Quarterly Review of Economics and Finance最新文献

Using Colombian credit vintage data, we decompose non-performing loans into two main components: one capturing the evolution of borrowers’ payment capacity and another reflecting changes in the credit risk assumed by banks when granting loans. We employ intrinsic estimators and penalized regression techniques to address the perfect multicollinearity inherent in the model. Our analysis reveals that these two components have evolved differently over time and that they interact with the real and credit cycles distinctively. In particular, we find that a favorable economic environment and loose financial conditions improve the payment capacity of borrowers to meet their obligations, but coincide with increased risk-taking by financial institutions. Finally, we advocate for the adoption of this decomposition as a policy tool, easily applicable by financial and economic authorities with access to a continuous flow of credit vintage data. This methodology facilitates the identification of credit risk origins, thereby informing economic policies aimed at mitigating systemic financial risks.

Over the last decade, the green bond market experienced strong growth rates fueled by the need to combat climate change. However, the discourse on enhancing the effectiveness of green bonds primarily revolves around regulatory measures, often overlooking the possibility of designing inherent incentives. We show that a green bond with a coupon structure positively related to the carbon price development stimulates (early) investment in an emission-reducing project and creates higher net present values ($NPV$s) when applied in project financing. In our simulation-based framework, we model carbon prices using a geometric Brownian motion, and create a general optimal stopping time problem regarding the start of the project. The green bond in our setting carries the risk of default, also mitigated by its carbon price-linked coupon structure.

We estimate stability performances in the Chinese banking industry over the 2007–2017 period using four risk indicators under nonparametric modelling. We are the first to calculate the risk indicator shadow prices, and we use a new way of studying the relationship between stability and economic performance. In particular, we reexamine stability performances when banks achieve their best economic performances. This questions the existence of stability rents, which form a prime reason for the banking authority to consider economic performance. Finally, we verify whether ownership has an impact on our results and investigate the role of the interest rate liberalization reforms.

We use intraday trading data from the Kraken exchange to calculate the daily price synchronicity of Bitcoin and Ether from February 2018 to December 2022. We then use a comprehensive report provided by christalblockchain.com to investigate the impact of hacks on price synchronicity between the top two cryptocurrencies. Our results show that price synchronicity, as measured by the realized correlation, is consistently positive throughout the sample period, with only one (negative) exception. We further uncover a positive relationship between hacking events and the future price synchronicity of Bitcoin and Ether. This result is robust to an alternative price synchronicity measure.

This study investigates the interplay between firm-level investor sentiment and uncertainty in financial markets. We demonstrate that investor sentiment significantly influences short-term stock market returns, particularly when there is an increase in firm-level uncertainty. This correlation becomes weaker among firms experiencing a decrease in uncertainty. The cross-sectional effect of sentiment is more pronounced during periods of heightened uncertainty, as evidenced by the higher returns of sentiment-based long-short portfolios under these conditions. Our findings are robust to adjusting for various factors and using alternative uncertainty and sentiment measures.

This paper predicts the daily return volatility of 28 advanced and developing stock markets using monthly metrics of the corresponding country and global energy-related uncertainty indexes (EUIs) recently proposed in the literature. Using data in their “natural” frequencies to avoid aggregation bias, the results show that country-specific and global EUIs have predictive powers for stock returns volatility for the in-sample periods, with increased levels of EUIs exhibiting the tendency to heighten volatility. This predictability also withstands various out-of-sample forecast horizons, implying that EUI is a statistically relevant predictor in the out-of-sample analysis. The forecast precision of the GARCH-MIDAS model is improved by incorporating global EUIs relatively more than country-specific EUIs. The robustness of the findings with respect to the choice of EUI and sample definition is further confirmed. The outcomes have important policy implications for the concerned stakeholders who are concerned with stability in the global financial system and economy.

The purpose of this paper is to examine the investors´ reaction to the largest ecological disasters –Samarco (2015) and Brumadinho (2019)– occurred in Minas Gerais (Brazil). Applying a short-term event study analysis, we test the stock and Credit Default Swap (CDS) market´s on the mining sector. Moreover, a cross-sectional analysis is performed testing the effect of ESG disclosures on the market reaction –in terms of Cumulative Abnormal Returns, CAR– on the competitors of Vale S.A., the company involved in such ecological catastrophes. Our findings show a statistically significant reaction in both events. Investors´ react negatively and immediately in the case of Vale for both events; CARs are statistically significant for the shorter windows. However, investors react differently in the mining sector sample –excluding Vale–. While CARs are negative in Samarco, investors do so positively in the case of Brumadinho. In that sense, investors seemed as if they switch their perceptions from this first event –Samarco–in comparison to the most recent one –Brumadinho– rewarding the increase of ESG disclosures in the meantime and mitigating a negative contagion effect in the mining sector. The impact on the CDS market is also found positive in mining sector.

Exploiting a unique measure of takeover vulnerability principally based on the staggered passage of anti-takeover state legislations, we investigate how customer concentration is influenced by the discipline of the market for corporate control, which is widely regarded as a crucial instrument of external corporate governance. Our results demonstrate that more takeover exposure raises customer concentration considerably. Specifically, a rise in takeover susceptibility by one standard deviation increases customer concentration by 8.10%− 9.16%. When insulated from the discipline of the takeover market, risk-averse managers prefer to live a quiet life, trying to reduce firm risk. Consequently, they seek to lower customer concentration as a high level of customer concentration is risky. Therefore, firms more exposed to hostile takeovers exhibit higher customer concentration. Further analysis including entropy balancing, propensity score matching, and instrumental-variable analysis validates the results. Our study is the first to link customer concentration to the market for corporate control.

Using the data from the 2013, 2015, and 2017 waves of the China Household Finance Survey, this paper explores the impact of participation in social pension insurance on household risky asset investment with the time-varying difference-in-difference model. The research findings indicate that, in urban areas, insured households are 2.3% more likely to invest in risky assets compared to uninsured households, and the share invested in risky assets is 0.8% higher. This positive effect is more pronounced for households with a higher level of risk preference. At the same time, there is no significant difference in the probability or proportion of risky assets allocation between insured and uninsured households in rural areas. These findings have important policy implications. When the government reforms the social pension insurance system or allocates public resources in the future, they can consider gradually breaking the dual urban-rural structure in the pension insurance system to alleviate concerns among rural households regarding uncertainties.

We examine the dynamics of long-short factor returns on FOMC announcement days and the role of sentiment. We find that factor returns are negative on FOMC announcement days. Moreover, on these days returns are significantly lower following low sentiment periods. Hence, investor sentiment is a key driver of factor returns on FOMC days and this effect emanates mainly from the short portfolio leg of each factor.