and cross-quantile methods, we examine ASEAN+ 3 countries’ time-frequency co-movement, quantile spillover effects, and network connectedness of the exchange rate markets. Our empirical results are as follows: significant co-movement heterogeneity exists across countries over different frequency bands. Moreover, the Chinese Yuan (CNY), Japanese Yen, and South Korea Won are desirable sources of diversification for other currencies across different investment horizons. CNY and JPY exhibit good regional safe haven currency attributes in different investment horizons. Overall, these findings suggest ways for currency authorities to maintain exchange rate stability and investor portfolio decisions.

The objectives of this study are twofold; to explore the structural break(s) in the time series of the US firms’ cash ratio, and, to examine the sensitivity of cash to firm characteristics around the identified break point(s) using the time-varying coefficients model. We identify a major shift in cash ratio in 1995, in the middle of the longest NBER economic expansion. We attribute this changepoint to the large and unexpected change in the target federal funds rate in 1994–1995. Moreover, we find that cash flows exert a gradually decreasing positive effect on cash holdings in the pre-1995 era, followed by an increasing negative effect in the post-1995 era. We argue that this time series evidence can settle the debate on the cash-cash flow sensitivity in the literature. We further document a hump-shaped effect from market-to-book ratio on cash holdings with a turning point in 1995. Noting that 1995 is not the exclusive period displaying such a pattern, the recurring hump-shaped effect of market-to-book ratio complements previous findings on the cyclical feature of investment opportunities. Our findings are robust to the type of changepoint detector and alternative cash measures. The incidence of the changepoint amid economic boom highlights the need for additional research on firm cash holding decisions during periods of economic growth, as most previous studies focus on cash holding during periods of economic hardship.

Anchoring impacts risk-taking decisions. This paper provides experimental evidence (n = 744) that (social) anchors shift the Prospect Theory’s value function (Kahneman and Tversky, 1979; Tversky and Kahneman, 1992). We observe that extreme (social) anchors lead to shifts in the value function, indicating a change in risk-taking. Anchors that are in line with risk-averse (risk-seeking) behavior lead, relative to the baseline, to more risk-averse (risk-seeking) decisions. Our findings are similar for social and non-social environments.

This study analyzes the marginal contribution of Brazilian banks to the systemic risk. The objective is to identify whether banks that share common characteristics similarly contribute to systemic financial shocks. First, the risk assumed by a sample of listed banks is measured from the accounting, market, and regulatory perspectives. Sample banks were segregated using an unsupervised clustering model. The results were compared with the methodology currently used by the Central Bank of Brazil to segment the banking institutions. Finally, we evaluate the banking groups’ marginal contribution to systemic financial risk using $\Delta CoVaR$. These results suggest that institutions that share similar characteristics in relation to their risk profiles behave similarly during times of greater market stress. Notably, size, geographic diversification, and liquidity were common attributes among banks contributing significantly to systemic risk during financial crises. This study advances the field of banking finance by introducing an analytical framework that goes beyond the traditional focus on bank balance sheet size, aligning with international standards for evaluating the systemic importance of financial institutions.

The objective of the study is to examine the intra-industry effects of Evergrande’s bankruptcy on the Chinese real estate listed firms. Based on an event study, we evidence a negative and statistically significant stock price reaction to Evergrande’s bankruptcy announcement. These results are consistent with the contagion effect. We also find the highest negative impact on real estate firms with greater leverage and a higher similarity in cash flows with the bankrupt firm. Finally, the magnitude of the stock market reaction to Evergrande’s bankruptcy is reinforced or mitigated by firm-specific determinants such as size and liquidity.