Journal of Financial Economics最新文献

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Back to the 1980s or not? The drivers of inflation and real risks in Treasury bonds

IF 10.4 1区经济学 Q1 BUSINESS, FINANCE

Journal of Financial Economics

Pub Date : 2025-02-27 DOI: 10.1016/j.jfineco.2025.104027

Carolin Pflueger

This paper shows that supply shock uncertainty interacts with the monetary policy rule to drive bond risks in a New Keynesian asset pricing model. In my model, positive nominal bond-stock betas emerge as the result of volatile supply shocks but only if the monetary policy rule features a high inflation weight. Habit formation preferences generate endogenously time-varying risk premia, explaining the volatility and predictability of bond and stock excess returns in the data, and implying that bond-stock betas price the expected equilibrium mix of shocks rather than realized shocks. The model explains the change from positive nominal and real bond-stock betas in the 1980s to negative nominal and real bond-stock betas in the 2000s with a shift from dominant supply shocks and an inflation-focused monetary policy rule, to demand shocks in the 2000s. Post-pandemic nominal and real bond-stock betas are explained with dominant supply shocks and a late increase in the monetary policy inflation coefficient.

引用次数: 0

Warp speed price moves: Jumps after earnings announcements

IF 10.4 1区经济学 Q1 BUSINESS, FINANCE

Journal of Financial Economics

Pub Date : 2025-02-24 DOI: 10.1016/j.jfineco.2025.104010

Kim Christensen , Allan Timmermann , Bezirgen Veliyev

Corporate earnings announcements unpack large bundles of public information that should, in efficient markets, trigger jumps in stock prices. Testing this implication is difficult in practice, as it requires noisy high-frequency data from after-hours markets, where most earnings announcements are released. Using a unique dataset and a new microstructure noise-robust jump test, we show that earnings announcements almost always induce jumps in the stock price of announcing firms. They also significantly raise the probability of price co-jumps in non-announcing firms and the market. We find that returns from a post-announcement trading strategy are consistent with efficient price formation after 2016.

引用次数: 0

Intermediary financing without commitment

IF 10.4 1区经济学 Q1 BUSINESS, FINANCE

Journal of Financial Economics

Pub Date : 2025-02-24 DOI: 10.1016/j.jfineco.2025.104025

Yunzhi Hu , Felipe Varas

Intermediaries reduce agency problems through monitoring, but credible monitoring requires sufficient retention until the loan matures. We study credit markets when intermediaries cannot commit to retention. Two structures are examined: investors lending alongside an all-equity bank and investors lending through the bank via short-term debt. With a commitment to retention, they are equivalent. Without commitment, the all-equity bank sells loans and reduces monitoring over time. Short-term debt encourages the intermediary to retain loans and incentivizes monitoring. Our analysis provides a novel mechanism for intermediaries’ reliance on short-term debt—the constant repricing of debt creates incentives that resolve the commitment problem in loan retention and monitoring.

引用次数: 0

Constrained liquidity provision in currency markets

IF 10.4 1区经济学 Q1 BUSINESS, FINANCE

Journal of Financial Economics

Pub Date : 2025-02-24 DOI: 10.1016/j.jfineco.2025.104028

Wenqian Huang , Angelo Ranaldo , Andreas Schrimpf , Fabricius Somogyi

We devise a simple model of liquidity demand and supply to study dealers’ liquidity provision in currency markets. Drawing on a globally representative data set of currency trading volumes, we show that at times when dealers’ intermediation capacity is constrained the cost of liquidity provision increases disproportionately relative to dealer-intermediated volume. Consequently, the otherwise strong and positive relation between liquidity costs and trading volume diminishes significantly when dealers face tighter Value-at-Risk limits or higher funding costs. Using various econometric approaches, we show that this nonlinear effect of dealer constraints on market liquidity primarily stems from a reduction in the elasticity of liquidity supply, rather than changes in liquidity demand.

引用次数: 0

Distributed ledgers and the governance of money

IF 10.4 1区经济学 Q1 BUSINESS, FINANCE

Journal of Financial Economics

Pub Date : 2025-02-22 DOI: 10.1016/j.jfineco.2025.104026

Raphael Auer , Cyril Monnet , Hyun Song Shin

Distributed ledgers promise to enable the classical vision of money as a universal transaction record. But is it ever optimal to update a ledger through decentralized consensus? Analyzing an exchange economy with credit, we show that centralized updating is optimal when long-term rewards are more valued, minimizing redundant validation costs and maximizing economic surplus. Decentralization becomes preferable under weaker intertemporal incentives and when validators are drawn from market participants. We show how competing ledgers – anonymous or identified, permissioned or permissionless – can achieve socially optimal outcomes even in low-trust environments. Our framework provides a foundation for designing robust and efficient ledger systems.

引用次数: 0

Expected idiosyncratic volatility

IF 10.4 1区经济学 Q1 BUSINESS, FINANCE

Journal of Financial Economics

Pub Date : 2025-02-20 DOI: 10.1016/j.jfineco.2025.104023

Geert Bekaert , Mikael Bergbrant , Haimanot Kassa

We use close to 80 million daily returns for more than 19,000 CRSP listed firms to establish the best forecasting model for realized idiosyncratic variances. Comparing forecasts from multiple models, we find that the popular martingale model performs worst. Using the root-mean-squared-error (RMSE) to judge model performance, ARMA(1,1) models perform the best for about 46 % of the firms in out-of-sample tests. The ARMA(1,1) model delivers an average RMSE that is statistically significantly lower than all alternative models, and also performs well when not the very best. Its forecasts reverse large, unexpected shocks to realized variances. When using this model to revisit the relation between idiosyncratic risk and returns (the IVOL puzzle), we fail to find a significant relation. The IVOL puzzle is closely connected to a very small set of observations where the martingale forecast over-predicts the future realized variance. These extreme observations are correlated with well-known firm characteristics associated with the IVOL puzzle such as poor liquidity as measured by high bid-ask spreads and the “MAX” effect.

引用次数: 0

Growing the efficient frontier on panel trees

IF 10.4 1区经济学 Q1 BUSINESS, FINANCE

Journal of Financial Economics

Pub Date : 2025-02-18 DOI: 10.1016/j.jfineco.2025.104024

Lin William Cong , Guanhao Feng , Jingyu He , Xin He

We introduce a new class of tree-based models, P-Trees, for analyzing (unbalanced) panel of individual asset returns, generalizing high-dimensional sorting with economic guidance and interpretability. Under the mean–variance efficient framework, P-Trees construct test assets that significantly advance the efficient frontier compared to commonly used test assets, with alphas unexplained by benchmark pricing models. P-Tree tangency portfolios also constitute traded factors, recovering the pricing kernel and outperforming popular observable and latent factor models for investments and cross-sectional pricing. Finally, P-Trees capture the complexity of asset returns with sparsity, achieving out-of-sample Sharpe ratios close to those attained only by over-parameterized large models.

引用次数: 0

The impact of bank financing on municipalities’ bond issuance and the real economy

IF 10.4 1区经济学 Q1 BUSINESS, FINANCE

Journal of Financial Economics

Pub Date : 2025-02-13 DOI: 10.1016/j.jfineco.2025.104022

Ramona Dagostino

Do federal tax incentives for banks investing in municipal bonds support local governments during recessions? This paper exploits a change in tax benefits for banks purchasing municipal bonds and finds that expanding access to bank financing during recessions increases local governments’ debt issuance and employment growth. The estimated job multiplier is 22 jobs per million dollars of spending. There is moderate evidence of mortgage loans being crowded out by banks’ increased holdings of municipal bonds.

引用次数: 0

Global Business Networks

IF 10.4 1区经济学 Q1 BUSINESS, FINANCE

Journal of Financial Economics

Pub Date : 2025-02-13 DOI: 10.1016/j.jfineco.2025.104007

Christian Breitung, Sebastian Müller

We leverage the capabilities of GPT-3 to generate historical business descriptions for over 63,000 global firms. Utilizing these descriptions and advanced embedding models from OpenAI, we construct time-varying business networks that represent business links across the globe. We showcase the performance of these networks by studying the lead–lag effect for global stocks and predicting target firms in M&A deals. We demonstrate how masking firm-specific details can mitigate look-ahead bias concerns that may arise from the use of embedding models with a recent knowledge cutoff, and how to differentiate between competitor, supplier, and customer links by fine-tuning an open-source language model.

引用次数: 0

Do bank CEOs learn from banking crises?

IF 10.4 1区经济学 Q1 BUSINESS, FINANCE

Journal of Financial Economics

Pub Date : 2025-02-13 DOI: 10.1016/j.jfineco.2025.104009

Gloria Yang Yu

Does the early-career exposure of bank CEOs to the 1980s savings and loans (S&L) crisis affect the outcomes of banks they subsequently managed? We measure the S&L crisis exposure by the bank failure rate in the states where CEOs worked during the S&L crisis. Armed with this measure, we find that banks managed by CEOs with higher S&L crisis exposure took on less risk and that these banks better survived the financial crisis of 2008. In particular, CEOs adjusted risk attitudes in areas causing the S&L crisis: their more intense crisis experience reduced banks’ interest rate risk, exposure to risky financial innovation and credit risk. We establish the causal interpretation of the findings by evaluating the impact of crisis exposure via CEO hometown states and exploiting quasi-exogenous turnovers due to CEO retirement. Overall, CEOs learned from the past industry crisis which helped curtail their institutions’ risk exposures and enhance later crisis performance.

引用次数: 0

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