Research articles for the 2020-03-19

A Systematic and Analytical Review of the Socioeconomic and Environmental Impact of the Deployed High-Speed Rail (HSR) Systems on the World
Mohsen Momenitabar,Zhila Dehdari Ebrahimi,Mohammad Arani

The installation of high-speed rail in the world during the last two decades resulted in significant socioeconomic and environmental changes. The U.S. has the longest rail network in the world, but the focus is on carrying a wide variety of loads including coal, farm crops, industrial products, commercial goods, and miscellaneous mixed shipments. Freight and passenger services in the U.S. dates to 1970, with both carried out by private railway companies. Railways were the main means of transport between cities from the late 19th century through the middle of the 20th century. However, rapid growth in production and improvements in technologies changed those dynamics. The fierce competition for comfortability and pleasantness in passenger travel and the proliferation of aviation services in the U.S. channeled federal and state budgets towards motor vehicle infrastructure, which brought demand for railroads to a halt in the 1950s. Presently, the U.S. has no high-speed trains, aside from sections of Amtrak s Acela line in the Northeast Corridor that can reach 150 mph for only 34 miles of its 457-mile span. The average speed between New York and Boston is about 65 mph. On the other hand, China has the world s fastest and largest high-speed rail network, with more than 19,000 miles, of which the vast majority was built in the past decade. Japan s bullet trains can reach nearly 200 miles per hour and dates to the 1960s. That system moved more than 9 billion people without a single passenger casualty. In this systematic review, we studied the effect of High-Speed Rail (HSR) on the U.S. and other countries including France, Japan, Germany, Italy, and China in terms of energy consumption, land use, economic development, travel behavior, time use, human health, and quality of life.

A Variational Analysis Approach to Solving the Merton Problem
Ali Al-Aradi,Sebastian Jaimungal

We address the Merton problem of maximizing the expected utility of terminal wealth using techniques from variational analysis. Under a general continuous semimartingale market model with stochastic parameters, we obtain a characterization of the optimal portfolio for general utility functions in terms of a forward-backward stochastic differential equation (FBSDE) and derive solutions for a number of well-known utility functions. Our results complement a previous studies conducted on optimal strategies in markets driven by Brownian noise with random drift and volatility parameters.

An Augmented q-Factor Model with Expected Growth
Hou, Kewei,Mo, Haitao,Xue, Chen,Zhang, Lu
In the investment theory, firms with high expected investment growth earn higher expected returns than firms with low expected investment growth, holding investment and expected profitability constant. Building on cross-sectional growth forecasts with Tobin’s q, operating cash flows, and change in return on equity as predictors, an expected growth factor earns an average premium of 0.84% per month (t = 10.27) in the 1967â€"2018 sample. The q5 model, which augments the Hou-Xue-Zhang (2015) q-factor model with the expected growth factor, shows strong explanatory power in the cross section and outperforms the Fama-French (2018) 6-factor model.

Application of Minsky's Theory to State-Dominated Economies
Vymyatina, Yulia,Pakhnin, Mikhail
The global financial crisis of 2007â€"2008, consequences of which continue to adversely affect the world economy, is often called a ‘Minsky crisis’. A prominent American economist Hyman Philip Minsky studied capitalist economic system paying special attention to its major properties, in particular, instability and high importance of money. He developed a consistent way to explain the nature of economic crises, which, according to him, are generated through financial mechanisms. Minsky’s financial instability hypothesis states that the fragility of financial system increases in periods of booms and thus crises arise from the very structure of business cycles.In this paper we give a short review of Minsky’s ideas and show that the last financial crisis could be persuasively explained in the framework of financial instability hypothesis. Moreover, we provide the extension of Minsky’s hypothesis and apply his insights to the ‘state-dominated economies’. Interesting and vivid examples of such economies are modern Russian economy (characterized by weak institutions, resource curse and dominance of state-related companies in the financial as well as non-financial sectors) and planned economy of the Soviet Union. We analyze the financial crisis 2008â€"2009 in Russia and the breakdown of the USSR and argue that these events could be interpreted along Minsky’s line of argument.

Causal Nexus Between the Anomalies in the Crude Oil Price and Stock Market
Hawaldar, Iqbal Thonse ,T.M., Rajesha,Lokesh, Lokesh,Sarea, Adel
The paper attempts to examine the causal association between the crude oil price anomalies and stock market returns in the Indian stock market. The study covers 9 years starting from 2009 to 2018, and the study includes ten companies in the oil drilling and exploration sectors listed in the BSE Sensex and CNX NIFTY indexes. We employed correlation tests in determining the relationships amongst the stock market return, crude oil price and market benchmarking indexes. Our study concludes that the oil price shocks is not directly affecting the stock prices of oil-related firms; instead, its indirectly impacting the economy through different channels such as fiscal, trade and price channels. We also suggest the need for future researches in determining the effect of oil price variations on the macroeconomic factors by precisely diagnosing the role of channels mentioned above.

Cognitive Limits and Preferences for Information
Tóbiás, Áron
The structure of uncertainty underlying certain decision problems may be so complex as to elude decision-makers’ full understanding, curtailing their willingness to pay for payoff-relevant information â€" a puzzle manifesting itself in, for instance, low stock-market participation rates. I present a decision-theoretic method that enables an analyst to identify decision-makers’ information-processing abilities from observing their preferences for information. A decision-maker who is capable of understanding only those events that either almost always or almost never happen fails to attach instrumental value to any information source. On the other hand, non-trivial preferences for information allow perfect identification of the decision-maker’s mental capacity.

Collateral Damage of Reckless Lending
Savvides, Savvakis C.
It is argued that lending where the overwhelming criterion is the collateral rather than the repayment capability of the project and the borrower is highly likely to be unproductive and will inevitably lead to a transfer of wealth. If this is done on a systematic and massive scale as was the case in Cyprus in the years leading to the 2013 crisis it is also likely to cause a long and deep balance sheet recession. Banks should therefore be in check and held accountable for such professional malpractices.

Collateral, Labour Monitoring and Banking Accelerator
Zhang, Hongru
This paper derives the determination of external finance premium () in the context of banking sector profit maximisation behaviour. EFP/credit spread stems from the managerial cost, associated with the intermediation process, of factor payments to collateral and labour services. The stake of entrepreneurs is relevant to determine the on two grounds: (a) the ratio of entrepreneurial net wealth to collateral value influences the total managerial cost; and (b) entrepreneurs' net worth (fraction of total collateral) helps mitigate the from extracting rebate from collateral service. Based on these, we can derive an observationally similar relationship between and entrepreneurial leverage, as in previous studies. This provides a rationale for us to understand the financial friction from a novel perspective. Besides the leverage ratio, the is shown to be determined also by the resource cost of financial intermediation, for which the model generates a mechanism that contains broader ingredients in determining the behaviour of .

Coronavirus Perceptions And Economic Anxiety
Thiemo Fetzer,Lukas Hensel,Johannes Hermle,Christopher Roth

We provide the first analysis of how the global spread of the novel coronavirus affects contemporaneous economic sentiment. First, we collect a global dataset on internet searches indicative of economic anxieties. We find that the arrival of coronavirus in a country led to a substantial increase in such internet searches of up to 58 percent. Second, leveraging two US representative survey experiments conducted in early and mid-March 2020, we document a rapid surge in economic anxieties after the arrival of the coronavirus in the US. Third, to understand how information about the coronavirus affects these anxieties, we measure perceptions about the coronavirus. We find substantial heterogeneity in participants' beliefs about the mortality from and contagiousness of the virus. Fourth, experimentally providing participants with information about mortality and contagiousness causally affects participants' worries regarding the aggregate economy and their personal economic situation. Finally, we document that participants' subjective mental models understate the non-linear nature of disease spread, and that these mental models shape the extent of economic worries. These results underscore the importance of public education about the virus for successful containment as well as the need for timely measures that decrease economic hardship and anxiety during a major global pandemic.

Creditor Rights and Strategic Default: Evidence from India
Tantri, Prasanna L.
I examine whether higher creditor rights prevent strategic default. Borrowers who cross either of two thresholds are exempt from a creditor rights law in India. Using a loan day-level dataset, I find that loan performance is better when the law applies and that outperformance increases after a further rise in creditor rights. To discern the strategic motive, I use an unprecedented invalidation of the Indian currency whereby holders of high-value currency were forced to declare their cash holdings to banks. Defaulters exempt from the law showed a greater tendency to repay their loans during the ban period.

Declaration of Dividend According to the Companies Act 2013 Along with Applicable Provisions of the Companies Act 1956
Jarwal, Devendra
The paper seeks to highlight the various provisions related to declaration and payment of dividend in a composite manner. The dividend related provisions are running through transitional phase and Sections 124 and 125 of the Companies Act 2013 are yet to be notified, hence till then corresponding sections of the Companies Act 1956 and rules thereof will be in force and we need to interpret both the Acts in a harmonious and constructive way for better compliance of the provisions. Explorative research method has been used in this paper. The paper concludes that new Companies Act has clarified most of the dividend related issues.

Demographic Impacts on Life Cycle Portfolios and Financial Market Structures
Liu, Weifeng,Poonpolkul, Phitawat
This paper provides a framework to endogenize rates of return for risk-free bonds and risky capital in an overlapping generation model. The rate of return on capital is endogenized by introducing idiosyncratic production shocks to avoid computation challenges associated with aggregate production shocks in the literature. The framework enables the interaction between financial markets and macroeconomic conditions in a production economy. Based on this framework, the paper first examines life-cycle portfolio choice without demographic change, and illustrates that several factors such as borrowing costs, labor income and production risk play important roles in life-cycle portfolios. The paper then investigates the impacts of population aging on macroeconomic conditions, life-cycle behaviors and financial market structures. The results show that population aging leads to higher capital-labor ratios, and reduces the rates of return on both assets. The bond market shrinks significantly, and capital decreases if the fertility rate declines but increases if the mortality rate declines, leading to structural change in financial markets. The impacts on life-cycle variables are quite different in the fertility and mortality cases particularly at the late stage of life.

Direct and indirect transactions and requirements
Husna Betul Coskun

The indirect transactions between sectors of an economic system has been a long-standing open problem. There have been numerous attempts to define and mathematically formulate this concept in various other scientific fields in literature as well. The existing indirect effects formulations, however, can neither determine the direct and indirect transactions separately nor quantify these transactions between two individual sectors of interest in an economic system. The novel concepts of the direct, indirect and total transactions between any two sectors are introduced, and the corresponding requirements matrices are systematically formulated relative to both final demands and gross outputs, based on the system decomposition theory. It is demonstrated theoretically and through illustrative examples that the proposed requirements matrices accurately define and quantify the corresponding direct, indirect, and total interactions and relationships. The proposed requirements matrices for the US economy using aggregated input-output tables for multiple years are then presented and briefly analyzed.

Equity Risk Premiums: Determinants, Estimation and Implications - The 2020 Edition
Damodaran, Aswath
The equity risk premium is the price of risk in equity markets, and it is a key input in estimating costs of equity and capital in both corporate finance and valuation. Given its importance, it is surprising how haphazard the estimation of equity risk premiums remains in practice. We begin this paper by looking at the economic determinants of equity risk premiums, including investor risk aversion, information uncertainty and perceptions of macroeconomic risk. In the standard approach to estimating the equity risk premium, historical returns are used, with the difference in annual returns on stocks versus bonds, over a long period, comprising the expected risk premium. We note the limitations of this approach, even in markets like the United States, which have long periods of historical data available, and its complete failure in emerging markets, where the historical data tends to be limited and volatile. We look at two other approaches to estimating equity risk premiums â€" the survey approach, where investors and managers are asked to assess the risk premium and the implied approach, where a forward-looking estimate of the premium is estimated using either current equity prices or risk premiums in non-equity markets. In the next section, we look at the relationship between the equity risk premium and risk premiums in the bond market (default spreads) and in real estate (cap rates) and how that relationship can be mined to generated expected equity risk premiums. We close the paper by examining why different approaches yield different values for the equity risk premium, and how to choose the “right” number to use in analysis.

Experience-based Learning, Stock Market Participation and Portfolio Choice
Foltyn, Richard
Recent evidence suggests that lifetime experiences play an important role in determining households' investment choices. I incorporate these findings and the fact that household portfolios are underdiversified into an otherwise standard life-cycle model and examine to what extent they can help resolve long-standing puzzles in the literature regarding stock market participation and the fraction of financial wealth invested in risky assets. I show that experience-based learning about returns creates a positive correlation between a household's position in the wealth distribution and its optimism about future returns. The wealthy consequently increase their investment in risky assets, while participation is limited among poor households. I find that in a reasonably calibrated quantitative model, this mechanism is able to close approximately half of the gap between participation rates observed in the data and the predictions from standard models. On the other hand, the average conditional risky share remains mostly unaffected.

Financial Stress and Economic Growth: The Moderating Role of Culture and Trust
Makrychoriti, Panagiota,Pasiouras, Fotios,Tasiou, Menelaos
Using a sample of EU countries over the period 2002-2018, we find that a national culture of uncertainty avoidance and trust has a conditional role in the interplay between financial stress and economic growth. However, the cultural dimension of individualism does not appear to influence this relationship. By dis-aggregating the GDP into its four main components, we find that the moderating effect of uncertainty avoidance and trust flows through consumption and investments. The results also show that, during the global financial crisis, the moderation effect of trust is weaker in magnitude, whilst that of uncertainty avoidance is reinforced. Finally, by adopting a North-South EU divide perspective, we find that the results are mainly driven by the latter cluster of countries.

Forecasting the Australian Yield Curve
Brugler, James,Li, Bonnie,Nasiri, Maryam,Sastry, Ravi
We apply a number of forecasting models to Australian Government Bond yields. All methods rely solely on the history of yields. Consistent with findings from US Treasury data, we show that the simplest forecasting models across all maturities and forecasting horizons are also generally the best: the forward yield (when available) and the random walk model. Models with more structure â€" e.g. principal components and Bayesian vector autoregression â€" can help forecast overnight yields at very short horizons, but provide little or no improvement in other cases.

Granger Causality Detection in High-Dimensional Systems Using Feedforward Neural Networks
Calvo-Pardo, Hector F.,Mancini, Tullio,Olmo, Jose
This paper proposes a novel methodology to detect Granger causality in mean in vector autoregressive settings using feedforward neural networks. The approach accommodates unknown dependence structures between the elements of highly-dimensional multivariate time series with weak and strong persistence. To do this, we propose a two-stage procedure. First, we fit a neural network given by an optimal number of nodes in the intermediate hidden layers. This is done by maximising the transfer of information between input and output variables in the network. Second, we apply a novel sparse double group lasso penalty function to identify the variables that have predictive ability and, hence, Granger cause the others. The penalty function inducing sparsity is applied to the weights characterizing the nodes of the neural network. We show the correct identification of these weights for increasing sample sizes. A comprehensive simulation study shows the strong performance of our method for Granger causality detection in terms of size and power, and the consistency of the method for model selection for increasing sample sizes. An application to the recently created Tobalaba network of renewable energy companies shows the increase in connectivity between companies after the creation of the network using Granger-causality measures to map the connections.

How Effective are Macroprudential Policies in Asiapacific? Evidence from a Meta-Analysis
Cantú, Carlos,Gambacorta, Leonardo,Shim, Ilhyock
This paper evaluates the effectiveness of macroprudential policies in five Asia-Pacific countries (Australia, Indonesia, New Zealand, the Philippines and Thailand). We use supervisory bank-level data and apply a common empirical strategy. We find that macroprudential policies are effective in reducing excessive household credit growth. Additionally, a tightening in macroprudential policy has a stronger effect than an easing. We also find that banks’ size and liquidity influence the effect of macroprudential policy on credit growth. Finally, macroprudential policy is effective in reducing bank risk as measured by the non-performing loan ratio. Full Publication: Measuring the Effectiveness of Macroprudential Policies Using Supervisory Bank-Level Data

Information Revolution and Insurance Ethos: Weber, Foucault, Deleuze and Beyond
Seog, S. Hun
We discuss the relationship between insurance and capitalism and the effect of information revolution on society. We propose that risk calculation and capitalistic insurance ethos represent the episteme of the classical period and laid the ground for capitalism. We discuss information revolution in relation to risk and insurance. Information revolution allows corporations to behave like insurers in that they produce and discriminate risks. In this sense, information revolution can be considered insurance revolution. Information revolution deconstructs individuals to dividuals, and transforms a society of discipline or control to a society of manipulation. In the society of manipulation, languages are numerical and network; manipulation has the form of modulation and metamorphosis; and people are exposed to multiple personalities and compound dividuals. It is also noted that information revolution intensifies the immanent conflicts of the insurance ethos.

Italia Economia a Fine 2019 (Italy - At the Close of 2019)
Mazziero, Maurizio,Lawford, Andrew,Serafini, Gabriele
Italian Abstract: Ricerca sulla situazione economica italiana basata sui dati economici ufficiali; vengono analizzati e confrontati con il passato il debito pubblico, le riserve ufficiali, il PIL, l'inflazione e la disoccupazione. English Abstract: Research into the state of the Italian economy based on official economic data; the current Sovereign Debt, Official Reserves, GDP, Inflation and Unemployment situation is presented and and compared with the past.

Judicial Efficiency and Lending Quality
D'Apice, Vincenzo,Fiordelisi, Franco
The worldwide diffusion of Covid-19 virus has been negatively impacting on borrowers' credit standing and a new Non-Performing Loans (NPLs) peak is expected, especially in Europe, where the current level is half trillion of Euro. How is it possible to help banks to reduce NPLs? By using contract enforcement reforms implemented in four European countries as a quasi-natural experiment, we provide empirical evidence that NPLs declines improving judicial system. Our results have important policy implications especially now since Covid-19 is a new storm. An effcient judicial system is crucial to help banks facing the virus' negative financial effects.

Loan Types and the Bank Lending Channel
Ivashina, Victoria,Laeven, Luc,Moral-Benito, Enrique
Using credit-registry data for Spain and Peru, we document that four main types of commercial credit â€" asset-based loans, cash flow loans, trade finance and leasing â€" are easily identifiable and represent the bulk of corporate credit. We show that credit growth dynamics and bank lending channels vary across these loan types. Moreover, aggregate credit supply shocks previously identified in the literature appear to be driven by individual loan types. The effects of monetary policy and the effects of the financial crisis propagating through banks’ balance sheets are primarily driven by cash flow loans, whereas asset-based credit appears to be largely insensitive to these types of effects.

Managing Risk for Sustainable Microfinance
Knewtson, Heather,Qi, Howard
Sustainable micro-finance depends on the appropriate management of credit risk. However, small and micro businesses (SMBs) tend to offer little information on their default probability, which poses serious challenges for their micro-finance needs. Given the tremendous socioeconomic impact of SMBs, it is essential that they receive appropriate guidance. The current situation is not sustainable â€" sometimes lenders charge excessive interest or withdraw funding if limited by regulatory ceilings; sometimes lenders underestimate SMB credit risk, through an insufficient understanding of intrinsic risk. To alleviate this problem, we propose an insurance framework to determine the feasible range of insurance premium.

Market Power and Welfare in Asymmetric Divisible Good Auctions
Manzano, Carolina,Vives, Xavier
We analyze a divisible good uniform-price auction that features two groups each with a finite number of identical bidders and present conditions under which a unique privately revealing equilibrium exists. We derive novel comparative static results highlighting that increases in transaction costs and noise in the signals of a group reinforce each other in making demand schedules of both groups steeper. If the correlation of values of the groups raises, as in a crisis situation, then the illiquidity effect is further reinforced. A “stronger” bidding group - which has more precise private information, faces lower transaction costs, and is more oligopsonistic - has more market power (price impact) and so will behave competitively only if it receives a higher per capita subsidy rate. When the strong group values the asset no less than the weak group, the expected deadweight loss increases with the quantity auctioned and also with the degree of payoff asymmetries. Price impact and the deadweight loss may be negatively associated and market integration may reduce welfare. The results are consistent with the available empirical evidence.

Portfolio Choice with Sustainable Spending: A Model of Reaching for Yield
Campbell, John Y.,Sigalov, Roman
We show that reaching for yield - a tendency to take more risk when the real interest rate declines while the risk premium remains constant - results from imposing a sustainable spending constraint on an otherwise standard infinitely lived investor with power utility. This is true for two alternative versions of the constraint which make wealth and consumption follow martingales in levels or in logs, respectively. Reaching for yield intensifies when the interest rate is initially low, helping to explain the salience of the topic in the current low-rate environment. The sustainable spending constraint also affects the response of risktaking to a change in the risk premium, which can even be negative when the riskless interest rate is sufficiently low. In a variant of the model where the sustainable spending constraint is formulated in nominal terms, low inflation also encourages risktaking.

Rentabilidad de los Fondos de Inversión en España, 2004-2019 (Return of Mutual Funds in Spain, 2004-2019)
Fernandez, Pablo,de Apellániz, Eduardo,Fernández Acín, Juan
Spanish Abstract: La rentabilidad media de los fondos de inversión en España en los últimos 15 años (2,67%) fue inferior a la inversión en bonos del estado español a 15 años (3,88%) y a la inversión en el IBEX 35 (5,07%). 138 fondos de los 631 con 15 años de historia tuvieron una rentabilidad superior a la de los bonos del estado a 15 años y 75 a la del IBEX 35. 9 fondos tuvieron rentabilidad negativa. El fondo más rentable proporcionó en los últimos 15 años a sus partícipes una rentabilidad total del 366% y el menos rentable del -56%. Se muestran los fondos más rentables y los menos rentables. English Abstract: The average return on investment funds in Spain in the last 15 years (2.67%) was lower than investment in government bonds to 15 years (3.88%) and investment in the IBEX 35 (5.07%). 138 of the 631 funds with 15 years had a higher return than 15-year government bonds . The most profitable fund provided in the last 15 years to its investors a total return of 366% and the least profitable of -56%.

Risk Contagion of Bank-firm Credit Network: Evidence from China
hao, Qingmin,Shen , Jim Huangnan,Lee, Chien-Chiang
In order to explore the effect of China’s listed companies’ credit on banking system risks, this research employs the network topology method to build a bankâ€"firm credit network of loans between banks and those listed companies and examines the dynamic topology of these network risks to the banking system. The results show that the credit network has a hierarchical coreâ€"margin structure, whereby Bank of China and China Merchants Bank are respectively key pivots for state-owned banks and stock-holding banks to control the contagion in the network. The decentralized structure of banks’ credit network effectively reduces risk to the banking system. Moreover, the average path length, network connectivity ratio, betweenness centrality, and degree of correlation in the credit network distinctly affect the banking system’s risk, thus making these characteristics suitable targets for the regulation and monitoring of such risk.

Robust Leveraged ETF Portfolios Extending Classic 40/60 Portfolios and Portfolio Insurance
Smirnov, Mikhail,Smirnov, Alexander
Leveraged ETFs provide a convenient mechanism to dynamically change portfolio exposure and can be successfully used to construct robust portfolios that perform well during equity market drops. We start with a classical 60 percent Bonds/ 40 percent Stocks portfolio with monthly rebalancing that delivered 9.4 percent annually over since 1986. Its 120 percent leveraged cousin that is 72 percent Bonds/ 48 percent Stocks delivered 10.4 percent annually since 1986, same as stocks but with lower volatility and drawdowns. Instead of leveraging with borrowing at portfolio level we can use a portfolio of leveraged ETFs.We consider several balanced stocks/bonds portfolios created with leveraged ETFs but without borrowing money at portfolio level and show that they present a very attractive risk-adjusted alternative to just stock index and classical stocks/bonds portfolios without leverage. In particular portfolio of 40 percent TQQQ, 20 percent TMF, 40 percent TLT with monthly rebalancing proposed by us in 2017 paper as a leveraged ETF alternative to classical stocks/bonds portfolios performed well in 2018 and through beginning of Coronavirus crisis up to February 28, 2020. What happens to this portfolio as crisis continues still to be seen.A classical portfolio insurance strategy of Black-Jones-Perold can be easily implemented with leveraged ETFs. More complex dynamic portfolio strategies can also be implemented using leveraged ETFs.

Scoring Functions for Multivariate Distributions and Level Sets
Xiaochun Meng,James W. Taylor,Souhaib Ben Taieb,Siran Li

Interest in predicting multivariate probability distributions is growing due to the increasing availability of rich datasets and computational developments. Scoring functions enable the comparison of forecast accuracy, and can potentially be used for estimation. A scoring function for multivariate distributions that has gained some popularity is the energy score. This is a generalization of the continuous ranked probability score (CRPS), which is widely used for univariate distributions. A little-known, alternative generalization is the multivariate CRPS (MCRPS). We propose a theoretical framework for scoring functions for multivariate distributions, which encompasses the energy score and MCRPS, as well as the quadratic score, which has also received little attention. We demonstrate how this framework can be used to generate new scores. For univariate distributions, it is well-established that the CRPS can be expressed as the integral over a quantile score. We show that, in a similar way, scoring functions for multivariate distributions can be "disintegrated" to obtain scoring functions for level sets. Using this, we present scoring functions for different types of level set, including those for densities and cumulative distributions. To compute the scoring functions, we propose a simple numerical algorithm. We illustrate our proposals using simulated and stock returns data.

Semi-closed form solutions for barrier and American options written on a time-dependent Ornstein Uhlenbeck process
Peter Carr,Andrey Itkin

In this paper we develop a semi-closed form solutions for the barrier (perhaps, time-dependent) and American options written on the underlying stock which follows a time-dependent OU process with a log-normal drift. This model is equivalent to the familiar Hull-White model in FI, or a time dependent OU model in FX. Semi-closed form means that given the time-dependent interest rate, continuous dividend and volatility functions, one need to solve numerically a linear (for the barrier option) or nonlinear (for the American option) Fredholm equation of the first kind. After that the option prices in all cases are presented as one-dimensional integrals of combination of the above solutions and Jacobi theta functions. We also demonstrate that computationally our method is more efficient than the backward finite difference method used for solving these problems, and can also be as efficient as the forward finite difference solver while providing better accuracy and stability.

The Decreasing Value of Non‐Soes’ Political Connections During China's Anti‐Corruption Campaign: Evidence and Mechanism
Liu, Jinsong,Ying, Qianwei
In this paper, we find that China's anti‐corruption campaign since 2012 significantly reduces the value of political connections for non‐state‐owned enterprises (non‐SOEs). We provide evidence showing that the decline of the value of political connections for non‐SOEs is attributed mainly to the decreasing return from political connections, instead of increasing political risk. We further find that the decreasing return of the politically connected firms is driven mainly by the disappearance of the 'resource effect' of political connection in facilitating access to bank credit and government subsidies, but not due to the increasing cost of maintaining political connections.

The Development and Regulation of Cryptoassets: Hong Kong Experiences and a Comparative Analysis
Huang, (Robin) Hui,Yang, Demin,Loo, Ferdinand Fai Yang
Cryptoassets have emerged as a new category of financial products in recent years and have attracted a great deal of attention from market participants and regulators. While the characteristics of cryptoassets, such as anonymity and disintermediation in transactions, bring significant benefits, they come with a range of significant risks concerning investor protection and market integrity. Due to the difficulties in regulating cryptoassets under the traditional framework, Hong Kong has set up its first comprehensive regulatory regime on cryptoassets in November 2018, imposing new standards on cryptoasset fund managers, distributors and platform operators. By means of a comparison with four major jurisdictions overseas, including Mainland China, the US, the UK, and Singapore, the strengths and potential concerns of Hong Kong’s new regime are analysed. Overall, the new regulatory regime for cryptoassets in Hong Kong is a significant development, addressing the issues of regulatory gaps and regulatory arbitrage that existed under the previous framework as well as introducing enhanced regulatory standards. This has the effect of improving investor protection, but there are some remaining concerns. Chief amongst them are the problems with regulatory scope, the application of traditional regulatory standards to cryptoassets that do not fall within the definition of securities or futures, problems with the sandbox mechanism, and ultimately as a matter of regulatory philosophy, the need for a better balance between investor protection and market development.

The Effect of Shareholder Turnout on Voting Rights and Separation
Bøhren, Øyvind,Christophersen, Sebastian,Lerfaldet, Simen
We find that shareholder turnout at the general meeting of Norwegian public firms varies between 11% and 95%, being 59% on average. This turnout behavior implies that majority control requires less than one third of the average firm’s shares, and that attending shareholders vote for 1.7 times the shares they own. Turnout is higher when the largest shareholder is foreign, the firm is small, the debt is low, and option compensation is on the agenda. This evidence suggests that shareholders consider the general meeting a more important monitoring device the more serious the potential conflicts of interest in the firm.

The Impact of Corporate’s Size on Their Common Stock’s Return: Evidence from EGX
Wagdi, Osama,Tarek, Yasmeen,Medhat , Ahmed,Mahdy, Amr,Waleed, Batool,Ashraf, Omar
The current research investigates the impact of the corporate's size of their common stock return in Egyptian exchange (EGX); the population of the study is Egyptians corporation that has been issued common stock and listed on the Egyptian Stock Exchange during the year 2019, finally, the study found an impact of corporate's size on their return; and it explain a 41% from the change on common stock's return in EGX. The study recommends that investors and portfolio managers consider the corporate's size as one of the determinants of investment weights for common stock; it's has impact of performance's portfolio, according to two dimensions are risk and return.

The Impact of Media Coverage on Voluntary Disclosure
Lock, Brandon
Prior research establishes that media coverage can influence manager behavior by broadly distributing information and directing the attention of investors and other stakeholders. In this study, I investigate whether and how firm-specific media coverage affects managers' voluntary disclosure decisions. I show that prior media coverage is positively associated with the both the likelihood of issuing management guidance and the quantity of guidance issued. The relation between media coverage and guidance is stronger for firms in which investors have a greater ability to influence managers’ voluntary disclosure decisions, for media coverage from more credible news sources, and for media articles that disseminate information quickly rather than provide additional commentary. Firms with more media coverage are also significantly more likely to hold earnings conference calls, speak more during conference calls, and issue more press releases. Using both a quasi-natural experiment and instrumental variable setting to generate plausibly exogenous variation in media coverage, I find evidence consistent with my main results. My study suggests that media coverage affects investor demand for public disclosure and provides new insights into the influence of the media on manager behavior.

The Interaction Effect in a Nonlinear Specification of Bank Lending: A Replication and Reexamination of the Peek and Rosengren (2005) Results on 'Unnatural Selection'
Inoue, Hitoshi,Nakashima, Kiyotaka,Takahashi, Koji
Peek and Rosengren (American Economic Review 2005; 95) suggested the mechanism of ``unnatural selection,'' where low-capitalized Japanese banks increase credit to low-quality firms because of their motivation to pursue balance sheet cosmetics. In this study, we replicate their estimation results, using loan-level data from 1994 to 1999, and thereby reexamine this mechanism in terms of the interaction effect in a nonlinear specification of bank lending. We demonstrate that their results imply that Japanese banks allocated lending from viable firms to unviable ones regardless of the degree of bank capitalization, being not consistent with the balance sheet cosmetics hypothesis.

Time-inhomogeneous Gaussian stochastic volatility models: Large deviations and super roughness
Archil Gulisashvili

We introduce time-inhomogeneous stochastic volatility models, in which the volatility is described by a positive function of a Volterra type continuous Gaussian process that may have extremely rough sample paths. The drift function and the volatility function are assumed to be time-dependent and locally $\omega$-continuous for some modulus of continuity $\omega$. The main result obtained in the paper is a sample path large deviation principle for the log-price process in a Gaussian model under very mild restrictions. We apply this result to study the first exit time of the log-price process from an open interval.

Towards the End of Plastic Era
Noor, Kashish
The last decade has seen the emergence of Customer Relationship Management (CRM) as a technique to underpin organizational performance improvement in improving customer retention, customer satisfaction and customer value. However, despite many studies conducted on customer relationship management in various industries in the past 20 years, there is still significant disagreement about its definition and meaning, and the framework for the effective implementation and evaluation of customer relationship management practice. Moreover, there is a lack of systematic empirical evidence regarding the success factors for the CRM performance. Objective: To address these issues, this study examines the influence of top management and customer orientation on CRM performance. Results: In this quantitative study, a total of 133 Jordanian hotels participated in this study by voluntarily completing the survey questionnaire, constituting an overall 66% response rate. From the analysis undertaken, it was found that Top Management significantly influence CRM performance But. this research found insignificant relationship between customer orientation and CRM performance Conclusion: The results suggest that hotels should have processes to maintain, analyze, and integrate customer information. Theoretical and managerial implications of these findings are discussed.

Valuing ESG: Doing Good or Sounding Good?
Cornell, Bradford ,Damodaran, Aswath
In the last decade, companies have come under pressure to be socially conscious and environmentally responsible, with the pressure coming sometimes from politicians, regulators and interest groups, and sometimes from investors. The argument that corporate managers should replace their singular focus on shareholders with a broader vision, where they also serve other stakeholders, including customers, employees and society, has found a receptive audience with corporate CEOs and institutional investors. The pitch that companies should focus on “doing good” is sweetened with the promise that it will also be good for their bottom line and for shareholders. In this paper, we build a framework for value that will allow us to examine how being socially responsible can manifest in the tangible ingredients of value and look at the evidence for whether being socially responsible is creating value for companies and for investors.

With a Little Help from Friends: Strategic Financing and the Crowd
Dasgupta, Sudipto,Fan, Tingting,Li, Yiwei,Xiao, Yizhou
Based on a crowdfunding platform and social media account login data, we study the information role of financing from connected individuals (e.g., family and friends) of entrepreneurs. While financing from connected individuals is generally considered as a signal of high-quality projects, our results suggest that this might be a signal of funding performance manipulation. Entrepreneurs with moderate early funding performance strategically solicit investments from friends to encourage naïve investors to herd. Sophisticated investors discern manipulation and are less likely to invest. Manipulation exists even when sophisticated investors have significant market power and projects with manipulation deliver poorer funding performance.