Research articles for the 2020-05-05

Carverhill, Andrew P.,Luo, Dan
We model the S&P500 index options dynamics using the CGMY distribution, with independent "up" and "down" return jumps, and diffusive jump intensities. Allowing the up and down parts to be separately parameterised accounts for the dynamic smirk effect, without correlation between returns and intensities. We filter the up and down intensity factors and associated options risk premia. Both factors are informative for dynamic risk premia of equity and corporate debt. We argue that the former is a liquidity effect, and the latter an equilibrium effect. The magnitudes of the estimated, dynamic equity premia are consistent with the "equity premium puzzle".

A First Look at the Impact of COVID19 on Commercial Real Estate Prices: Asset Level Evidence
Ling, David C.,Wang, Chongyu,Zhou, Tingyu
This is the first paper on the impact of COVID-19 pandemic on commercial real estate prices. We construct a novel measure of real estate investment trusts (REITs)’ exposure to COVID-19 growth at the asset level. We document a negative relationship between this geographically weighted case growth and risk-adjusted returns. However, there is huge variation across property types: retail and hospitality REITs react the most negatively while health care and technology REITs react positively to the geographic COVID-19 growth. Next, we show that our findings are not manifested in that the geography of REITs’ underlying properties overlaps perfectly with the geography of COVID-19 growth. Further, holding properties in population-dense areas increases the negative impact of COVID-19 on stock returns. After conditioning property type, days since the outbreak, population density, property type, and geographic concentration, firm-level financial characteristics (except returns in the past three months) have modest effects on the negative impact of the pandemic.

A Machine Learning Approach to Adaptive Robust Utility Maximization and Hedging
Tao Chen,Michael Ludkovski

We investigate the adaptive robust control framework for portfolio optimization and loss-based hedging under drift and volatility uncertainty. Adaptive robust problems offer many advantages but require handling a double optimization problem (infimum over market measures, supremum over the control) at each instance. Moreover, the underlying Bellman equations are intrinsically multi-dimensional. We propose a novel machine learning approach that solves for the local saddle-point at a chosen set of inputs and then uses a nonparametric (Gaussian process) regression to obtain a functional representation of the value function. Our algorithm resembles control randomization and regression Monte Carlo techniques but also brings multiple innovations, including adaptive experimental design, separate surrogates for optimal control and the local worst-case measure, and computational speed-ups for the sup-inf optimization. Thanks to the new scheme we are able to consider settings that have been previously computationally intractable and provide several new financial insights about learning and optimal trading under unknown market parameters. In particular, we demonstrate the financial advantages of adaptive robust framework compared to adaptive and static robust alternatives.

A neural network model for solvency calculations in life insurance
Lucio Fernandez-Arjona

Insurance companies make extensive use of Monte Carlo simulations in their capital and solvency models. To overcome the computational problems associated with Monte Carlo simulations, most large life insurance companies use proxy models such as replicating portfolios.

In this paper, we present an example based on a variable annuity guarantee, showing the main challenges faced by practitioners in the construction of replicating portfolios: the feature engineering step and subsequent basis function selection problem.

We describe how neural networks can be used as a proxy model and how to apply risk-neutral pricing on a neural network to integrate such a model into a market risk framework. The proposed model naturally solves the feature engineering and feature selection problems of replicating portfolios.

Analyst Teams
Hope, Ole-Kristian,Fang, Bingxu
This paper examines the impact of teamwork on sell-side analysts’ performance. Using a hand-collected sample of over 50,000 analyst research reports, we find that analyst teams issue more than 70% of annual earnings forecasts. In contrast, most prior research implicitly assumes that forecasts are issued by individual analysts. We document that analyst teams generate more accurate earnings forecasts than individual analysts and that the stock market reacts more strongly to forecast revisions issued by teams. Analyst teams also cover more firms, issue earnings forecasts more frequently, and issue less stale forecasts. Analysts working in teams are more likely to be voted as All-Star analysts in the future. Among analyst teams, we show that team size and team member ability are significantly associated with forecast accuracy. Moreover, using detailed analyst background information from LinkedIn, we find that forecast accuracy is positively associated with team diversity based on sell-side experience, educational background, and gender. Additional analyses suggest that analyst teams, especially more diverse ones, are more likely to issue cash-flow forecasts and use discounted cash-flow valuation models in their reports. These findings suggest that teamwork and team diversity play a crucial role in understanding sell-side analysts’ performance.

Are Cryptocurrencies Priced in the Cross-section? A Portfolio Approach
Assamoi, Kassi,Ekponon, Adelphe
Most papers, that study determinants of cryptocurrency prices, find no relation to existing market factors. We examine a portfolio approach to explore cross-sectional pricing within crypto-market. At its inception, Bitcoin meant to be an alternative to fiat currencies. Yet high returns in this market may have also attracted usual investors as well, as they are looking for more investments and diversification venue. Since Bitcoin, the number of cryptocurrencies has reached more than 6000 as of the beginning of 2020, according to Hence, investors have more choices when they decide to enter into the crypto-market. So, they have an incentive to understand the crypto-market interaction with their current investment. We examine ten factors from equity, currency, and commodity markets and find that size and commodity index have a negative and highly significant correlation with the cross-section of cryptocurrency returns. These results support the market participants’ view that cryptocurrencies are still too volatile to serve as a store of value. In the sense that, cryptos with a negative sensitivity to safe-haven assets, like gold or precious metals, are appreciated by investors.

Are the Liquidity and Collateral Roles of Asset Bubbles Different?
Clain-Chamosset-Yvrard, Lise,Raurich, Xavier,Seegmuller, Thomas
Several recent papers introduce different mechanisms to explain why asset bubbles are observed in periods of larger growth. These papers share common assumptions, heterogeneity among traders and credit market imperfection, but differ in the role of the bubble, used to provide liquidities or as collateral in a borrowing constraint. In this paper, we introduce heterogeneous traders by considering an overlapping generations model with households living three periods. Young households cannot invest in capital, while adults have access to investment and face a borrowing constraint. Introducing bubbles in a quite general way, encompassing the different roles they have in the existing literature, we show that the bubble may enhance growth when the borrowing constraint is binding. More significantly, our results do not depend on the - liquidity or collateral role attributed to the bubble. We finally extend our analysis to a stochastic bubble, which may burst with a positive probability. Because credit and bubble are no more perfectly substitutable assets, the liquidity and collateral roles of the bubble are not equivalent. Growth is larger when bubbles play the liquidity role, because the burst of a bubble used for liquidity is less damaging to agents who invest in capital.

Bank Efficiency and the Bond Markets: Evidence from the Asia and Pacific Region
Park, Donghyun,Tian, Grace,Wu, Qiongbing
This study examines the impact of bond markets on both bank profit and cost efficiency. By employing the stochastic frontier approach and utilizing a large micro dataset for 926 banks covering 27 economies from the Asia and Pacific region over the period from 2004 to 2017, we find that both the bond market development and bond market structure are relevant to bank efficiency. The development of bond markets generally has a positive (negative) effect on bank profit (cost) efficiency. Given the development level of the aggregate bond market, increasing the proportion of corporate bonds will enhance both bank profit and cost efficiency. Moreover, given the development level of a country’s corporate bond market, a greater share of local currency corporate bonds is significantly and positively related to both bank profit and cost efficiency. In addition, increasing share of bank-issued corporate bonds in corporate bonds significantly increases (decreases) bank profit (cost) efficiency. Overall, our results point to the significant importance of local currency corporate bonds to the overall bank efficiency. Our findings provide important implications for both policy makers and bank management.

Banking Relationships, Managerial Incentives, Board Monitoring and Corporate Cash Holdings: An Emerging Market Perspective
Yu, Hai-Chin,Sopranzetti, Ben J.,Lee, Cheng-Few
This paper uses Taiwanese data to examine the impact of firm-level corporate governance mechanisms on firms’ average cash holdings. Specifically, it examines how a firm’s number of banking relationships and the percentages of managerial ownership and board ownership impact the firm’s level of cash holdings. We document that higher percentages of managerial ownership and board ownership are associated with higher levels of corporate cash holding. Our results are consistent with the notion that managerial incentives and board monitoring are substitutes for each other. The substitution effect is especially pronounced when firms have poorly incentivized managers. We find that firms with a larger number of banking relationships are associated with lower levels of cash holdings. We find no evidence of a bank monitoring free-rider problem. We also document a life-cycle effect in the drivers of cash holdings: there are substantial differences in the drivers of cash holdings for firms that have been in business for more than 5 years relative to those that have not been in business less than 5 years.

Barter Credit: Warehouses as a Contracting Technology
Skrastins, Janis
A large Brazilian agribusiness lender introduces a new contracting technology: grain warehouses. Using runner-up warehouse locations as a control group, I find that lenders' access to these warehouses permits a new debt contract, i.e. a barter credit repayable in grain, increases borrowers' debt capacity and lowers borrowing costs. The effects are stronger when price insurance is important, for municipalities with weaker courts, and for financially-constrained borrowers. Overall, evidence suggests that creditors alter their organizational design to mitigate credit market imperfections.

Bartlett's delta in the SABR model
Patrick S. Hagan,Andrew Lesniewski

We refine the analysis of hedging strategies for options under the SABR model carried out in [2]. In particular, we provide a theoretical justification of the empirical observation made in [2] that the modified delta ("Bartlett's delta") introduced there provides a more accurate and robust hedging strategy than the conventional SABR delta hedge.

Bellman type strategy for the continuous time mean-variance model
Shuzhen Yang

To investigate a time-consistent optimal strategy for the continuous time mean-variance model, we develop a new method to establish the Bellman principle. Based on this new method, we obtain a time-consistent dynamic optimal strategy that differs from the pre-committed and game-theoretic strategies. A comparison with the existing results on the continuous time mean-variance model shows that our method has several advantages. The explicit solutions of the dynamic optimal strategy and optimal wealth are given. When the dynamic optimal strategy is given at the initial time, we do not change it in the following investment time interval.

COVID-19 Pandemic: A Snapshot of Global Economic Repercussions and Possible Retaliations
Amir, Khaled
Both human and economic cost of COVID-19 tsunami has continued to peak as nobody can even envisage when and how the shock will be solved. The value of life is uncountable on the other hand every sign clears that economic plunge will be prolonged and painful. The purpose of this paper is to provide a snapshot of global economic disaster, focusing especially on major regions (China, USA, and Italy) due to COVID-19 and possible economic responses to mitigate the severity of this pandemic. The paper first provides an overview of global economic imbalances reflected by growing medical and financial emergencies, falling asset prices, tightening financial conditions, abatement of global GDP, world trade and supply chain disruptions, the constraint on tourism and traveling, raising uneven inflation, augmenting poverty, the suffering of migrants, political discord and antagonism may lead to being the unexpected worst economic downturn in the history. Along with identifying these imbalances, possible economic responses have been presented amid the shock of COVID-19 and strategies for recoveries. The paper concludes that containing initiatives and economics of pandemics is not enough to beat the novel coronavirus (COVID-19) without solidarity and consensus among nations around the globe.

COVID-19, Oil Prices, and Exchange Rates: A Five-Currency Examination
Villarreal-Samaniego, Dacio
During the first quarter of 2020, the COVID-19 spread proved to be very detrimental to the social well-being and the economic conditions of the population of a large number of countries. In early March, when the disease was already a pandemic, Saudi Arabia substantially increased its oil production, plunging the WTI price around 25% in a single day. Against this background, this study examines the long- and short-term relationship between the exchange rates of five emerging market countries with the COVID-19, as well as with crude oil prices. The results of the ARDL estimations show that the variables related to the novel coronavirus were related to exchange rate fluctuations of some countries. Overall, the findings of the research also imply an inverse and significant relationship between the long- and short-term movements of the oil prices and the exchange rates.

Can the COVID Bailouts Save the Economy?
Elenev, Vadim,Landvoigt, Tim,Van Nieuwerburgh, Stijn
The COVID-19 crisis has led to a sharp deterioration in firm and bank balance sheets. The government has responded with a massive intervention in corporate credit markets. We study equilibrium dynamics of macroeconomic quantities and prices, and how they are affected by government intervention in the corporate debt markets. We find that the interventions should be highly effective at preventing a much deeper crisis by reducing corporate bankruptcies by about half, and short-circuiting the doom loop between corporate and financial sector fragility. The fiscal costs are high and will lead to rising interest rates on government debt. We propose a more effective intervention with lower fiscal cost. Finally, we study longer-run consequences for firm leverage and intermediary health when pandemics become the new normal.

Centralized Decentralization: Simple Economics of Governance Attacks on the DPoS Blockchain
Jeong, Seungwon (Eugene)
In the Delegated Proof-of-Stake (DPoS) blockchain, block producers (BP) are elected by stake-weighted vote. If the supermajority of BPs agree, they can change the rule of the blockchain. Thus, preventing the centralization of votes is important. Some DPoS blockchains allow users to vote for multiple BPs. We introduce the Governance Game, and find the number of votes allowed per user that minimizes the takeover risk and maximizes the voting flexibility. A smaller number of votes allowed requires an attacker to have a more stake for the takeover, but only up to a certain point.

Changes in the Relationship between Short‐Term Interest Rate, Inflation and Growth: Evidence from the UK, 1820â€"2014
Bataa, Erdenebat,Vivian, Andrew,Wohar, Mark E.
This paper examines the dynamic relationship between interest rates, inflation and economic growth using a long dataset for the UK. The approach adopted enables us to identify structural breaks in the dynamic system (vector autoregression (VAR)). We find interest rates respond much more strongly to growth and inflation over recent decades, and forecast error variance decomposition analysis indicates there is increasing interconnectedness between the variables in recent years. Economic policymakers need to carefully monitor the linkages between these variables and be prepared to adjust their monetary policy tools when faced with structural changes.

Complexity as a Proxy for Risk when Evaluating Derivative Securities
Durney, Michael T,Libby, Robert,Silva, Felipe Bastos G.
The overall market for derivative securities is often estimated as more than ten times the World’s GDP and many decry the complexity of derivatives as a main contributor to the subprime financial crisis. In this paper, we investigate whether and why complexity is used as a proxy for risk when evaluating derivatives. We conduct three laboratory experiments to show a robust effect consistent with investors and managers taking complexity as a proxy for risk and deeming more complex, but equally risky, derivatives as worse for risk minimization. We also provide evidence that the effect is driven by negative perceptions (i.e., affect) regarding derivatives. Altogether, our results shed light on how derivatives are evaluated and suggest an important potential source of misinterpretations of disclosures provided under US GAAP (ASC 815-10-50).

Conditions for Effective Macroprudential Policy Interventions
Khan, Fahad,Ramayandi, Arief,Schröder, Marcel
This paper aims at identifying effective macroprudential policy (MPP) interventions and analysing the macroeconomic conditions that promote them. We define effective MPP interventions as those that stabilize its underlying target variable, such as credit growth, house price growth, etc. For our analysis, we construct a new database that documents the use of a large number of MPP instruments for 61 advanced and emerging market economies from 2000 to 2016. The new feature of the database is that it maps every recorded MPP intervention in these economies and over this period to stabilize a specific target variable category for banking, health, domestic loans, the exchange rate, foreign capital movements, and house prices. Using this dataset, we introduce a practical way for defining the macroprudential policy effectiveness. We find that MPP interventions are more likely to be effective when several prudential measures are taken together, but at the same time avoid the diminishing returns of repeated MPP tightening. Monetary tightening seems to override the effectiveness of MPP instruments. The output gap, credit cycle, external debt, current account, and global risk appetite also count for the likelihood of MPP successes. The paper provides a guideline for the effective conduct of MPPs.

Corporate Governance Practices in the Context of the Pandemic Crisis
Mathew, Sudha,Sivaprasad, Sheeja
What is the impact of the COVID-19 crisis on the corporate governance practices of firms? In this paper, first, we discuss the impact of COVID-19, then analyse how corporate governance practises have been affected and conclude with recommendations of policies to be adapted by firms in principle to cope with pandemics of this magnitude. The pandemic crisis triggered unprecedented changes in the manner the firms are governed and managed. This discussion suggests that pandemics have an impact on the governance of firms and how going forward, firms should be prepared to face any eventualities by paying attention to business continuity plans in the event of natural disasters and pandemics. Overall, this paper provides some of the initial insights on how COVID-19 pandemic has given rise to both opportunities and challenges for firms. This article recommends a corporate governance policy focussing on sustainability, well-being and IT infrastructure of coping with any future challenges arising from the aftermath of the pandemic crisis.

Defining an intrinsic stickiness parameter of stock price returns
Naji Massad,Jørgen Vitting Andersen

We introduce a non linear pricing model of individual stock returns that defines a stickiness parameter of the returns. The pricing model resembles the capital asset pricing model used in finance but has a non linear component inspired from models of earth quake tectonic plate movements. The link to tectonic plate movements happens, since price movements of a given stock index is seen adding stress to its components of individual stock returns, in order to follow the index. How closely individual stocks follow the indexs price movements, can then be used to define their stickiness

Determinants of Peer-to-Peer Lending Expansion: The Roles of Financial Development and Financial Literacy
Oh, Eun Young,Rosenkranz, Peter
To explore the determinants of peer-to-peer (P2P) lending expansion, this study examines factors that impact P2P lending using a sample of 62 economies over the period 2015â€"2017. We investigate the effects of financial development and financial literacy on the expansion of P2P lending. The level of development of financial institutions is assessed by access, efficiency, and depth. We find that financial institutions’ efficiency, financial literacy, and lower branch and ATM penetration are positively related with the expansion of P2P lending. This finding suggests that P2P lending can fill funding gaps in economies where traditional financial institutions may be less available, and thus promote financial inclusion. We also find that better information technology infrastructure and high new business density are positively associated with the expansion of P2P lending, suggesting that physical infrastructure is an essential prerequisite for it, while this is more likely to happen in dynamic business environments.

Differential Machine Learning
Antoine Savine,Brian Huge

Differential machine learning (ML) extends supervised learning, with models trained on examples of not only inputs and labels, but also differentials of labels to inputs.

Differential ML is applicable in all situations where high quality first order derivatives wrt training inputs are available. In the context of financial Derivatives risk management, pathwise differentials are efficiently computed with automatic adjoint differentiation (AAD). Differential ML, combined with AAD, provides extremely effective pricing and risk approximations. We can produce fast pricing analytics in models too complex for closed form solutions, extract the risk factors of complex transactions and trading books, and effectively compute risk management metrics like reports across a large number of scenarios, backtesting and simulation of hedge strategies, or capital regulations.

The article focuses on differential deep learning (DL), arguably the strongest application. Standard DL trains neural networks (NN) on punctual examples, whereas differential DL teaches them the shape of the target function, resulting in vastly improved performance, illustrated with a number of numerical examples, both idealized and real world. In the online appendices, we apply differential learning to other ML models, like classic regression or principal component analysis (PCA), with equally remarkable results.

This paper is meant to be read in conjunction with its companion GitHub repo, where we posted a TensorFlow implementation, tested on Google Colab, along with examples from the article and additional ones. We also posted appendices covering many practical implementation details not covered in the paper, mathematical proofs, application to ML models besides neural networks and extensions necessary for a reliable implementation in production.

Do Corporate Disclosures Constrain Strategic Analyst Behavior?
Chang, Yen-Cheng,Ljungqvist, Alexander,Tseng, Kevin
We show that U.S. analysts alter their forecasting behavior in response to a randomly assigned shock that exogenously varies the timeliness and cost of accessing companies’ mandatory disclosures in the cross-section of investors: analysts reduce the number of stocks they cover, issue less optimistic and more accurate forecasts that are less bold, and collectively reduce forecast dispersion. Our investigation of possible channels favors the explanation that analysts reduce the strategic component of their behavior: the changes are more pronounced among analysts with stronger incentives to strategically skew their forecasts, such as affiliated analysts and those catering to retail investors. We conclude that mandatory disclosure is a substitute for information production by analysts, whose behavior is constrained by investors’ ability to verify their forecasts using corporate filings.

Do Demand Curves for Stocks Slope Down? Evidence from an Exogenous Demand Shock
Wong, Kin Ming,Tsang, Kwok Ping
The Mutual Market Access scheme in 2014 triggered an influx of capital from mainland China to Hong Kong. We argue that it is exogenous demand shock for the Hong Kong stocks market and thus provides a unique opportunity to test whether the demand curves for stocks are downward sloping. We find a positive relationship between abnormal returns and demand shocks, implying downward-sloping demand curves for stocks in short-run. Over time the demand flattens, and the positive relationship disappears in about 40 days. We only find weak evidence that limited attention and arbitrage risk are related to the elasticity.

Employment in Family Managed Firms: Less But Safe? Analysing Labour Demand of German Family Managed Firms with a Treatment Model for Panel Data
Kölling, Arnd
This paper analyses the differences in labour demand between family and non‐family managed firms. These firms seem to have better employment performance than non‐family controlled companies. Therefore, this study applies a treatment model for panel data controlling for endogeneities of being a family managed firm or not. The results of the estimations indicate that labour demand is possibly larger because of family members joining the firms as extra employees. Moreover, labour turnover is lower, supporting the assumption that family firms offer some kind of implicit labour contracts. However, in opposite to previous results, it seems that only small family managed firms show different employment behaviour.

Endogenous Market Structures and the Optimal Financial Structure - Structures De Marché Endogènes Et Structure Financière Optimale. 
Etro, Federico
We characterize the optimal financial structure as a strategic device to optimize the value of a firm competing in a market where entry is endogenous. Debt financing is always optimal under quantity competition, and, contrary to the Brander‐Lewis‐Showalter results based on duopolies, we show the optimality of moderate debt financing also under price competition with cost uncertainty (but not with demand uncertainty). We derive the formulas for the optimal financial structure, which does not affect the strategies of the other firms but reduces their number. On caractérise la structure financière optimale comme un dispositif stratégique pour optimiser la valeur d'une entreprise concurrençant dans un marché où l'entrée est endogène. Le financement de la dette est toujours optimal dans un régime de concurrence par les quantités, et, contrairement aux résultats de Brander‐Lewis‐Showalter pour les duopoles, on montre qu'il y a optimalité aussi du financement d'une dette modérée dans un régime de concurrence par les prix quand il y incertitude des coûts (mais pas incertitude de la demande). On dérive les formules pour la structure financière optimale, qui n'affecte pas les stratégies des autres entreprises mais réduit leur nombre.

Entry Cost, the Tobin Tax, and Noise Trading in the Foreign Exchange Market - Coût À L'Entrée, Taxe De Tobin Et Bruit Transactionnel Qui Empêche Le Prix D'Être Parfaitement Révélateur Dans Le Marché Des Changes. 
Shi, Kang,Xu, Juanyi
Two types of policy have been proposed to eliminate noise trading in the foreign exchange market: increasing the entry cost or imposing a 'Tobin tax' type of transaction tax. In this paper, we endogenize entry decisions of both informed traders and noise traders and show that these policies may be ineffective in reducing exchange rate volatility. This is because these policies will discourage the entry of all traders, so they may not change the relative ratio of traders, or they may affect informed traders disproportionately more, which increases the relative ratio of noise traders and exchange rate volatility. Deux types de politiques ont été proposées pour éliminer le bruit transactionnel qui empêche le prix d'être parfaitement révélateur dans le marché des changes : accroître le coût à l'entrée ou imposer une taxe à la Tobin sur les transactions. Dans ce texte, on endogénise les décisions à l'entrée à la fois des opérateurs informés et des autres qui n'ont pas d'information significative, et on montre que ces politiques sont ineffectives pour réduire la volatilité du taux de change. C'est que ces politiques découragent l'entrée de tous les opérateurs. En conséquence, elles peuvent ne pas changer le ratio des deux types d'opérateurs, ou peuvent même affecter les opérateurs informés davantage – ce qui accroît l'importance relative des moins informés et donc la volatilité du taux de change.

Financial Constraints and Investment: Assessing the Impact of a World Bank Credit Program on Small and Medium Enterprises in Sri Lanka - Contraintes Financières Et Investissement: Une Évaluation De L'Impact Du Programme De Crédit De La Banque Mondiale Sur Les Petites Et Moyennes Entreprises AU Sri Lanka
Aivazian, Varouj,Santor, Eric
This paper examines the investment behaviour of a sample of small, credit‐constrained firms in Sri Lanka. Using a unique panel data set, we analyze and compare the activities of two groups of small firms distinguished by their differential access to financing; one group consists of firms with subsidized loans from the World Bank, while the other group consists of firms without such subsidies. The paper shows that the program led to higher levels of investment for financially constrained firms. However, the evidence is inconclusive on whether the program improved economic efficiency. Ce mémoire examine le comportement d'investissement d'un échantillon de petites firmes au Sri Lanka. Utilisant un ensemble de données de panel unique, on analyse et compare les activités de deux groupes de petites firmes qui se distinguent par leur accès différentiel au financement; le premier groupe contient des entreprises qui reçoivent des prêts subventionnés par la Banque mondiale, alors que le second contient des entreprises qui ne sont pas subventionnées. On montre que le programme de subventions entraîne des niveaux plus élevés d'investissement pour les firmes financièrement contraintes. Les résultats ne sont cependant pas concluants à savoir si le programme a amélioré l'efficacitééconomique.

Financial Distress and the Cost of Labor: Evidence from a Natural Experiment
Pedersen, David
Employees bear significant costs in bankruptcy. Theoretical models predict they will accept lower wages in the face of financial distress to avoid such costs. Using a natural experiment, I test this theory and find an exogenous increase in default risk causes a decrease in employee wages. The effect is economically meaningful: the reduction in aggregate annual wages equals 10% of the firm’s earnings and 33% of its interest expense. As expected, it is concentrated in financially vulnerable firms and those with fewer agency conflicts. Employees thus represent an important financial resource for firms in the midst of financial distress.

Financial Education Affects Financial Knowledge and Downstream Behaviors
Kaiser, Tim ,Lusardi, Annamaria,Menkhoff, Lukas,Urban, Carly
We study the rapidly growing literature on the causal effects of financial education programs in a meta-analysis of 76 randomized experiments with a total sample size of over 160,000 individuals. The evidence shows that financial education programs have, on average, positive causal treatment effects on financial knowledge and downstream financial behaviors. Treatment effects are economically meaningful in size, similar to those realized by educational interventions in other domains and are at least three times as large as the average effect documented in earlier work. These results are robust to the method used, restricting the sample to papers published in top economics journals, including only studies with adequate power, and accounting for publication selection bias in the literature. We conclude with a discussion of the cost-effectiveness of financial education interventions.

Global Bitcoin Markets and Local Regulations
Park, Cyn-Young,Tian, Grace,Zhao, Bo
Since the launch of Bitcoin in 2009, the spectacular rise and fall of cryptocurrencies and the underlying blockchain technology have attracted global attention. While the application of distributed ledger technology presents great economic and business potential, significant volatility and speculative trading of cryptocurrencies have raised concerns over investor and consumer protection and prompted government interventions within their respective jurisdictions. This study focuses on the six Bitcoin trading markets comprising 99% of global trading volume as of February 2018. Adopting the event study methodology to newly compiled information about local regulation events, we find that the effect of government regulations on the Bitcoin price is only short-lived, but regulations discourage trading activities for a longer term in local markets. Interestingly, however, the repressive effect of domestic regulations on trading activities can be mitigated by the domestic financial market openness. Together, these findings are consistent with the view that Bitcoin markets are globally integrated and that, to uphold market integrity, international cooperation would be essential.

Heuristics in experiments with infinitely large strategy spaces
Jørgen Vitting Andersen,Philippe de Peretti

We introduce a new methodology that enables detection of the onset of convergence towards Nash equilibria in simple repeated games with infinitely large strategy spaces, thereby revealing the heuristics used in decision-making. The method works by constraining on a special finite subset of strategies, called decoupled strategies. We show how the technique can be applied to understand price formation in financial market experiments by introducing a predictive measure {\Delta}D: the different between positive decoupled strategies (recommending to buy) and negative decoupled strategies (recommending to sell). Using {\Delta}D we illustrate how the method can predict (at certain special times) participants' actions with a high success rate in a series of experiments

How to manage the post pandemic opening? A Pontryagin Maximum Principle approach
R. Mansilla

The COVID-19 pandemic has completely disrupted the operation of our societies. Its elusive transmission process, characterized by an unusually long incubation period, as well as a high contagion capacity, has forced many countries to take quarantine and social isolation measures that conspire against the performance of national economies. This situation confronts decision makers in different countries with the alternative of reopening the economies, thus facing the unpredictable cost of a rebound of the infection. This work tries to offer an initial theoretical framework to handle this alternative.

Inclusive Education for Inclusive Economic Participation: The Financial Access Channel
Asongu, Simplice,Nnanna, Joseph,Acha-Anyi, Paul N.
Purpose â€" The study assesses how inclusive education affects inclusive economic participation through the financial access channel.Design/methodology/approach â€" The focus is on 42 sub-Saharan African countries with data for the period 2004-2014. The empirical evidence is based on the Generalised Method of Moments.Findings â€" The following findings are established. First, inclusive secondary education moderates financial access to exert a positive net effect on female labour force participation. Second, inclusive “primary and secondary school education” and inclusive tertiary education modulate financial access for a negative net effect on female unemployment. Third, inclusive secondary education and inclusive tertiary education both moderate financial access for an overall positive net effect on female employment. In order to provide more gender macroeconomic management policy options, inclusive education thresholds for complementary policies are provided and discussed. Originality/value â€" Policy implications are discussed in the light of challenges of economic development in the sub-region and Sustainable Development Goals.

Industry Networks and the Geography of Firm Behavior
Grieser, William,LeSage, James P.,Zekhnini, Morad
We consider the role of local geographic peers in determining equilibrium firm behavior. We exploit in-transitivity in local peer-firm networks and utilize spatial econometric techniques to circumvent well-known challenges in estimating and interpreting empirical models of peer effects. We find that geography network effects play a highly significant causal role in explaining corporate investment decisions, and these effects play a much more modest role in explaining financial policies and firm performance. We then implement a novel structured network regression to separately identify the effects of geography, product markets, and supply-chain networks. We find that local externalities in firm behavior operate almost exclusively within industry boundaries, and geographic effects outside industry boundaries are moderately evident only for corporate investment decisions.

Levels of structural change: An analysis of China's development push 1998-2014
Torsten Heinrich,Jangho Yang,Shuanping Dai

We investigate structural change in the PR China during a period of particularly rapid growth 1998-2014. For this, we utilize sectoral data from the World Input-Output Database and firm-level data from the Chinese Industrial Enterprise Database. Starting with correlation laws known from the literature (Fabricant's laws), we investigate which empirical regularities hold at the sectoral level and show that many of these correlations cannot be recovered at the firm level. For a more detailed analysis, we propose a multi-level framework, which is validated with empirically. For this, we perform a robust regression, since various input variables at the firm-level as well as the residuals of exploratory OLS regressions are found to be heavy-tailed. We conclude that Fabricant's laws and other regularities are primarily characteristics of the sectoral level which rely on aspects like infrastructure, technology level, innovation capabilities, and the knowledge base of the relevant labor force. We illustrate our analysis by showing the development of some of the larger sectors in detail and offer some policy implications in the context of development economics, evolutionary economics, and industrial organization.

Liquidity Provision during a Pandemic
Kahn , Charles,Wagner, Wolf
We examine how public liquidity should be distributed to firms when immediate production entails externalities, such as by spreading a virus. Direct provision of liquidity can address externalities, but traditional distribution of liquidity (through banks) has informational advantages. We show that which mode is preferred is determined by the variance (but not the level) of firm characteristics in the economy. Traditional provision is always part of the optimal policy when liquidity modes can be combined, and involves promising low interest rates for when the pandemic is over in order to incentivize temporary production shutdowns at firms.

Long short-term memory networks and laglasso for bond yield forecasting: Peeping inside the black box
Manuel Nunes,Enrico Gerding,Frank McGroarty,Mahesan Niranjan

Modern decision-making in fixed income asset management benefits from intelligent systems, which involve the use of state-of-the-art machine learning models and appropriate methodologies. We conduct the first study of bond yield forecasting using long short-term memory (LSTM) networks, validating its potential and identifying its memory advantage. Specifically, we model the 10-year bond yield using univariate LSTMs with three input sequences and five forecasting horizons. We compare those with multilayer perceptrons (MLP), univariate and with the most relevant features. To demystify the notion of black box associated with LSTMs, we conduct the first internal study of the model. To this end, we calculate the LSTM signals through time, at selected locations in the memory cell, using sequence-to-sequence architectures, uni and multivariate. We then proceed to explain the states' signals using exogenous information, for what we develop the LSTM-LagLasso methodology. The results show that the univariate LSTM model with additional memory is capable of achieving similar results as the multivariate MLP using macroeconomic and market information. Furthermore, shorter forecasting horizons require smaller input sequences and vice-versa. The most remarkable property found consistently in the LSTM signals, is the activation/deactivation of units through time, and the specialisation of units by yield range or feature. Those signals are complex but can be explained by exogenous variables. Additionally, some of the relevant features identified via LSTM-LagLasso are not commonly used in forecasting models. In conclusion, our work validates the potential of LSTMs and methodologies for bonds, providing additional tools for financial practitioners.

Offshore Fears and Onshore Risk: Exchange Rate Pressures and Bank Volatility Contagion in the People’s Republic of China
Lai, Jennifer,McNelis, Paul D.
This paper shows that signals from the offshore Hong Kong, China spot market for the currency of the People’s Republic of China (PRC), the renminbi (listed as CNH), directly affect the volatility of share prices of PRC banks and the overall risks to banking stability in the country. This is especially so amid heightened uncertainty about global trade of the PRC. Thus, CNH market volatility is a leading indicator of onshore PRC banking sector volatility. The results suggest that further offshore exchange market movements arising out of news such as increasing trade friction with the United States will generate greater volatility in the PRC’s banking sector. Far from being a shock absorber for the financial system of the PRC, the CNH market appears to be a shock transmitter of risk from offshore economic policy uncertainty to the PRC’s banking system.

On the Evolution of Cryptocurrency Market Efficiency
Akihiko Noda

This study examines whether the efficiency of cryptocurrency markets (Bitcoin and Ethereum) evolve over time based on Lo's (2004) adaptive market hypothesis (AMH). In particular, we measure the degree of market efficiency using a generalized least squares-based time-varying model that does not depend on sample size, unlike previous studies that used conventional methods. The empirical results show that (1) the degree of market efficiency varies with time in the markets, (2) Bitcoin's market efficiency level is higher than that of Ethereum over most periods, and (3) a market with high market liquidity has been evolving. We conclude that the results support the AMH for the most established cryptocurrency market.

On the Legal Protection and Value of Novel Designs: Evidence from Egyptian Goddess v. Swisa
Chan, Tian Heong,Hsu, Po-Hsuan,Tseng, Kevin
In this paper, we empirically examine how the strengthened legal protection of novel designs prevents mimicking behaviors and thus enhances the economic value of novel designs and their assignees. We use the decision of the Federal Circuit Court of Appeals in Egyptian Goddess, Inc. v. Swisa, Inc. as an unexpected regulation change that prevented accused infringers from using the “point-of-novelty” test to defend themselves, which enhanced the protection of design patents, especially intricate ones. After this decision, we show that intricate designs are better protected than simple designs and are less mimicked by subsequent designs. Moreover, we show that stock market reactions to grants of intricate design patents are significantly more positive than reactions to grants of simple design patents after this decision. Finally, we show that such positive reactions are more pronounced among firms facing fiercer product market competition and among firms previously involved in design patent litigation.

Parametrization of Correlations in Multi-Stochastic Volatility/Local-Stochastic Volatility Models
Bergomi, Lorenzo
When designing multi-asset stochastic volatility (SV) or local-stochastic volatility (LSV) models, one of the main issues involves the construction of the global correlation matrix. Typically correlation matrices for each assets' degrees of freedom are set and the challenge is to build a global correlation matrix which at least recovers these individual correlation matrices, is positive, and is a smooth function of inputs, so that meaningful sensitivities can be calculated.We present a general methodology for constructing such correlation matrices that uses few parameters, is based on correlations of physical observables, applies to both SVs and LSVs, and works regardless of the dimensionality of the single-asset SV/LSV model.

Power Laws for Research Output of Institutions: Evidence from Financial Economics
Dong, Hui,Luo, Dan,Zeng, Xudong,Zou, Zhentao
Cross-affiliation emerges as a new and fast-developing means to promote collaboration in financial research. We find that the average number of affiliations reported per author in the top-three finance journals increases steadily from 1.1 to 1.3 from 1995 to 2016. Scale-free power laws characterize the resulting highly-skewed distributions of top finance journal publications of worldwide institutions. We propose an explanation of the scale-in-variance, based on a network model featuring nonlinear growth and linear preferential attachment. We show that preferential allocation of publications through success-breeds-success engenders disparity in institutions’ research output, while acceleration in the growth of collaboration reduces the dispersion.

Preventing a European Banking and Financial Crisis after the COVID-19 Health Crisis: Lessons from the Last Decade
Gagnon, Marie-Hélène,Gimet, Céline
This paper investigates how the ECB can reduce financial and banking fragmentation, a stated objective in crisis period. We use regional SVAR models and national GVAR models to study the impact of interest rates, QE and LTROs on price and volume indicators of fragmentation through the main channels of transmission of monetary policies. Using data from the last decade, we find that LTROs reduce banking price dispersion, but have no effect on credit volume indicators. The positive signal generated by QE measures increases credit volume in most fragile countries. In these countries, an unbalanced repurchase of government bonds is necessary in order to decrease long-term interest rate spreads.

Relaxing Household Liquidity Constraints through Social Security
Catherine, Sylvain,Miller, Max,Sarin, Natasha
More than a quarter of working-age households in the United States do not have sufficient savings to cover their expenditures after a month of unemployment. We explore proposals to alleviate financial distress arising from the COVID-19 pandemic. We show that giving workers early access to just 1% of their future Social Security benefits allows most households to maintain their current consumption for at least two months. Unlike other approaches (like early access to retirement accounts, stimulus relief checks, and expanded unemployment insurance), access to Social Security serves the needs of workers made vulnerable by the crisis, but does not increase the overall liabilities of the federal government or have distortionary effects on the labor market.

Re‐Vitalizing Money Demand in the Euro Area. Still Valid at the Zero‐Lower Bound
Dreger, Christian,Gerdesmeier, Dieter ,Roffia, Barbara
The analysis of monetary developments has always been a cornerstone of the ECB's monetary analysis and, thus, of its overall monetary policy strategy. In this respect, money demand models provide a framework for explaining monetary developments and assessing price stability over the medium term. It is a well‐documented fact in the literature that, when interest rates are at the zero‐lower bound, the analysis of money stocks become even more important for monetary policy. Therefore, this paper re‐investigates the stability properties of M3 demand in the euro area in the light of the recent economic crisis. A cointegration analysis is performed over the sample period 1983 Q1 and 2015 Q1 and leads to a well‐identified model comprising real money balances, income, the long‐term interest rate and the own rate of M3 holdings. The specification appears to be robust against the Lucas critique of a policy dependent parameter regime, in the sense that no signs of breaks can be found when interest rates reach the zero‐lower bound. Furthermore, deviations of M3 from its equilibrium level do not point to substantial inflation pressure at the end of the sample. Excess liquidity models turn out to outperform the autoregressive benchmark, as they deliver more accurate CPI inflation forecasts, especially at the longer horizons. The inclusion of unconventional monetary policy measures does not contradict these findings.

Risk Matters: Breaking Certainty Equivalence
Parra-Alvarez, Juan Carlos,Polattimur, Hamza,Posch, Olaf
In this paper we use the property that certainty equivalence, as implied by a first-order approximation to the solution of stochastic discrete-time models, breaks in its equivalent continuous-time version. We study the extent to which a first-order approximated solution built by perturbation methods accounts for risk. We show that risk matters economically in a real business cycle (RBC) model with habit formation and capital adjustment costs and that neglecting risk leads to substantial pricing errors. A first-order approximation in continuous time reduces pricing errors by 90 percent relative to the certainty equivalent linear solution.

Robust Portfolio Selection with Near Optimal Centering
Cajas, Dany
Quantitative asset allocation models have not been widely adopted by practitioners because they suffer from two problems: the lack of robustness and diversification of portfolios obtained through these models. To solve these problems, I developed a new portfolio selection method that can be applied to any convex risk measure. The procedure begins selecting an optimal portfolio in the efficient frontier, then I define a near optimal region and finally I define the analytic center as the new optimal portfolio. I com- pare 30 portfolio optimization models for 4 asset samples, and the results suggest that the new method overcomes traditional methods in robustness and diversification.

Smart Fund Managers? Stupid Money? - Malins Gestionnaires De Fonds? Investisseurs Stupides?
Bernhardt, Dan,Davies, Ryan J.
We develop a model of mutual fund manager investment decisions near the end of quarters. We show that when investors reward better performing funds with higher cash flows, near quarter‐ends a mutual fund manager has an incentive to distort new investment toward stocks in which his fund holds a large existing position. The short‐term price impact of these trades increase the fund's reported returns. Higher returns are rewarded by greater subsequent fund inflows which, in turn, allow for more investment distortion the next quarter. Because the price impact of trades is short term, each subsequent quarter begins with a larger return deficit. Eventually, the deficit cannot be overcome. Thus, our model leads to the empirically observed short‐run persistence and long‐run reversal in fund performance. In doing so, our model provides a consistent explanation of many other seemingly contradictory empirical features of mutual fund performance. Les auteurs développent un modèle de décisions d'investissement des gestionnaires de fonds mutuels près de la fin d'un trimestre. On montre que quand les investisseurs récompensent les fonds mutuels performants en y injectant des ressources additionnelles, vers la fin d'un trimestre, le gestionnaire de fonds a une incitation à infléchir le nouvel investissement vers des actions dans lesquelles le fond a une forte position existante. L'impact de ces transactions sur les prix de ces actions à court terme augmente les rendements trimestriels rapportés pour le fond. De meilleurs rendements sont récompensés par un influx d'investissement subséquent, ce qui ouvre la porte à encore plus de déflection d'investissement au trimestre suivant. Parce que l'impact de ces transactions sur le prix des actions est à court terme, chaque trimestre subséquent commence avec un déficit de rendements plus important. Eventuellement, il n'est plus possible de combler ce déficit. Ce modèle permet d'expliquer les observations empiriques de persistance de mesures de performance du fond à court terme et de renversement de la tendance à long terme. Le modèle fournit aussi une explication consistante de plusieurs autres caractéristiques apparemment contradictoires notées empiriquement dans la performance des fonds mutuels.

Stock Price Manipulation: Corporate Actions and the Exploitation of Retail Investors in China
Titman, Sheridan ,Wei, Chishen,Zhao, Bin
Using account level data from the Shanghai Stock Exchange, we find widespread evidence consistent with insiders manipulating share prices to exploit naïve retail investors. We identify a group of “suspicious” firms that use stock splitsâ€"perhaps, along with other misleading activitiesâ€"to artificially inflate their share prices. Retail investors are strongly attracted to these suspicious splits, providing insiders an opportunity to sell large blocks of shares or use their shares as collateral for loans. A group of large accounts exploits the positive feedback trading behavior of naïve retail investors by accumulating positions before suspicious split announcements and selling in the post-split period.

Systemic Risk Contagion in FX Market: A Frequency Connectedness and Network Analysis
Polat, Onur
In this study, we analyse systemic risk contagion between a set of most actively traded currencies (EURO, JPY, GBP, AUD, CAD and CHF) by application of VAR based frequency connectedness proposed by Baruník and Křehlík. By using this novel approach, we gauge foreign exchange (FX) market connectedness in 200‐day frequency band using spectral representation of variance decompositions of VAR and identify directional spillovers between the most actively traded foreign exchange rates. Dynamics of the overall spillover index reveals that the index capture well‐known financial stress incidents properly. Finally, network topology of directional spillovers between currency pairs is provided for visulalization interconnectedness between them.

The Dependence Structure between the Canadian Stock Market and the Usd/Cad Exchange Rate: A Copula Approach - La Structure De Dépendance Entre La Bourse Canadienne Et Le Taux De Change Canada/Eu: Une Approche Utilisant Une Fonction À Copule. 
Michelis, Leo,Ning, Cathy
This paper investigates the dependence structure between the real Canadian stock returns and the real USD/CAD exchange rate returns, using the Symmetrized Joe‐Clayton (SJC) copula function. We estimate the SJC copula with monthly data over the period 1995:1 to 2006:12. Our results show significant asymmetric static and dynamic tail dependence between the real stock returns and the real exchange rate returns, such that the two returns are more dependent in the left than in the right tail of their joint distribution. We explain this asymmetric dependence in terms of an asymmetric interest rate policy by Canadian monetary authorities in response to changes in the real exchange rate during sub‐periods of falling and rising commodity prices. Le texte analyse la structure de dépendance entre les rendements réels sur les actions canadiennes en bourse et les taux de rendements réels sur le taux de change entre le Canada et les États‐Unis en utilisant la fonction à copule Symétrisée Joe‐Clayton (SJC). On calibre cette fonction à l'aide de données mensuelles pour la période allant de 1995 :1 à 2006 :12. Les résultats montrent une dépendance asymétrique statique et dynamique significative entre les rendements réels sur les actions et les taux de rendements réels sur le taux de change, telle que les deux rendements réels sont davantage dépendants l'un de l'autre à l'extrémité gauche qu'à l'extrémité droite de leur distribution conjointe. On explique cette dépendance asymétrique en termes d'une politique asymétrique du taux d'intérêt par les autorités canadiennes en réponse aux changements dans le taux de change réel durant les sous‐périodes de prix croissants et décroissants des denrées.

The High-Volume Return Premium and Economic Fundamentals
Wang, Zijun
Extending Kaniel, Ozoguz, and Starks (2012, J. Financ. Econ.) and many others, we present first empirical evidence that indicates the high volume return premium is linked to economic fundamentals. The volume premium has strong predictive power for future industrial production growth and other macroeconomic indicators with or without controls for common equity pricing factors and business cycle variables. However, only a small portion of the volume premium can be attributed to its co-movement with equity return factors and economic risk factors. Mis-pricing-based factor models also fail to adequately explain the return anomaly.

The High-Volume Return Premium and Economic Fundamentals (Internet Appendix)
Wang, Zijun
This appendix has eight sections. Section A reports replication results of Yang (1966, Econometrica) using daily data from 1963 to 2016. In Section B, we investigate time-series relation between daily trading volume and daily equity market index and economic activities. Section C reports additional summary statistics and discussion of the volume premium and other control variables used in the predictive regressions. In Section D, we construct and evaluate the predictive power of an aggregate measure of abnormal trading volume. Section E includes details on the construction of variables analyzed in Table 5 of the paper. Section F studies alternative measures of liquidity and (shocks to) idiosyncratic volatility that are used in the bivariate portfolio analysis. We discuss in Section G how to form the two types of mimicking portfolios used in Section 5.3. Finally, we collect 13 tables in Section H that are either referenced in this appendix or referenced but not reported in the paper.

The Returns on Government and Corporate Securities with Prices Propped up by Central Bank Purchases using Unlimited Quantities of Currencies with Less Intrinsic Value than Toilet Paper
Murphy, Austin
This paper evaluates several investment scenarios which could result from the rather dire economic situation existing in early 2020 caused by the coronavirus pandemic that is restricting economic production of goods and services at the same time that cost-push factors and the unlimited creation of money by central banks worldwide create upward inflationary pressures. Just as during the similar situation in Germany in 1923, the nominal prices of both equities and fixed-rate instruments might be propped up, but all security investments would generate highly negative real returns short-term. Only stock prices might eventually match the inflation rate.

Trust and Lending: An Experimental Study
Hyndman, Kyle B.,Wu, Jiabin,Xiao, Steven Chong
This paper investigates the importance and the determinants of trust in a lending situation using an online controlled experiment. We find that communication can facilitate collaboration between lenders and borrowers through three channels of trust: 1) an information channel, 2) a preference channel, and 3) a guilt-aversion channel. Our results highlight the advantages of relationship-based lending that may not be substituted by FinTech solutions.

Using Alternative Date to Predict Key Performance Indicators
Lin, Chuyang,Huang, Yiwei,Tan, Yibing,Lu, Xiaocun,Zhou, Yujie,Liu, Yifei,Wescott, Paul,Stoikov, Sasha
The integration of robust data analysis into the financial markets has allowed firms to develop more efficient and accurate algorithms for predicting the behavior of individual firms. This analysis has been most effective with large and comprehensive data sets. However, the ease of integration for these types of data sets has led to their widespread adoption has diminished their usefulness in the financial markets. The most valuable data then exists in forms that are difficult to use and have not been used by the majority of the firms in the market. The purpose of this project is to integrate foot traffic data from individual stores into a quantitative and fundamental framework for predicting the values of significant KPIs for public firms.

Viewpoint: Estimating the Equity Premium - Evaluer La Prime Des Actions Par Rapport Aux Obligations
Campbell, John Y.
Finance theory restricts the time‐series behaviour of valuation ratios and links the cross‐section of stock prices to the level of the equity premium. This can be used to strengthen the evidence for predictability in stock returns. Steady‐state valuation models are useful predictors of stock returns, given the persistence in valuation ratios. A steady‐state approach suggests that the world geometric average equity premium fell considerably in the late twentieth century, rose modestly in the early years of the twenty‐first century, and was almost 4% at the end of March 2007. La théorie financière contraint le comportement diachronique des ratios de valorisation et relie transversalement les prix des actions au niveau de prime des actions sur les obligations. Voilà qui peut être utilisé pour renforcer la prédictibilité des rendements sur les actions. Les modèles de valorisation en régime permanent sont des prédicteurs utiles des rendements sur les actions, compte tenu du caractère stable des ratios de valorisation. Une approche en termes de régime permanent suggère que la moyenne géométrique mondiale de la prime des actions sur les obligations a chuté considérablement à la fin du 20e siècle, qu'elle a été modestement en hausse dans les premières années du 21e siècle, et qu'elle était à presque 4%à la fin de mars 2007.

What Do Analysts’ Provision Forecasts Tell Us About Expected Credit Loss Recognition?
Beatty, Anne,Liao, Scott
We examine the incremental predictive ability and information content of analysts’ provision forecasts to explore the potential effects of the FASB’s new current expected credit loss (CECL) accounting method. Controlling for the recognized loan loss provision, consensus analyst provision forecasts are incrementally associated with future non-performing loans (NPLs) and equity markets returns. This incremental association is increasing in banks’ unconstrained ability to estimate future losses as evidenced by their loan fair value disclosures and the extent of the constraints imposed by the incurred loss model measured by the fraction of heterogeneous loans individually reviewed for impairment. For a sample of analysts that also forecast NPLs, the association between the individual analyst’s provision forecast and future NPLs is increasing in the analyst’s comparative NPL forecasting accuracy. Finally, we find that the association between the analyst’s provision forecast and future NPLs is increasing in EPS forecast errors but decreasing in target price forecast errors. Together these results suggest that the reported provisions under the current incurred loss model do not fully incorporate banks’ information about future losses and that the extent to which this occurs depends both on banks’ ability to forecast expected losses and the constraints imposed by the incurred loss model. These results suggest that analysts forecast future losses beyond those reflected in the recognized provision and that the incremental information in these forecasts and potential CECL provision timeliness effect is greater when the constraints imposed by the incurred loss model are greater.