Quarterly Review of Economics and Finance最新文献

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.

Bond and bank financing coexist despite their similarities as debt financing. I hypothesize that strengthening the rule of law in each country impacts corporate monitoring and firms’ financing preferences. I use panel data from 50 countries to analyze how the strength of the rule of law differs depending on countries’ legal origins. By using a regression model with an interaction term, I estimate marginal effects to determine if a stricter rule of law promotes bank or bond financing. The findings show that countries with common-law legal origins tend to have a stronger rule of law than civil law countries. A stronger rule of law increases bank lending but has a negative impact on bond issuance. This effect has a more significant impact in countries with Scandinavian legal origins and only a minor effect in countries with French legal origins. These differences can be attributed to how each country addresses agency problems, concerns regarding bank influence, and the availability of additional banking services.

Based on the data of listed companies in Shanghai and Shenzhen that have implemented private equity placements (PEP) from 2007 to 2020, we examine the impact of different types of government subsidies on institutional investors' participation in PEPs. We found that, first, the more government R&D subsidies obtained by companies issuing PEP, the greater the proportion of strategic investors’ subscriptions, with corporate R&D investment playing an intermediary role. Second, the participation of strategic investors in PEPs can effectively contribute to the positive impact of R&D subsidies on firms' innovation output, while the participation of financial investors doesn’t. This study reveals the heterogeneity of the information transfer effects of government subsidies and the investment preferences of institutional investors. Our research provides empirical evidence for the authority to improve the government subsidy policy and PEP system, and provide a referenced theoretical basis for institutional investors who intend to participate in PEPs.

Generally, in the real market, empirical findings suggest that either local volatility (LV) or stochastic volatility (SV) models have a limit to capture the full dynamics and geometry of the implied volatilities of the given equity options. In this study, to overcome the disadvantage of such LV and SV models, we propose a special type of hybrid stochastic-local volatility (SLV${}^{\ast }$) model in which the volatility is given by the squared logarithmic function of the underlying asset price added to a function of a fast mean-reverting process. By making use of asymptotic analysis and Mellin transform, we derive analytic pricing formulas for European derivatives with both smooth and non-smooth payoffs under the SLV${}^{\ast }$ model. We run numerical experiments to verify the accuracy of the pricing formulas using a Monte-Carlo simulation method and to display that the proposed new model fits the geometry of the market implied volatility more closely than other models such as the Heston model, the stochastic elasticity of variance (SEV) model, the hybrid stochastic and CEV type local volatility (SVCEV) model and the multiscale stochastic volatility (MSV) model, especially for short time-to-maturity options.