Research articles for the 2019-06-28

A Framework for Debt-Maturity Management
Bigio, Saki,, Galo Nuno,Passadore, Juan
We characterize the optimal debt-maturity management problem of a government in a small open economy. The government issues a continuum of finite-maturity bonds in the presence of liquidity frictions. We find that the solution can be decentralized: the optimal issuance of a bond of a given maturity is proportional to the difference between its market price and its domestic valuation, the latter defined as the price computed using the government’s discount factor. We show how the steady-state debt distribution decreases with maturity. These results hold when extending the model to incorporate aggregate risk or strategic default.

A Lucas Critique to the Difficulty Adjustment Algorithm of the Bitcoin System
Noda, Shunya,Okumura, Kyohei,Hashimoto, Yoshinori
The design of the difficulty adjustment algorithm (DAA) of the Bitcoin system is vulnerable as it dismisses miners' response to the difficulty adjustment. We develop an economic model of the Proof-of-Work based blockchain system. Our model allows miners to pause operation when the expected reward is below the shutdown point. Hence, the supply of aggregate hash power can be elastic in the cryptocurrency price and the difficulty target of the mining puzzle. We prove that, when the hash supply is elastic, the Bitcoin DAA fails to generate a new block at a constant rate. In contrast, the DAA of another blockchain system, Bitcoin Cash, is shown to be stable even when the cryptocurrency price is volatile and the supply of hash power is highly elastic. We also provide empirical evidence and simulation results supporting the model's prediction. Our results indicate that the current Bitcoin system might collapse once a sharp price fall lowers the reward for mining denominated in fiat money. However, such a crisis can be prevented through upgrading.

An Insight into Consequences of Non-Compliance or Colorable Compliance of Corporate Governance
Jarwal, Devendra,Vyas, Anoop
Non-Compliance of Corporate Governance means not adhering to the code of Corporate Governance. The non-compliance is not very serious because in case of non-compliance it is simple to identify the offender and penalize him, the serious matter is colorable compliance. The colorable compliance means, on paper it is inferred that code of corporate governance is adhered but actually it is not so hence it become very difficult to whom to rectify and what to rectify. Colorable compliance of Corporate Governance also leads to ineffectiveness of the corporate governance code. The non-compliance or colorable compliance of corporate governance standards is one of the primary factors resulting in corporate frauds or scandals. The corporate frauds in India occurred in recent times have resulted from a flagrant disregard of and non-compliance with the Indian Corporate Governance regime. Properly constituted audit committees and other committees play an important role in the sustained growth of a corporation and eliminate the corporate frauds. The colorable compliance with corporate governance norms often perceived in the entities dominated by the family members. Therefore, this paper is an attempt to highlight the state of non-compliance of corporate norms and factors responsible for colorable compliance.

Artificial Intelligence and Systemic Risk
Danielsson, Jon,Macrae, Robert,Uthemann, Andreas
Artificial intelligence (AI) is rapidly changing how the financial system is operated, taking over core functions because of cost savings and operational efficiencies. AI will assist both risk managers and microprudential authorities. It meanwhile has the potential to destabilise the financial system, creating new tail risks and amplifying existing ones due to procyclicality, endogenous complexity, optimisation against the system and the need to trust the AI engine.

Asesoramiento en la Ley de crédito inmobiliario (Advisory Services in Law Regulating Credit Agreements Relating to Residential Immovable Property)
Zunzunegui, Fernando
Spanish Abstract: El asesoramiento en operaciones de crédito inmobiliario es una de las actividades comprendidas en la Ley 5/2019, de 15 de marzo, reguladora de los contratos de crédito inmobiliario. La complejidad que puede alcanzar el crédito inmobiliario y la posible existencia de conflictos de intereses aconsejaban regular este tipo de asesoramiento. Se siguen los pasos del sistema MiFID. Desde esta perspectiva, el presente artículo analiza el régimen jurídico del asesoramiento en crédito inmobiliario y su controvertida naturaleza. Asimismo, se describe su iIter contractual, desde la perfilación del cliente, pasando por el análisis de productos y la evaluación de su adecuación al perfil del cliente, hasta le emisión de la recomendación, con referencias a la responsabilidad contractual del asesor. Se reivindica la profesión de asesor financiero, descartando que la función del notario sea la de asesorar a los clientes.English Abstract: The provision of advisory services on transactions on credit agreements relating to residential immovable property is one of the activities within the scope of Law 5/2019. It is recommended to regulate this type of legal advice due to its complexity and the conflicts of interest that may arise. MiFID II rules are been followed. From this perspective, this paper analyses the legal regime of advisory services on credit agreements relating to residential immovable property and their controversial legal nature. The contract process is described from the profile of the client, through the analysis of products and the assessment of their suitability according to the client’s profile, to the provision of the personal recommendation, with reference to advisor’s contractual liability. It is claimed the role of financial advisors, discarding that the purpose of the notary is advising clients.

Blockchain-Based Securities Offerings
Kaal , Wulf A.,Evans, Samuel
Blockchain technology has the potential to supplement the existing infrastructure for securities offerings. After examining the shortcomings of historical attempts, the article analyses the redeeming features of blockchain-based securities offerings including lower overall cost structure, substantially reduced settlement cycle, counter-party risk and systemic risk reduction, enhanced transparency, among others. The authors examine the tradeoffs between opportunities and risks of blockchain-based securities offerings.

Career Experience and Executive Performance: Evidence from Former Equity Research Analysts
Huang, Shawn X.,Hugon, Artur,Liu, Summer,Weng, Liwei
This study examines CEOs and CFOs who have prior work experience as equity research analysts. Consistent with backgrounds in forecasting and valuation, we find these executives provide earnings guidance that is more accurate than that of other executives, and their merger and acquisition (M&A) transactions generate significantly higher announcement returns. For available CEOs and CFOs, we examine their track records as research analysts with respect to forecasting accuracy and stock recommendation profitability. We find a positive association between a record of past forecasting accuracy and more accurate earnings guidance, as well as a positive association between past stock recommendation profitability and M&A announcement returns. Beyond these traits, we find these executives provide greater certainty in their answers to analysts during conference calls, especially when answering forward-looking questions. Finally, these executives’ firms exhibit superior accounting and stock return performance. Overall, our evidence suggests that early career skill sets can shape top executive performance outcomes.

Does Credit Affect Stock Trading? Evidence From the South Sea Bubble
Braggion, Fabio,Frehen, Rik,Jerphanion, Emiel
We study the relationship between credit, stock trading and prices bubbles. The role of credit in financial bubbles is theoretically ambiguous. On the one hand, it may help rational arbitrageurs to trade against a bubble; on the other hand, it may enable naive speculators to buy overvalued assets. We construct a novel database containing every individual stock transaction in three major British companies during the 1720 South Sea Bubble. We link these transactions to daily margin loan positions and subscription lists of new share issues. We find that margin loan holders acted as extrapolators, i.e., they were more likely to buy (sell) following high (low) past returns. Loan holders also signed up to buy new shares of overvalued companies and incurred large trading losses. Our results suggest that credit provision was instrumental in fueling the bubble.

Expectation Error
Zhang, Xiao
I backcast expectation errors of credit spreads via machine learning. I use newspapers over the past century to construct text-based expectations of credit spreads and study the relationship between expectation errors and business cycles. The main result is that overoptimism about future credit spreads predicts lower GDP growth and higher unemployment over the medium run, even after controlling for past and prevailing credit spreads. This finding suggests credit-market sentiment is an important driver of economic fluctuations. Consistent with this story, I also find both the amount of net debt issuance and the ratio of debt to equity issuance increase following periods of overoptimism.

Famaâ€"French Factor Timing: The Long-Only Integrated Approach
Leippold, Markus,Rüegg, Roger
We find significant positive abnormal returns for long-only factor timing strategies. Adopting the integrated approach to factor investing, we can generate a timing alpha of 0.38\% per month. The timing ability persists among the Fama--French factors, the US, developed and emerging markets, and arises irrespectively of the actual premium in the underlying factors. Also, it remains significant when we apply robust test statistics and adjust for multiple tries. Even though the strategies are subject to high turnover, including the information of the covariance matrix helps to generate alpha even after transaction costs.

Financial Interconnectedness, Amplification, and Cross-Border Activity
Ikeda, Daisuke,Ojima, Mayumi,Takahashi, Koji
Interconnectedness is an essential feature of banks, but it can be a shock-amplifier. We explore changes in, and implications and underlying drivers of interconnectedness among major banks in the world, focusing on their stock market volatilities. The estimated vector autoregressive model reveals significant changes in interconnectedness between before and after the global financial crisis of 2007-09. Specifically, the estimation shows a significant increase in connectedness from foreign banks to Japanese banks. The impulse responses to a credit shock show that changes in the estimated interconnectedness can be an amplifier for Japanese banks in particular. A panel regression analysis suggests that Japanese banks' cross-border activity, especially lending, has likely driven an increase in connectedness from foreign banks.

Financing Conditions and Toxic Emissions
Goetz, Martin Richard
Exploiting heterogeneity in U.S. firms' exposure to an unconventional monetary policy shock that reduced debt financing costs, I identify the impact of financing conditions on firms' toxic emissions. I find robust evidence that lower financing costs reduce toxic emissions and boost investments in emission reduction activities, especially capital-intensive pollution control activities. The effect is stronger for firms in noncompliance with environmental regulation. Examining the ability of regaining regulatory compliance by implementing pollution control activities I find that only capital-intensive activities help firms regaining compliance. These findings underscore the impact of firms' financing conditions for emissions and the environment.

Government Guarantee, Investment, and the Welfare Effects (정부의 ì•"묵적 지급보증이 투자를 통해 사회후생에 미치ëŠ" 효과)
Hwang, Sunjoo
English Abstract: Creditor bail-in is a new resolution regime under which failed banks are resolved at the costs of creditors rather than taxpayers, which essentially implies that banks cannot rely on government guarantees anymore. G20 and other developed countries agree on accepting this new regime since bail-in could arguably resolve several fundamental problems of bailouts such as banks’ moral hazard, fiscal instability, and economic injustice. However, there is an opposing view on bail-in: as government guarantees are abolished, investment would be discouraged and hence social welfare decreases. This paper focuses on this opposing view and clarifies when this view is valid and when it is not. In under-developed financial systems, financial constraints are strong and the related problem of insufficient investment could be exacerbated as government guarantees are abolished. In advanced financial systems, by contrast, financial constraints are weaker and the related problem of excessive investment could be mitigated after the abolition.Korean Abstract: 채권자 베일인은 은행이 실패했을 ë•Œ 납세자가 ì•„ë‹Œ 채권자의 손실분담을 통해 은행을 정리하ëŠ" 제도이다. 이러한 제도가 도입되면 대형은행에 대한 정부의 ì•"묵적 지급보증은 ê·¸ 효력을 실질적으로 상실하게 된다. 베일인 제도ëŠ" 은행의 도덕적 해이, 국가재정 ì•…í™", 경제적 불평ë"±ì´ë¼ëŠ" 근본적인 문제를 초래하ëŠ" 기존의 베일아웃을 대체할 수 있다. ë"°ë¼ì„œ 글로벌 금융위기 이후 G20을 비롯한 선진국은 베일인 제도를 도입하기로 합의하였다. 그러나 정부의 ì•"묵적 지급보증이 사라지면 투자가 위축될 것이고 ë"°ë¼ì„œ 사회후생이 감소할 것이라ëŠ" 반론도 존재한다. 본 연구ëŠ" 이러한 반론에 논의의 초점을 ë'ê³  이론모형을 통해 당해 반론이 언제 성립하고 언제 성립하지 ì•ŠëŠ"지 분석한다. 금융시스템의 발전 정도가 낮은 경우 금융제약이 강하게 ìž'용하기 때문에 사회적으로 최적인 수준보다 투자가 과도하게 낮은 이른ë°" 과소투자의 문제가 발생할 가능성이 크다. 이 경우 정부의 ì•"묵적 지급보증이 사라지면 과소투자 문제가 ì•…í™"되므로 베일인 제도ëŠ" ë°"람직하지 않다. 반면 금융시스템의 발전 정도가 ë†'은 경우 금융제약이 약하게 ìž'용하여 오히려 과당투자 문제가 발생할 가능성이 크다. 이러한 상황에서 ì•"묵적 지급보증이 사라지면 과당투자 문제가 경감되므로 베일인 제도ëŠ" ë°"람직하다.

How Reverse Merger Firms Raise Capital in PIPEs: Search Costs and Placement Agent Reputation
Bayar, Onur,Liu, Yini,Mao, Juan
We examine the role of placement agents in private investments in public equity (PIPE) deals of firms that went public via a reverse merger (RM). We find that reputable placement agents with greater expertise (expert agents) help RM firms to complete their PIPE deals in a smaller number of financing rounds (closings) and raise funds from a larger base of private investors. However, RM firms advised by expert agents agree to more investor-friendly contract terms and pay higher cash compensation to their placement agents. Further, RM firms are not able to negotiate more attractive pricing when they agree to more investor-friendly contract terms in PIPEs placed by expert agents. Overall, our evidence indicates that, while expert PIPE agents use their superior networking capabilities to reduce the search costs of RM firms, they also exercise more bargaining power against RM firms compared to non-expert PIPE agents. Finally, compared to the PIPE offerings of IPO firms, the PIPE offerings of RM firms are more likely to involve deals with multiple closings and substantially larger offer price discounts. This suggests that raising new capital in PIPEs entails significantly higher costs for RM firms than IPO firms.

Inference and Prediction of Stock Returns using Multilevel Models
Green, Brice,Thomas, Samuel
Linear models that associate current period stock returns with observable characteristics (“risk” or “factor” models) are common in the finance industry and academic literature. Multilevel models are a generalized form of traditional linear regression models and have several benefits relative to traditional OLS regression including the regularization of parameter estimates, the ability to incorporate prior information, better out-of-sample forecasts, desirable inferential properties, and the ability to directly model the time-series/cross-sectional nature of financial security returns. We demonstrate the effectiveness of this strategy on two common linear models for security returns, with applications to inference and forecasting for risk and prices.

Infusion of Integrated Reporting in India through Corporate Governance Norms
Jarwal, Devendra
On the global platform integrated reporting is a new standard and procedure for corporate communication, which helps to complete financial and sustainability reports among the corporate entity and its stakeholders. Integrated reporting is a "process that results in communication, most visibly a periodic “integrated report”, about value creation over time. In India also, various initiatives have been taken in the past by the Ministry of Corporate Affairs and SEBI to ascertain that those entrusted with the responsibility of governing shareholder wealth are adequately regulated and made accountable. Integrated Reporting is enhancing the way organizations think, plan and report the story of their business. Organizations are using Integrated Reporting to communicate a clear, concise, integrated story that explains how all of their resources are creating value. The framework still needs to be fully field-tested, and it would help prospective compliance officers greatly if IIRC were able to provide case studies of best practice across a range of different organizations. These would also help promote adoption and aid compliance in an area where, as our survey shows, there is much enthusiasm but little awareness.

Internal Rating Based Models: Do They Matter for Bank Profit Margins?
Mascia, Danilo V.,Keasey, Kevin,Vallascas, Francesco
The net interest margin (NIM) from the traditional intermediation function is pivotal for bank profitability and solvency. Using a unique cross-country sample on bank internal rating based (IRB) models, we find that the NIM increases when banks measure a larger share of their credit risk via IRB models. This result does not reflect greater credit risk-taking by IRB banks. Instead, IRB models improve credit risk-management, and this improvement is accompanied by lower funding costs and higher investment in interest earning assets. Ultimately, IRB models improve the risk-return trade-off of a bank’s traditional intermediation function as compared to cruder credit-risk measurement systems.

Is Market Liquidity Less Resilient after the Financial Crisis? Evidence for US Treasuries
Broto, Carmen,Lamas, Matias
We analyse the market liquidity level and resilience of US 10-year Treasury bonds. Having checked that five indicators show inconclusive results on the liquidity level, we fit a bivariate CC-GARCH model to evaluate its resilience, that is, how liquidity reacts to financial shocks. According to our results, spillovers from liquidity volatility to returns volatility and viceversa are more intense after the crisis. Further, the volatility persistence of both returns and liquidity becomes lower after the crisis. These results are consistent with the existence of more frequent short-lived episodes of high volatility and more unstable liquidity that is more prone to evaporation.

Labor Mobility and Loan Origination
Agarwal, Sumit,Lin, Yupeng,Zhang, Yunqi,Zhang, Zilong
This paper examines whether and to what extent loan officers’ labor mobility affects the U.S. residential mortgage loan originations and modifications. Our identification relies on a spatial regression discontinuity design (RDD) instituted by staggered adoptions of the inevitable disclosure doctrine (IDD) in different states of the U.S. We find that mortgages originated after the adoptions of the IDD are 10% less likely to default, suggesting an improvement in ex ante screening. In addition, IDD adoptions lead to a reduction in loan-to-value (LTV), and an increase in interest rate unaccompanied with any decrease in the loan supply, suggesting an improvement in loan origination efficiency. Further analyses reveal that a discouragement on loan officers’ mobility increases ex post monitoring as loan modification rate increases and foreclosure rate decreases after IDD adoptions. Such positive effects further translate into more stable housing prices. Overall, we find economically meaningful impacts of restricting loan officers’ job switching on the mortgage market.

Liquidity Stress Detection in the European Banking Sector
Heuver, Richard,Triepels, Ron
Liquidity stress constitutes an ongoing threat to financial stability in the banking sector. A bank that manages its liquidity inadequately might find itself unable to meet its payment obligations. These liquidity issues, in turn, can negatively impact the liquidity position of many other banks due to contagion effects. For this reason, central banks carefully monitor the payment activities of banks in financial market infrastructures and try to detect early-warning signs of liquidity stress. In this paper, we investigate whether this monitoring ask can be performed by supervised machine learning. We construct probabilistic classifiers that estimate the probability that a bank faces liquidity stress. The classifiers are trained on a dataset consisting of various payment features of European banks and which spans several known stress events. Our experimental results show that the classifiers detect the periods in which the banks faced liquidity stress reasonably well.

Loan Portfolio Risk and Capital Adequacy: A New Approach to Evaluating the Riskiness of Banks
Lee, Charles M.C.,Zhong, Qinlin,Wang, Yanruo
We develop a new Loan Portfolio Risk (LPR) variable that captures expected loan losses given historical cross-correlations in default rates across loan types. We find a LPR-based capital adequacy ratio dominates ratios based on risk-weighted asset (RWA) in predicting bank failures. The LPR-based variable is incrementally useful in predicting failures up to five years in advance, even after controlling for the CAMELS variables. Further tests show publicly-listed bank holding companies with higher LPR have higher market implied costs-of-capital, suggesting equity markets are aware of their riskier nature. However, on average, high-LPR firms still appear overpriced relative to low-LPR firms. During the financial crisis, a cash-neutral strategy that longs low-LPR firms and shorts high-LPR firms earns 3% to 4% in monthly five-factor alpha.

Market Power and Consumer Welfare: Evidence from Home Rental Markets
Xiao, Steven Chong,Xiao, Serena Wenjing
This paper examines the recent rise of institutional investment in the single-family home-rental market and its implication to renters' welfare. Using institutional mergers to identify local exogenous variation in corporate landlords' market power, we show that rent increased in neighborhoods where both of the merging firms owned properties (i.e. overlapping neighborhoods) relative to other non-overlapping neighborhoods. Interestingly, crime rate also decreased significantly in the overlapping neighborhoods after mergers. Our findings suggest that while corporate landlords leverage market power to extract greater surplus from renters, they also improve the quality of rental service by internalizing the cost of public goods.

Mutual Fund Flows and the Information Channel of the Risk-free Rate
De Jesus, Miguel Karlo
I establish that mutual fund flows are less sensitive to past performance when the risk-free rate declines. I present a model of portfolio allocation with endogenous information choice to show that this novel fact is attributable to more informed fund investors when rates fall. To strengthen the empirical identification of this mechanism, I proxy information costs by a fund's age and retail clientele, and confirm that the weakening of the flow-performance relationship is more pronounced when information barriers are higher. Also consistent with this information channel, I find that page visits to online fund filings decrease with the riskless rate.

Optimal Delegated Contracting
Buffa, Andrea M.,Liu, Qing,White, Lucy
We investigate a setting where two agents exert complementary efforts on a principal’s project. In standard Principal-Agent theory, contracts are public and it is at least weakly better for a principal to contract directly with each agent. Yet in the real world, delegated contracting is very common. We show delegated contracting can be optimal when that the terms of incentive contracts are observed only by the direct signatories to those contracts. With centralized contracting, each agent fears that the principal will opportunistically reduce the other agents bonus, muting incentives to exert effort. With delegated contracting, one agent observes the contract of the agent he hires, alleviating effort concerns, but allowing rent extraction. In delegating, the principal trades off the loss of control and rent extraction by the hiring agent against the gains from improved observability and effort.

Organizational Structure, Voluntary Disclosure, and Investment Efficiency
Hwang, Hyun
The understanding of what determines firm boundaries is central to the theory of the firm, and much attention has been paid to firms’ decisions to organize multiple projects within one firm. One factor that drives these decisions is information sharing that facilitates efficient internal capital allocation, but few studies investigate how firms’ information sharing with external capital markets can affect firm boundaries and how they affect firms’ disclosure behaviors. This project examines the relationship between external disclosures and firm boundaries with an emphasis on internal capital allocation. My analysis demonstrates two main points. First, the ability to allocate capital internally induces a multi-project firm to withhold more private information to the external capital markets than a group of stand-alone firms. Second, I show conditions under which it is beneficial to organize multiple projects within one firm. Specifically, if disclosure friction is at a moderate level, the value of a multi-project firm is greater than the value of a group of stand-alone firms. If firms choose their organizational structure based on firm value, these results imply that firms that are subject to a moderate level of disclosure friction choose to own multiple projects under the same roof. In addition, multi-project firms are informationally opaque because of i) disclosure friction and ii) internal capital allocation.

Parimutuel Betting on the Esports Duels: Reverse Favourite-Longshot Bias and Its Determinants
Dagaev, Dmitry,Stoyan, Egor
We analyse betting behaviour patterns of the visitors of the specialized betting website dedicated to the popular eSports game Counter-Strike: Global Offensive. The reverse favourite-longshot bias is found both in the in-sample and out-of-sample datasets. This phenomenon is rather unusual for parimutuel betting markets because favourite-longshot bias is more common. We define simple betting strategies based on the bets on underdogs and show that these strategies make a sufficiently large positive profit, which is a sign of market inefficiency. Next, we investigate determinants of the reverse favourite-longshot bias. We hypothesize that popular teams attract more unsophisticated gamblers which adds to the stronger reverse favourite-longshot bias in matches with such teams. Geographical proximity is found to be a significant factor that increases the bias, whereas the effect of internet popularity measured by the number of team players' followers on Twitter surprisingly follows the U-shape curve.

Pricing Financial Derivatives Subject to Multilateral Credit Risk and Collateralization
Xiao, Tim
This article presents a new model for valuing financial contracts subject to credit risk and collateralization. Examples include the valuation of a credit default swap (CDS) contract that is affected by the trilateral credit risk of the buyer, seller and reference entity. We show that default dependency has a significant impact on asset pricing. In fact, correlated default risk is one of the most pervasive threats in financial markets. We also show that a fully collateralized CDS is not equivalent to a risk-free one. In other words, full collateralization cannot eliminate counterparty risk completely in the CDS market.

Professionals on Corporate Boards: How Do They Affect the Bottom Line?
Sako, Mari,Kubo, Katsuyuki
Professional-directors â€" licensed professionals who sit on corporate boards â€" play varied roles under different circumstances, leading to differential corporate performance. We develop a two-dimensional framework with the “wise counsel” role in relation to the professional-capital dimension, and the “cop” and “entrepreneur” roles along the risk-taking dimension. We demonstrate, using data on all publicly quoted companies in Japan during 2004-2015, that the presence of professional-directors increases profitability and corporate value across sectors, indicative of their wise counsel role. Their presence also leads to higher stock return volatility, evidence of their risk-endorsing role, in regulated industries than in less regulated industries. Professional-directors thus constitute a specific type of resource that influences corporate strategy, leading to corporate performance heterogeneity.

Proof-of-What? Detecting Original Consensus Algorithms in Cryptocurrencies with a Four-Factor Model
Shanaev, Savva,Sharma, Satish,Valluri, Subhakara,Shuraeva, Arina
This study applies Fama-French-style factor loading analysis to cryptocurrency financial performance data to determine the originality of 32 reportedly novel consensus algorithms (“proofs”) and 20 hybrid consensus mechanisms as compared to conventional proof-of-work and proof-of-stake using a sample of 302 cryptocurrencies. Only 14 out of 32 new consensus algorithms and 12 out of 20 hybrid mechanisms are found to be truly original. Innovative consensus protocols are not associated with superior returns while original hybrid solutions are. The findings allow investors to select coins with original “proofs” and to explore performance implications of consensus algorithms. For future research, the applicability of market, size, proof and age factors for risk and attribution analysis of cryptocurrency markets is evidenced.

Real Estate Market Evolution and Monetary Policy in Kazakhstan
Ybrayev, Zhandos,Becker, Charles
This paper considers the link between macroeconomic policy and housing demand in an upper middle-income transition economy, Kazakhstan. The paper further explores price cointegration and contagion across cities. We find evidence that some parts of the housing market lead others but that, overall, regional housing markets are only weakly interlinked. The markets also tend to respond weakly to policy interventions â€" a matter of possible concern to the nation’s central bank.

Robust Desmoothed Real Estate Returns
Delfim, Jean-Christophe,Hoesli, Martin
This research starts from the observation that common desmoothing models are likely to generate some extreme returns. Such returns will distort risk measurement and hence can lead to investment decisions that are suboptimal relative to those that would be made if a transaction based index were available. Thus, we propose to improve the desmoothing models by incorporating a robust filter into the procedure. We report that in addition to properly treating for smoothing, the method prevents the occurrence of extreme values. As shown with U.S. data, our method leads to desmoothed series whose characteristics are akin to those of transaction-based indices.

Temperature Shocks and Establishment Sales
Addoum, Jawad M.,Ng, David T.,Ortiz Bobea, Ariel
Combining granular daily data on temperatures across the continental U.S. with detailed establishment data from 1990 to 2015, we study the causal impact of temperature shocks on establishment sales and productivity. Using a large sample yielding precise estimates, we find no evidence that temperature exposures significantly affect establishment-level sales or productivity, including among industries traditionally classified as heat-sensitive. At the firm-level, we also find that temperature exposures aggregated across firm establishments are generally unrelated to sales, productivity, and measures of profitability. Our results are consistent with findings of a tenuous relation between temperature and aggregate economic growth in rich countries.

The Effect of International Subsidiaries on Voluntary Disclosure - Evidence from Natural Disasters
Oesch, David,Urban, Felix
This paper documents that managers of multinational companies adjust voluntary disclosure after significant events at international subsidiaries. We show an increase in the likelihood and frequency of management forecasts following natural disasters in regions where companies operate subsidiaries. The exogenous and staggered nature of natural disasters as well as our research design choices substantially raise the hurdle for alternative explanations of our result. Further analyses suggest that the effect is particularly strong for companies that rely on equity financing. Our paper contributes to the nascent literature on transmission effects within international business groups.

Unspanned Risks, Negative Local Time Risk Premiums, and Empirical Consistency of Models of Interest-Rate Claims
Bakshi, Gurdip,Crosby, John,Gao Bakshi, Xiaohui
We formalize the notion of local time risk premium in the context of a theory in which the pricing kernel is a general diffusion process with spanned and unspanned components. We derive results on the expected excess return of options on bond futures. These results are organized around our new empirical finding that the average returns of out-of-the-money puts and calls on Treasury bond futures are both negative. Our theoretical reconciliation warrants a negative local time risk premium, and our treatment considers models with market incompleteness and sources of volatility uncertainty.

What Makes Cryptocurrencies Special? Investor Sentiment and Return Predictability During the Bubble
Chen, Cathy Yi‐Hsuan,Despres, Romeo,Guo, Li,Renault, Thomas
The 2017 bubble on the cryptocurrency market recalls our memory in the dot-com bubble, during which hard-to-measure fundamentals and investors' illusion for brand new technologies led to overvalued prices. Benefiting from the massive increase in the volume of messages published on social media and message boards, we examine the impact of investor sentiment, conditional on bubble regimes, on cryptocurrencies aggregate return prediction. Constructing a crypto-specific lexicon and using a local-momentum autoregression model, we find that the sentiment effect is prolonged and sustained during the bubble while it turns out a reversal effect once the bubble collapsed. The out-of-sample analysis along with portfolio analysis is conducted in this study. When measuring investor sentiment for a new type of asset such as cryptocurrencies, we highlight that the impact of investor sentiment on cryptocurrency returns is conditional on bubble regimes.

Ð"инамички коефицијенти: нови приступ у анализи солвентности предузећа (The Dynamic Coefficients: New Approach to the Analysis of Company’s Solvency)
Bukvic, Rajko,Pavlovic, Radica
Serbian Abstract: У чланку се разматра коришћење двају приступа анализи солвентности предузећа â€" традиционалног, заснованог на показатељима из биланса стања и биланса успеха, и новог, заснованог на показатељима из извештаја о кретању новчаних средстава. Уз помоћ дисперзионе анализе показано је да та два приступа резултирају значајно различитим оценама солвентности. То омогућује закључак, да за анализу солвентности (превасходно) треба користити и динамичке показатеље.English Abstract: The article considers the use of two approaches in the analysis of enterprise’s solvency â€" traditional, based on balance and profit and loses balance, and new, based on indicators from cash-flow report. With the analysis of variance, on the data for one of the branches of Serbian economy, it was showed, that these two approaches give significantly different estimates of enterprise’s solvency. It makes possible to conclude, that for analysis of solvency it is necessary to use too (at first) dynamic indicators.

ê³ ë ¹í™"ê°€ 금융기관의 경영환경에 미치ëŠ" 영향과 예보의 ì—­í•  (The Effects of Population Aging on Business Environment of Financial Institutions and the Role of the KDIC)
Kim, Minhyuk,Park, Jinwoo
Korean Abstract: 본 연구ëŠ" 우리나라의 인구 ê³ ë ¹í™"ê°€ 금융기관의 경영환경에 미칠 수 있ëŠ" 영향에 대해 2003년부터 2017년까지의 일반은행, 저축은행, 생명보험사, 손해보험사, 증권사의 패널자료를 이용하여 실증적으로 분석하고 있다. 실증분석은 인구 ê³ ë ¹í™"ê°€ 금융기관의 부보예금, 수익성 및 부실위험에 미치ëŠ" 영향을 ì¶"정하고 5ê°œ 업권별 차이를 분석하고 있다. 그리고 이러한 분석결과를 통해 인구 ê³ ë ¹í™"에 ë"°ë¥¸ 금융기관의 경영환경 ë³€í™"와 관련한 예금보험공사의 ì—­í• ê³¼ 대ì'전략에 대한 시사점을 얻고자 했다. 분석결과 첫째, 인구 ê³ ë ¹í™"에 ë"°ë¼ 일반은행의 부보예금은 증가하고 생명보험, 손해보험 ë"± 보험사의 수입보험료ëŠ" 감소하ëŠ" 것으로 나타나고 있다. 반면 저축은행, 증권사에 대한 영향은 통계적으로 유의하지 않은 것으로 나타났다. ë'˜ì§¸, 저축은행을 제외한 모ë"  업권에서 금융기관의 수익성에 인구 ê³ ë ¹í™"에 ë"°ë¥¸ 부정적 영향이 나타나고 있다. 셋째, 손해보험사의 경우 타 업권과ëŠ" 달리 인구 ê³ ë ¹í™"에 ë"°ë¥¸ Z-Scoreë¡œ 측정된 부실위험이 증가하고 ROA 변동성도 증가하ëŠ" 것으로 나타나 전반적인 경영위험이 ë†'아지ëŠ" 결과를 보여주고 있다. 본 연구ëŠ" 이러한 인구 ê³ ë ¹í™" ë"± 구조적 ë³€í™"에 ë"°ë¥¸ 결과를 토대로 예금보험공사의 ì—­í• ê³¼ 대ì'전략으로서 거시건전성감독 차원의 상시감시 ê°•í™", ì°¨ë"±ë³´í—˜ë£Œìœ¨ì œ 개편, 예보기금의 재원조달 체계 보완, RRP, Bail-in ë"±ì˜ 제도 도입을 통한 정리당국으로서의 선제적이고 효과적인 대ì'체계 확립, 예금자 ë"± 금융소비자의 보호와 편익 제고 í•„ìš"성 ë"±ì„ 제시하고 있다.English Abstract: This study examines the effects of population aging on the business environment of financial institutions by using the actual panel data of banks, savings banks, life insurance corporations, non-life insurance corporations, and securities companies. Empirical studies estimate the effects of population aging upon financial firms’ insured deposits, profitability and insolvency risks focusing on how the effects differ according to each sector. From the analysis, we have tried to derive implications upon KDIC’s role and corresponding strategy for the changes population aging created. First of all, in terms of insured deposits of each sector, as the population ages commercial banks’ insured deposits increase while those of insurance companies decrease. On the other hand, the results regarding savings banks and securities companies were statistically insignificant. Secondly, population aging seems to be a negative factor for the profitability of each sector except the savings banks. Thirdly, focusing on the management risks incurred by population aging, we found that the insolvency risks of each sector measured by the Z-Score did not increase except for the non-life insurance corporations of which the bankruptcy risks and the ROA volatility increased significantly. This study provides the reinforcement of off-site surveillance in terms of macroprudential supervision, reform of the differential premium system, supplementation of the financing system of deposit insurance fund, establishment of a preemptive response system through RRP and bail-in, protection of financial consumers as the corresponding strategy for KDIC.

네트워크를 통해 분석한 êµ­ë‚´ 금융기관간 상호연계성 연구- 외환위기와 글로벌금융위기를 ì¤'심으로-(Measuring the Systemic Risk in the Korean Financial Institution Using Network Analysis)
Mun, Jeonghun,Hwang, Soosung
Korean Abstract: 본 연구ëŠ" 우리나라 금융기관간, 금융산업과 비금융산업간 상호연계성을 분석함으로써 시스테믹 리스크(systemic risk)를 측정하였다. 네트워크 분석결과 금융기관간 상호연계성은 외환위기, 글로벌 금융위기 및 유럽재정위기와 같은 금융위기 기간 동안 매우 ë†'게 나타나며 특히, 우리 내부적 ìš"인에서 기인한 1997ë…„ 외환위기의 경우 다른 대외적 ìš"인에서 기인한 위기ë"¤ë³´ë‹¤ ê·¸ 연계성이 훨ì"¬ ë†'았다. 한편 금융위기 발생시 금융업이 비금융산업에 미치ëŠ" 영향이 상당히 커서 금융위기가 실물경제위기로 전파됨을 보여주고 있다. 또한 외환위기 이전과 이후 상호연계도의 ì–'상이 다름을 ì•Œ 수 있었다. 외환위기 이후에ëŠ" 위기 전에 비하여 상호연계성이 낮아지고, ì¤'심적인 역할을 하ëŠ" 업종이 은행에서 증권업으로 ë³€í™"í•œ 것으로 분석되었다. 이ëŠ" 외환위기 이후 한국 금융시스템의 구조변í™"ë¡œ 은행ì¤'심금융체제에서 시장ì¤'심금융체제로 ë³€í™"를 겪었고 거시건전성과 금융시스템이 안정í™"된 것으로 해석할 수 있다. 종합해보면, 정책적으로 외환위기 이전에ëŠ" 은행의 안정성이, ê·¸ 이후에ëŠ" 증권회사의 안정성이 금융시장 전체의 안정성에 결정적인 역할을 í•  수 있다.English Abstract: In this paper we estimate systemic risk by analyzing interconnectedness between financial institutions, and between financial institutions and non-financial industries in Korea. The result show that interconnectedness between financial institutions was very high during the financial crises such as the 1997 Currency Crisis, the 2008 Global Financial Crisis, and the European Sovereign Debt Crisis. In particular, systemic risk during the 1997 Currency Crisis caused by domestic reasons was much higher than that caused by other external shocks. During the 1997 Currency Crisis, the risk in the financial sector was spread to non-financial sector, creating significant national economic crisis. It is also found that the patterns of interconnectedness before and after the 1997 Currency Crisis are different. The systemic risk was higher before the Currency Crisis, and it was commercial banks that were at the center of systemic risk. After the Crisis, the systemic risk is more driven by investment banks or insurance institutions. These results suggest a major shift in the Korean financial industry from commercial banking to market-based financing. In conclusion, the stability of investment banks plays a crucial role for the entire financial system.

선택편의를 고려한 가계부채의 ì¶"ì • (Correcting for Selection Bias in Estimating a Household Debt Equation)
Hwang, Jin-Tae,kim, Sung-min
Korean Abstract: 본 연구ëŠ" 가계부채에 대한 방정식을 제시하고, Heckman(1979)의 확률효과 선택모형을 이용하여 이를 ì¶"정하였다. 가계의 부채조달과 관련하여 본 연구ëŠ" 발생 가능한 비임의성에 ë"°ë¥¸ 선택편의 문제를 완í™"하기 위하여 가계의 부채조달 선택과 유동성 제약을 선택방정식으로 고려하였으며, 가계의 유동성 제약 여부를 판단하기 위하여 3가지 형태의 기준을 사용하였다. SFLC(2012~2017) 패널자료의 경우 부채조달 가구의 비ì¤'은 60%를 상회하ëŠ" 수준이었으며, 유동성 제약 가구의 비ì¤'은 ê·¸ 기준에 ë"°ë¼ 17.8%, 25.7%, 48.5%ë¡œ 나타났다.Heckman 모형의 ì¶"ì •ê²°ê³¼, 가계소ë"ì´ 1% 증가할 경우 가계부채가 0.06~0.30%, 그리고 부동산이 1% 증가할 경우 0.77~0.79% 증가하ëŠ" 것으로 ì¶"정되었다. 또한, Heckman 모형 ì¤' 가계의 부채조달과 유동성 제약 관련 선택방정식과 결과방정식의 충격ë"¤ 간에 통계적으로 유의한 ì–'(+)의 상관관계를 발견하였다. 아울러 일반적인 확률효과 패널모형 ì¶"정치에 하향편의가 존재할 가능성도 발견하였다.English Abstract: Using Heckman's (1979) sample selection model, we estimate a household debt equation suggested in this study. To do this, we consider two selection equations, so that we may correct for biases from non-randomness regarding debts borrowed by a given household: one is whether a particular household decides to fall into debt; and the other is whether it has a liquidity constraint(s) binding. The proportion of households indebted in the SFLC data used is more than 60%. Given three criteria used for liquidity constraints, the proportions of liquidity constrained households are 17.8%, 25.7%, and 48.5%, respectively.Our findings in the Heckman's selection model are that a 1% increase in a typical borrower's income would lead to a 0.06-0.30% increase in household debt, and that a 1% increase in his/her real estate would increase it by 0.77-0.79%. Furthermore, we find that a positive estimated correlation coefficient is statistically significant between shocks in each of two selection equations and an outcome equation of the Heckman's model. It is also found that there can be a downward bias in standard random effects estimators.

은행 자기자본비율과 주거래 기업의 대출 관계 (Bank Capital Ratio and Corporate Loan of Main Bank)
Lee, Sangwook
Korean Abstract: 본 연구ëŠ" 기업수준의 미시자료를 이용하여 은행 자기자본비율과 기업 대출 관계에 대해 다ì–'í•œ 분석결과를 제시하였다. 은행 자기자본비율과 (주거래)기업 대출은 ì–'의 관계를 보였으나, 은행 자기자본비율과 기업의 주거래은행 대출비ì¤'은 음의 관계를 보였다. 은행 자기자본비율 관련 기업대출의 경기순ì'성을 확인할 수 있ëŠ" 반면, 주거래기업의 은행대출 관계에서ëŠ" 은행 자기자본비율에 ë"°ë¥¸ 기업대출의 경기순ì'성이 완í™"될 것으로 ì¶"론된다.ë°"젤Ⅱ 시행 전후, 은행 규모에 ë"°ë¼ 은행 자기자본비율과 (주거래)기업 대출, 은행 자기자본비율과 기업의 주거래은행 대출비ì¤'은 유의한 차이를 보였다. 2008ë…„ ë°"젤Ⅱ시행이후 은행 자기자본비율과 (주거래)기업 대출 간의 ì–'의 관계ëŠ" ë"ìš± 확대되ëŠ" 반면, 은행 자기자본비율과 기업 주거래은행 대출비ì¤' 간의 음의 관계ëŠ" 감소하였다. 한편 은행 규모가 클수록 은행 자기자본비율과 (주거래)기업 대출 간의 ì–'의 관계ëŠ" 감소되ëŠ" 반면, 은행 자기자본비율과 기업의 주거래은행 대출비ì¤' 간의 음의 관계ëŠ" ë"ìš± 확대된 것으로 나타났다.English Abstract: The purpose of the study is to empirically investigate the various relationships between the bank capital ratio and the corporate bank loans by using micro firm level data. We analyzed all non-financial listed companies in Korea between 2002 and 2012. The results showed a positive relationship between bank capital ratio and the corporate main bank loans. It supports the pro-cyclicality of bank capital ratio in corporate bank loans. However, we found a negative relationship between bank capital ratio and firm’s main bank loan ratio. We inferred the less pro-cyclicality of bank capital ratio in the main bank-firm relationship. In addition, we found the significant impacts of Baselâ…¡ capital regulation and bank size on the relationships between bank capital ratio and bank corporate loan or main bank loan ratio.