Pub Date : 2026-01-22DOI: 10.1016/j.jbankfin.2026.107635
Akihiko Ikeda , Hiroshi Osano
This paper examines the equilibrium implications of fund investors’ information capacity investments in mitigating agency problems under delegated asset management by improving the precision of information signals acquired by fund managers. Using comparative static analysis, we investigate how agency conflicts, the interaction between information capacity investment and information acquisition effort—whether substitutes or complements—and the growing institutionalization of asset management affect three key outcomes: information capacity investment; the likelihood of a market freeze, where a high-quality asset fails to circulate fully in the market; and the structure of performance-based pay for fund managers.
{"title":"Information capacity investment and financial stability under delegated asset management","authors":"Akihiko Ikeda , Hiroshi Osano","doi":"10.1016/j.jbankfin.2026.107635","DOIUrl":"10.1016/j.jbankfin.2026.107635","url":null,"abstract":"<div><div>This paper examines the equilibrium implications of fund investors’ information capacity investments in mitigating agency problems under delegated asset management by improving the precision of information signals acquired by fund managers. Using comparative static analysis, we investigate how agency conflicts, the interaction between information capacity investment and information acquisition effort—whether substitutes or complements—and the growing institutionalization of asset management affect three key outcomes: information capacity investment; the likelihood of a market freeze, where a high-quality asset fails to circulate fully in the market; and the structure of performance-based pay for fund managers.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"185 ","pages":"Article 107635"},"PeriodicalIF":3.8,"publicationDate":"2026-01-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146090220","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-21DOI: 10.1016/j.jbankfin.2025.107621
Xin Liu, Tianyao (Terry) Zhang, Yaodong Zhang
By decomposing close-to-close mid-quote returns of ETFs into their overnight and intraday components, we find that the overnight return is significantly positive, whereas the intraday return is negative. This overnight–intraday return differential is ubiquitous across ETFs tracking different asset classes or assets located in different time zones. This phenomenon cannot be explained by differences in overnight and intraday risks, macroeconomic announcements, or information asymmetry. Instead, our analysis reveals that the return pattern is primarily driven by demand shocks from retail investors and limited supply from arbitrageurs. These results indicate that the convenience of buying ETFs during intraday trading hours carries a hidden cost to investors.
{"title":"A hidden cost of ETF investing: Retail demand shocks and limits to arbitrage","authors":"Xin Liu, Tianyao (Terry) Zhang, Yaodong Zhang","doi":"10.1016/j.jbankfin.2025.107621","DOIUrl":"10.1016/j.jbankfin.2025.107621","url":null,"abstract":"<div><div>By decomposing close-to-close mid-quote returns of ETFs into their overnight and intraday components, we find that the overnight return is significantly positive, whereas the intraday return is negative. This overnight–intraday return differential is ubiquitous across ETFs tracking different asset classes or assets located in different time zones. This phenomenon cannot be explained by differences in overnight and intraday risks, macroeconomic announcements, or information asymmetry. Instead, our analysis reveals that the return pattern is primarily driven by demand shocks from retail investors and limited supply from arbitrageurs. These results indicate that the convenience of buying ETFs during intraday trading hours carries a hidden cost to investors.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"185 ","pages":"Article 107621"},"PeriodicalIF":3.8,"publicationDate":"2026-01-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146090206","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-14DOI: 10.1016/j.jbankfin.2026.107640
Michele Azzone , Emilio Barucci , Davide Stocco
We investigate the portfolio frontier and risk premia in equilibrium when institutional investors aim to minimize the tracking error variance and to attain a certain ESG score (ESG mandate). Provided that a negative ESG premium is priced by the market, we show that an ESG mandate can reduce the mean–variance inefficiency of the portfolio frontier when the asset manager targets a limited over-performance return with respect to the benchmark. In equilibrium, with mean–variance investors and asset managers endowed with an ESG mandate, a negative ESG premium arises if the mandate is binding for asset managers. The negative ESG premium is due to the ESG constraint (institutional investors over-invest in virtuous ESG stocks). We find empirical evidence of such a negative premium in the US market.
{"title":"Asset management with an ESG mandate","authors":"Michele Azzone , Emilio Barucci , Davide Stocco","doi":"10.1016/j.jbankfin.2026.107640","DOIUrl":"10.1016/j.jbankfin.2026.107640","url":null,"abstract":"<div><div>We investigate the portfolio frontier and risk premia in equilibrium when institutional investors aim to minimize the tracking error variance and to attain a certain ESG score (ESG mandate). Provided that a negative ESG premium is priced by the market, we show that an ESG mandate can reduce the mean–variance inefficiency of the portfolio frontier when the asset manager targets a limited over-performance return with respect to the benchmark. In equilibrium, with mean–variance investors and asset managers endowed with an ESG mandate, a negative ESG premium arises if the mandate is binding for asset managers. The negative ESG premium is due to the ESG constraint (institutional investors over-invest in virtuous ESG stocks). We find empirical evidence of such a negative premium in the US market.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"184 ","pages":"Article 107640"},"PeriodicalIF":3.8,"publicationDate":"2026-01-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145979533","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-10DOI: 10.1016/j.jbankfin.2026.107638
Mengmeng Guo , Na Wu , Junyi Zhao
This paper investigates the impact of extreme heat exposure on household financial risk-taking. Using data from the China Household Finance Survey (CHFS) and meteorological data, we find that extreme heat has a statistically and economically significant negative effect on households' stock market participation and the share of risky assets in their portfolios. This deterrent effect is robust across a comprehensive series of identification checks and alternative specifications. We identify three primary channels through which this effect operates: updated climate beliefs, uninsurable income shocks, and health shocks. Notably, our heterogeneity analysis reveals that more financially sophisticated households—those with higher income and literacy—exhibit a stronger negative response. This suggests that the withdrawal from risky assets is not merely a passive reaction to liquidity needs but an active response to heightened risk perceptions, consistent with theories of disappointment aversion. Moreover, we find that the negative impact of extreme heat is attenuated for households with better access to credit and stronger social capital, but is amplified for those with financial constraints such as mortgage debt. Our findings provide micro-level evidence on how a pervasive physical climate risk shapes household portfolio choice.
{"title":"Extreme heat and stock market participation: Evidence from China","authors":"Mengmeng Guo , Na Wu , Junyi Zhao","doi":"10.1016/j.jbankfin.2026.107638","DOIUrl":"10.1016/j.jbankfin.2026.107638","url":null,"abstract":"<div><div>This paper investigates the impact of extreme heat exposure on household financial risk-taking. Using data from the China Household Finance Survey (CHFS) and meteorological data, we find that extreme heat has a statistically and economically significant negative effect on households' stock market participation and the share of risky assets in their portfolios. This deterrent effect is robust across a comprehensive series of identification checks and alternative specifications. We identify three primary channels through which this effect operates: updated climate beliefs, uninsurable income shocks, and health shocks. Notably, our heterogeneity analysis reveals that more financially sophisticated households—those with higher income and literacy—exhibit a stronger negative response. This suggests that the withdrawal from risky assets is not merely a passive reaction to liquidity needs but an active response to heightened risk perceptions, consistent with theories of disappointment aversion. Moreover, we find that the negative impact of extreme heat is attenuated for households with better access to credit and stronger social capital, but is amplified for those with financial constraints such as mortgage debt. Our findings provide micro-level evidence on how a pervasive physical climate risk shapes household portfolio choice.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"184 ","pages":"Article 107638"},"PeriodicalIF":3.8,"publicationDate":"2026-01-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145979534","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-10DOI: 10.1016/j.jbankfin.2026.107639
Yahui Liu , Wenxuan Zhao , Di Gao , Zhaohui Chen
In this study, we examine how firms’ structural positions within supply chain networks influence stock price efficiency. Using a supplier-customer dataset for Chinese A-share listed firms, we construct a dynamic firm-level supply chain network and measure structural positions using degree centrality and structural hole centrality. We find that more central firms exhibit higher stock price efficiency. Further analysis demonstrates that centrality enhances price efficiency through both a disclosure channel and an information production channel. Cross-sectional analyses indicate that this relationship is stronger for firms with higher active institutional ownership, greater access to foreign investors, and fewer short-selling constraints but weakens during periods of elevated investor sentiment, underscoring the role of institutional investors in information acquisition. Finally, we find that the improved price efficiency of central firms translates into a lower cost of equity.
{"title":"From chain waves to market moves: Untangling price efficiency in the supply chain network","authors":"Yahui Liu , Wenxuan Zhao , Di Gao , Zhaohui Chen","doi":"10.1016/j.jbankfin.2026.107639","DOIUrl":"10.1016/j.jbankfin.2026.107639","url":null,"abstract":"<div><div>In this study, we examine how firms’ structural positions within supply chain networks influence stock price efficiency. Using a supplier-customer dataset for Chinese A-share listed firms, we construct a dynamic firm-level supply chain network and measure structural positions using degree centrality and structural hole centrality. We find that more central firms exhibit higher stock price efficiency. Further analysis demonstrates that centrality enhances price efficiency through both a disclosure channel and an information production channel. Cross-sectional analyses indicate that this relationship is stronger for firms with higher active institutional ownership, greater access to foreign investors, and fewer short-selling constraints but weakens during periods of elevated investor sentiment, underscoring the role of institutional investors in information acquisition. Finally, we find that the improved price efficiency of central firms translates into a lower cost of equity.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"185 ","pages":"Article 107639"},"PeriodicalIF":3.8,"publicationDate":"2026-01-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146039929","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-09DOI: 10.1016/j.jbankfin.2026.107636
Yvonne Fang , Xiaolu Hu , Angel Zhong , Zheyao Pan , Youdan Cao
This study employs a broad set of machine learning (ML) methods to examine cross-sectional variation in corporate bond returns in China. Using macroeconomic indicators together with bond- and issuer-specific characteristics, we find that ML techniques outperform traditional linear models in both statistical and economic terms. These models are particularly effective at capturing distinctive features of the Chinese market, including the dominance of state-owned enterprises, implicit government guarantees, and rapid market evolution. We compare long-short and long-only portfolio strategies to account for practical constraints on short selling. The results indicate that ML methods are effective in markets where institutional features and information asymmetries play a central role in asset pricing.
{"title":"Machine learning in corporate bonds: Evidence from China","authors":"Yvonne Fang , Xiaolu Hu , Angel Zhong , Zheyao Pan , Youdan Cao","doi":"10.1016/j.jbankfin.2026.107636","DOIUrl":"10.1016/j.jbankfin.2026.107636","url":null,"abstract":"<div><div>This study employs a broad set of machine learning (ML) methods to examine cross-sectional variation in corporate bond returns in China. Using macroeconomic indicators together with bond- and issuer-specific characteristics, we find that ML techniques outperform traditional linear models in both statistical and economic terms. These models are particularly effective at capturing distinctive features of the Chinese market, including the dominance of state-owned enterprises, implicit government guarantees, and rapid market evolution. We compare long-short and long-only portfolio strategies to account for practical constraints on short selling. The results indicate that ML methods are effective in markets where institutional features and information asymmetries play a central role in asset pricing.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"184 ","pages":"Article 107636"},"PeriodicalIF":3.8,"publicationDate":"2026-01-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145979535","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-09DOI: 10.1016/j.jbankfin.2025.107626
Maxime L.D. Nicolas
This paper investigates whether stocks earn a premium for their sensitivity to market tail events, referred to as tail risk exposure (TRE). We show that commonly used estimators of TRE, typically based on tail dependence between asset and market returns exhibit significant statistical biases, particularly in the presence of general market dependence. Empirically, we find that tail risk is priced only in low-correlation stocks, where average market comovement is weak. This suggests that investors underestimate TRE in low-correlation stocks and overestimate it in high-correlation stocks. To address this, we propose a novel double-sort portfolio strategy that accounts for both TRE and correlation, allowing us to isolate and accurately price TRE. This strategy consistently outperforms traditional single-sort methods in terms of predictive accuracy and risk-adjusted returns.
{"title":"Tail risk exposure and the cross section of expected stock returns","authors":"Maxime L.D. Nicolas","doi":"10.1016/j.jbankfin.2025.107626","DOIUrl":"10.1016/j.jbankfin.2025.107626","url":null,"abstract":"<div><div>This paper investigates whether stocks earn a premium for their sensitivity to market tail events, referred to as tail risk exposure (TRE). We show that commonly used estimators of TRE, typically based on tail dependence between asset and market returns exhibit significant statistical biases, particularly in the presence of general market dependence. Empirically, we find that tail risk is priced only in low-correlation stocks, where average market comovement is weak. This suggests that investors underestimate TRE in low-correlation stocks and overestimate it in high-correlation stocks. To address this, we propose a novel double-sort portfolio strategy that accounts for both TRE and correlation, allowing us to isolate and accurately price TRE. This strategy consistently outperforms traditional single-sort methods in terms of predictive accuracy and risk-adjusted returns.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"184 ","pages":"Article 107626"},"PeriodicalIF":3.8,"publicationDate":"2026-01-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145929156","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-08DOI: 10.1016/j.jbankfin.2026.107637
Daniel Dorn , Pramod Kumar Yadav
We hypothesize that vanity amplifies realization utility in teams; admitting mistakes is particularly painful when mistakes have to be admitted to self and colleagues. Consistent with the Vanity hypothesis, U.S. stock funds run by teams hold on to losers when losers were initiated by a subset of the team (to avoid admitting a mistake to their non-initiating colleagues), when initiators of loser positions are more experienced (to avoid losing authority by admitting mistakes to junior colleagues), and when all colleagues agree that a position is a loser. Vanity is costly – losers held underperform by a risk-adjusted 1% annually.
{"title":"Vanity in teams","authors":"Daniel Dorn , Pramod Kumar Yadav","doi":"10.1016/j.jbankfin.2026.107637","DOIUrl":"10.1016/j.jbankfin.2026.107637","url":null,"abstract":"<div><div>We hypothesize that vanity amplifies realization utility in teams; admitting mistakes is particularly painful when mistakes have to be admitted to self <em>and</em> colleagues. Consistent with the Vanity hypothesis, U.S. stock funds run by teams hold on to losers when losers were initiated by a subset of the team (to avoid admitting a mistake to their non-initiating colleagues), when initiators of loser positions are more experienced (to avoid losing authority by admitting mistakes to junior colleagues), and when all colleagues agree that a position is a loser. Vanity is costly – losers held underperform by a risk-adjusted 1% annually.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"184 ","pages":"Article 107637"},"PeriodicalIF":3.8,"publicationDate":"2026-01-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146038611","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-07DOI: 10.1016/j.jbankfin.2026.107633
Li Wang
We examine whether option availability improves price efficiency of IPO stocks during the lockup periods. Using a difference-in-difference analysis, we show that before September 2008, optioned IPOs exhibit significantly higher price efficiency than non-optioned IPOs during lockup periods across three measures. This efficiency advantage coincides with a regulatory exemption that allowed option market makers (OMMs) to short sell without pre-borrowing shares or complying with “close-out” requirements. After the exemption was eliminated, the efficiency advantage disappears. Additional evidence from Deep-In-the-Money option trading and fail-to-deliver data supports the mechanism that options enhance price efficiency by relaxing short-sale constraints during lockup periods.
{"title":"Option introduction, short-sale constraints, and stock price efficiency: New evidence from IPO lockup periods","authors":"Li Wang","doi":"10.1016/j.jbankfin.2026.107633","DOIUrl":"10.1016/j.jbankfin.2026.107633","url":null,"abstract":"<div><div>We examine whether option availability improves price efficiency of IPO stocks during the lockup periods. Using a difference-in-difference analysis, we show that before September 2008, optioned IPOs exhibit significantly higher price efficiency than non-optioned IPOs during lockup periods across three measures. This efficiency advantage coincides with a regulatory exemption that allowed option market makers (OMMs) to short sell without pre-borrowing shares or complying with “close-out” requirements. After the exemption was eliminated, the efficiency advantage disappears. Additional evidence from Deep-In-the-Money option trading and fail-to-deliver data supports the mechanism that options enhance price efficiency by relaxing short-sale constraints during lockup periods.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"184 ","pages":"Article 107633"},"PeriodicalIF":3.8,"publicationDate":"2026-01-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145979532","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-05DOI: 10.1016/j.jbankfin.2025.107624
Manuel Ramos-Francia , Peter Karlström , Ricardo Montañez-Enríquez , Matias Ossandon Busch
Using unique data on natural capital stock in Mexico since the 1980s, this paper shows that significant natural capital losses are associated with a reallocation of bank deposits and credit, shifting funds from environmentally distressed regions to those with abundant natural capital. Identification relies on comparing bank branches within the same municipality that differ in exposure to natural capital losses through their banks’ regional spread. The findings highlight that adaptation responses to environmental degradation can be affected by a natural capital depletion spiral, driven by a geographical reallocation of bank activities.
{"title":"Stranded in the wastelands? Natural capital depletion and bank deposit reallocation","authors":"Manuel Ramos-Francia , Peter Karlström , Ricardo Montañez-Enríquez , Matias Ossandon Busch","doi":"10.1016/j.jbankfin.2025.107624","DOIUrl":"10.1016/j.jbankfin.2025.107624","url":null,"abstract":"<div><div>Using unique data on natural capital stock in Mexico since the 1980s, this paper shows that significant natural capital losses are associated with a reallocation of bank deposits and credit, shifting funds from environmentally distressed regions to those with abundant natural capital. Identification relies on comparing bank branches within the same municipality that differ in exposure to natural capital losses through their banks’ regional spread. The findings highlight that adaptation responses to environmental degradation can be affected by a natural capital depletion spiral, driven by a geographical reallocation of bank activities.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"184 ","pages":"Article 107624"},"PeriodicalIF":3.8,"publicationDate":"2026-01-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145929234","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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