Research articles for the 2021-05-05

Aggregate Cyber-Risk Management in the IoT Age: Cautionary Statistics for (Re)Insurers and Likes
Ranjan Pal,Ziyuan Huang,Xinlong Yin,Sergey Lototsky,Swades De,Sasu Tarkoma,Mingyan Liu,Jon Crowcroft,Nishanth Sastry

In this paper, we provide (i) a rigorous general theory to elicit conditions on (tail-dependent) heavy-tailed cyber-risk distributions under which a risk management firm might find it (non)sustainable to provide aggregate cyber-risk coverage services for smart societies, and (ii)a real-data driven numerical study to validate claims made in theory assuming boundedly rational cyber-risk managers, alongside providing ideas to boost markets that aggregate dependent cyber-risks with heavy-tails.To the best of our knowledge, this is the only complete general theory till date on the feasibility of aggregate cyber-risk management.

All You Need is Cash: Corporate Cash Holdings and Investment after the Global Financial Crisis
Joseph, Andreas,Kneer, Christiane,van Horen, Neeltje
Cash holdings at the onset of a financial crisis are a key determinant of investment by SMEs not only during the crisis but also during the recovery period. Cash-rich SMEs could maintain their capital stock during the global financial crisis, while cash-poor rivals reduced theirs. This gave cash-rich SMEs a competitive advantage during the recovery, resulting in a persistent and growing investment gap. The amplification effect was present for SMEs with both volatile and stable cash holdings and was particularly pronounced for younger and smaller firms. Competition dynamics and borrowing constraints seem to drive this amplification effect.

An Investment Strategy Based on Impact
Juddoo, Kumari,Malki, Issam,Mathew, Sudha,Sivaprasad, Sheeja
In this paper, we investigate the empirical association between corporate social responsibility (CSR) and tax avoidance in impact investing. We adopt an investment strategy based on firm‐level ESG ratings and tax avoidance practices. In a ‘pure’ impact investment strategy based on ESG and tax avoidance, we find that investing in high‐ESG rated firms and low tax avoidance firms yield a buy and hold abnormal return of 2.6% per annum and 14.3% in a three-year investment horizon. Next, if ethical investors were to combine traditional investment strategies based on risk with impact measures, we find that portfolios of high‐ESG and high price‐to‐book‐ratio firms earn a buy and hold abnormal return of 25.5%, while a portfolio of low tax avoidance and high price-to-book portfolios earn 33.1% in the long run. Our results are robust to other risk factors and the sector of the firm. Collectively, our results suggest that whilst impact investing do provide investors a return alongside generating an environmental and social impact, it does not necessarily outperform traditional investment strategies, lending credence to the notion that corporate culture, regulation, religiosity and citizenship affect impact investing.

Bond Power Exchange Options
Blenman, Lloyd P.
We study power exchange options written on zero-coupon bonds under a stochastic string frame- work. We obtain closed-form expressions for pricing and hedging bond power exchange options and, as particular cases, the corresponding expressions for call power options and constant underlying elasticity in strikes (CUES) options. Suffi cient conditions for the equivalence of the European and the American versions of bond power exchange options are provided and the put- call parity relation for this kind of option is also stated. Finally, we consider several applications of our results including duration and convexity measures for bond power exchange options, pric- ing extendable/accelerable maturity zero-coupon bonds, options to price a zero-coupon bond off of a shifted term-structure, and options on interest rates and rate spreads.

Common Sense about Common Ownership
Klovers, Keith,Ginsburg, Douglas H.
Some scholars have argued that the phenomenon known as common ownership, particularly by large investment managers, is anticompetitive and prohibited by the U.S. antitrust laws. These proponents call for the divestiture of trillions of dollars of equities. We believe the argument for antitrust enforcement against common ownership is misguided. First, proponents conflate management by investment managers and economic ownership by individual account holders and therefore incorrectly attribute allegedly anticompetitive conduct to the investment managers. Second, proponents substantially overstate the validity and strength of the existing empirical work purporting to show common ownership causes anticompetitive harm. Third, proponents overstate their legal case, both by relying upon inapplicable cross ownership cases and by stretching the holdings of those cases. Fourth, at bottom proponents concerns are with either conscious parallelism, which is not illegal, or anticompetitive conduct that, if proven, could be addressed using established antitrust doctrines applicable to hub-and-spoke conspiracies and the anticompetitive exchange of information.

Connection Theory - Gravity and Light have the same dimensional pattern
Challoumis Κωνσταντίνος Χαλλουμής, Constantinos
This paper proofs the connection between Gravity and Light. The concept is formed on the mathematical axiomatics physics. The Connection Theory shows the relation between the gravitonian theory of the paper “Gravity Control” and the light. The light and the gravity obey to the same rules, the difference is to the mass. The mass is the reason why the black holes keep the light insight them, as the light needs a rate of its initial mass to keep out of a black hole. Moreover, light and gravity are formed on the same dimensional pattern following the rule of U.F.C. according to the work “Dimensions and Universe Form Code (U.F.C.)”, revealing that gravity and light belong to the same concept. Additionally, it is revealed that a beam of light is the form and the presentation of the dimension.

Credit Demand in a Crisis
Collier, Benjamin,Ellis, Cameron
Negative shocks to housing, most households’ largest consumption good, are expected to create strong credit demand to smooth these shocks over time. We estimate and trace a credit demand curve for households who recently experienced a negative shock to their housing stock. We use administrative data on over one million applications to a federal loan program for households impacted by natural disasters. Our identification strategy exploits 24 quasi-experiments, leveraging exogenous, time-based variation in the program's offered interest rate to estimate extensive-margin demand. We find that households are surprisingly price-sensitive, only a third would accept loans offered at the 30-year mortgage rate. We find a large impact of credit quality on demand and evidence of monthly payment targeting. Credit-constrained households exhibit inelastic demand. Many high credit quality applicants are reluctant to borrow, even at very low interest rates where no private alternative exists.

Credit Risk Sharing in General Equilibrium
Subramanian, Ajay
We develop a tractable general equilibrium model to analyze credit risk sharing via credit default swaps (CDS) and CDS market regulation under aggregate uncertainty. If available equity capital is below a threshold, any equilibrium of the basic economy with no CDS markets features firm default and underinvests in firms relative to the efficient allocation. For low aggregate risk levels, there is a unique equilibrium of the economy with unregulated CDS markets in which bondholders are fully insured. Investment is efficient, and the efficient allocation can be implemented via transfers alone. For intermediate aggregate risk, the unregulated CDS economy overinvests, and a margin or collateral requirement on CDS sellers that becomes more stringent as aggregate risk increases is necessary for efficiency. When aggregate risk is high, the CDS market breaks down. A collateral requirement restores equilibrium and efficiency, but it must be maximally stringent and accompanied by a capital requirement that restricts CDS supply.

Cross-sectional Return Predictability in Indian Stock Market: An Empirical Investigation
Goswami, Gautam
This paper provides a comprehensive analysis of stock return predictability in the Indian stock market by employing both the portfolio and cross-sectional regressions methods using the data from January 1994 and ending in December 2018. We find strong predictive power of size, cash-flow-to-price ratio, momentum and short-term-reversal, and in some cases of book-to-market-ratio, price-earnings-ratio. The total volatility, idiosyncratic volatility, and beta are not consistent stock return predictors in the Indian stock market. In cross-sectional regression analysis, size, short-term reversal, momentum, and cash-flow-to-price ratio predict the future stock returns. Overall, the two variables momentum and cash flow to price ratio demonstrate reliable forecasting power under all methods and both small and large size samples.

Day and Night Returns for Chinese Stocks
Ma, Chaoqun,Xiao, Ru,Rösch, Dominik
Compared to US stocks, Chinese stocks earn most of the returns during the day. We extend previous findings by Qiao and Dam (2020) arguing that the absence of day trading in the Chinese stock markets explains these differences and argue that these differences reflect an illiquidity premium. We estimate difference-in-differences regressions comparing affected Chinese A-class stocks to unaffected Chinese B-class stocks and propensity-score matched Japanese stocks two years pre and post the day trading ban in 1995. We find an increase in day returns (especially, for previously liquid stocks), a decrease in night returns, and unchanged 24-hour returns. Using data from 1999 to 2014, we rule out risk-based explanations and we show that Chinese stock returns exhibit momentum during the night. Overall, these findings help explain how illiquidity and day trading affects stock prices.

Default Contagion in a Two-Tree Economy
Ericsson, Jan,Jeanneret, Alexandre,Lu, Yiliu
We propose an explanation for default contagion based on a Lucas model with two independent debt-financed trees. The transmission mechanism is that variations in the size of one tree impact the level of risk premium and the default decision for all borrowers. If a negative shock hits one tree, the other tree contributes to a larger proportion of aggregate consumption and thus bears more systematic risk. The resulting higher risk premium increases the cost of debt and tilts that borrower's decision towards default. This mechanism induces contagion in default probabilities, leverage, and financial volatility across borrowers with uncorrelated fundamentals. The effect is stronger for borrowers with greater rollover needs.

Defragmenting Markets: Evidence from Agency MBS
Liu, Haoyang,Song, Zhaogang,Vickery, James I.
Agency mortgage-backed securities (MBS) issued by Fannie Mae and Freddie Mac have historically traded in separate forward markets. We study the consequences of this fragmentation, showing that market liquidity endogenously concentrated in Fannie Mae MBS, leading to higher issuance and trading volume, lower transaction costs, higher security prices, and a lower primary market cost of capital for Fannie Mae. We then analyze a change in market designâ€"the Single Security Initiativeâ€"which consolidated Fannie Mae and Freddie Mac MBS trading into a single market in June 2019. We find that consolidation increased the liquidity and prices of Freddie Mac MBS without measurably reducing liquidity for Fannie Mae; this was in part achieved by aligning characteristics of the underlying MBS pools issued by the two agencies. Prices partially converged prior to the consolidation event, in anticipation of future liquidity. Consolidation increased Freddie Mac’s fee income by enabling it to remove discounts that previously compensated loan sellers for lower liquidity.

Discounting Restricted Securities
Umar, Tarik,Yimfor, Emmanuel,Zufarov, Rustam
We examine the costs of trading restrictions by exploiting an SEC rule change eliminating an ~80-day restriction period in private placements for small issuers. Using a difference-in-differences specification, we find that the restriction is binding, as dollar volume increases 19 percentage points vis-à-vis proceeds, and costly, as offering discounts fall by eight percentage points. Discounts fall more for issuers with higher information asymmetry or longer restriction periods. We account for endogenous responses to the rule change. Overall, our findings suggest that trading restrictions are costly and have large effects on firms’ cost of capital.

Do ESG Mutual Funds Deliver on Their Promises?
Curtis, Quinn,Fisch, Jill E.,Robertson, Adriana
Corporations have received growing criticism for their role in climate change, perpetuating racial and gender inequality, and other pressing social issues. In response to these concerns, shareholders are increasingly focusing on environmental, social, and corporate governance (ESG) criteria in selecting investments, and asset managers are responding by offering a growing number of ESG mutual funds. The flow of assets into ESG is one of the most dramatic trends in asset management.But are these funds giving investors what they promise? This question has attracted the attention of regulators, with the Department of Labor and the Securities and Exchange Commission (SEC) both taking steps to rein in ESG funds. The change in administration has created an opportunity to rethink these steps, but the rapid growth and evolution of the market means regulators are acting without a clear picture of ESG investing.We step into this gap by offering the most complete empirical overview of ESG mutual funds to date. Combining comprehensive data on mutual funds with proprietary data from the several of the most significant ESG ratings firms, we provide a unique picture of the current ESG environment with an eye to informing regulatory policy. We evaluate a number of criticisms of ESG funds made by academics and policymakers and find them lacking. We find that ESG funds offer their investors increased ESG exposure. They also vote their shares differently from non-ESG funds and are more supportive of ESG principles. Our analysis shows that they do so without increasing costs or reducing returns.We conclude that ESG funds generally offer investors a differentiated and competitive investment product that is consistent with their labeling. In short, we see no reason to single out ESG funds for special regulation.

Do firms with specialized M&A staff make better acquisitions?
Gokkaya, Sinan,Liu, Xi,Stulz, René M.
We open the black box of the M&A decision process by constructing a comprehensive sample of US firms with specialized M&A staff. We investigate whether specialized M&A staff improves acquisition performance or facilitates managerial empire building instead. We find that firms with specialized M&A staff make better acquisitions when acquisition performance is measured by stock price reactions to announcements, long-run stock returns, operating performance, divestitures, and analyst earnings forecasts. This effect does not hold when the CEO is powerful, overconfident, or entrenched. Acquisitions by firms without specialized staff do not create value, on average. We provide evidence on mechanisms through which specialized M&A staff improves acquisition performance. For identification, we use the staggered recognition of inevitable disclosure doctrine as a source of exogenous variation in the employment of specialized M&A staff.

Does Socially Responsible Investing Change Firm Behavior?
Heath, Davidson,Macciocchi, Daniele,Michaely, Roni,Ringgenberg, Matthew C.
Socially responsible investment (SRI) funds are increasing in popularity. Yet, it is unclear if these funds improve corporate behavior. Using novel micro-level data, we find that SRI funds select firms with higher environmental and social standards: the firms they hold exhibit lower pollution, greater board diversity, higher employee satisfaction, higher workplace safety, and fewer customer complaints. Yet, using an exogenous shock to SRI capital, we find no evidence that SRI funds improve firm behavior. The results suggest SRI funds invest in a portfolio consistent with the fund's objective, but they do not significantly improve corporate conduct.

Does excluding sin stocks cost performance?
Blitz, David,Swinkels, Laurens
We examine the impact of excluding sin stocks on expected portfolio return and risk. Taking an asset pricing perspective we find that popular exclusions typically go against rewarded factors such as value, profitability, and low-risk. This is harmful for expected portfolio returns, but this return loss may be offset by overweighting non-sin stocks that offer similar factor characteristics. We then discuss whether sin itself could be a priced factor. Although there are theoretical arguments for the existence of a distinct sin stock premium, the empirical evidence does not consistently support this. A sin premium might arise in the future though, if exclusion policies reach the scale needed to significantly raise the cost of capital of sin stocks. Exclusions also involve risk relative to the market and peers. We show how this tracking error can be translated in an equivalent loss in expected return, which is negligible at low tracking error levels, but not at higher levels. However, even modest ex ante tracking error levels may ex post result in substantial long-term underperformance, which may have consequences for the time-consistency of these strategies and the careers of investors implementing them.

Does time-space compression affect analysts’ forecast performance?
Chen, Kejing,Guo, Wenqi,Xiong, Xiong
Through the difference-in-differences (DID) methodology, we find that the connection of China’s high-speed railway (HSR) as an exogenous shock could improve analysts’ forecast performance, leading to more accurate forecasts, decrease the dispersion between analysts, stimulate more forecast revisions with less revision volatility, evidenced by analyst site visits to firms. The results are robust with a battery of robustness checks such as 2SLS regression and so on. And the counterfactual relations caused by the lightning accident in 2011 also confirm our previous assumption. Furthermore, when the local economic development is weak, the trips by HSR is more convenient, or the information environment of firms are weak, the correlations will be stronger. Moreover, the connection of HSR also improves the information availability of stock recommendations issued by analysts. Overall, our study contributes to the relevant study of sell-side analysts’ performance and has an important impact on studying the role of geographic proximity on information efficiency.

Error estimates for discrete approximations of game options with multivariate diffusion asset prices
Yuri Kifer

We obtain error estimates for strong approximations of a diffusion with a diffusion matrix $\sigma$ and a drift b by the discrete time process defined recursively X_N((n+1)/N) = X_N(n/N)+N^{1/2}\sigma(X_N(n/N))\xi(n+1)+N^{-1}b(XN(n/N)); where \xi(n); n\geq 1 are i.i.d. random vectors, and apply this in order to approximate the fair price of a game option with a diffusion asset price evolution by values of Dynkin's games with payoffs based on the above discrete time processes. This provides an effective tool for computations of fair prices of game options with path dependent payoffs in a multi asset market with diffusion evolution.

Euro Area House Prices and Unconventional Monetary Policy Surprises
Hülsewig, Oliver,Rottmann, Horst
This paper examines the reaction of house prices in a panel of euro area countries to monetary policy surprises over the period 2010-2019. Using Jordà’s (2005) local projection method, we find that real house prices rise in response to expansionary monetary policy shocks that can be related to unconventional policy measures. In the core countries including Ireland, we also find that lending for house purchases increases relative to nominal output. Thus, household debt rises.

Exploring Diffusion Characteristics that Influence Serious Games Adoption Decisions
Katerina Antonopoulou,Nicholas Dacre

In this paper we discuss the diffusion of serious games and present reasons for why Rogers traditional approach is limited in this context. We present an alternative overview through the characteristics of relative advantage, compatibility, complexity, trialability, and observability, that reflect on the adoption decision and contributes on the commercialization of serious games.

Female directors on audit committees, the gender of financial experts, and internal control weaknesses: evidence from Iran
Oradi, Javad,E-Vahdati, Sahar
While there is little evidence on the relationship between board gender diversity and internal control weaknesses (ICWs), existing studies are based on the U.S. data. We extend the literature by examining the relationship between female directors on audit committees (ACs) and ICWs in Iran, a developing country with different cultural and corporate governance characteristics from western countries, which are the focus of most previous studies. We further split financial expert directors on ACs by gender and examine whether female and male financial experts on ACs are associated with ICWs. Using hand-collected data of 181 unique firms on the Tehran Stock Exchange (TSE) over the period 2013â€"2018, we find that firms with female representation on the AC are less likely to have ICWs. We also find that female financial experts on ACs are associated with fewer ICWs, whereas male financial experts on ACs are not significantly associated with ICWs. These results remain robust after performing several sensitivity tests. Overall, our results are interesting and indicate that the presence of female directors has a positive effect on corporate outcomes even in such an environment that is expected to yield different results. Our study has practical implications for Iranian regulators about gender-diversity policies.

Financial Reforms and Innovation: A Micro-Macro Perspective
Boikos, Spyridon,Bournakis, Ioannis,Christopoulos, Dimitris,McAdam, Peter
We develop a horizontal R&D growth model that allows us to investigate the different channels through which financial reforms affect R&D investment and patent activity. First, a “micro” reform that abolishes barriers to entry in the banking sector produces a straightforward result: a decrease in lending rates which stimulates R&D investment and economic growth. Second, a “macro” reform that removes restrictions on banks’ reserves and credit controls. While this reform increases liquidity, it also increases the risk of default, potentially raising the cost of borrowing. This we dub the “reserves paradox” â€" this makes banks offset the rise in the default rate with a higher spread between loans and deposit rates. Thus our model suggests that whilst micro reforms boost innovation, macro reforms may appear negative. We test and find empirical support for these propositions using a sample of 21 OECD countries.

Finding Linkages between Financial Literacy and Financial Inclusion among Rural women in Kerala.
Thomas, Asha E.
This study intends to clarify the relation between Financial Literacy and Financial Inclusion among marginalized community. Financial Literacy in this research is a latent variable, which is measured using Financial Knowledge, financial Behaviour and Financial Attitude. Participants of this study were 329 women from villages in the state of Kerala. Main results showed that financial literacy has a positive impact on financial inclusion among the selected population. The method used in the study is exploratory as it utilizes scoring of the variables. The collected data contains both the qualitative and quantitative data. Accordingly, the study uses both qualitative and quantitative techniques for the analysis of data. The statistical analysis comprised of two stages. The first stage examined the descriptive statistics of the measurement items and assessed the reliability and validity of the measure applied in this study. The second stage tested the proposed research model using Structural Equation Modeling technique and this involves assessing the contributions and significance of the manifest variables path coefficients.

Foreign Bank Lending: The Role of Home Country Culture During Prosperous and Crisis Periods
Jackowicz, Krzysztof,Kowalewski, Oskar,Kozłowski, Łukasz
We investigated whether home country culture determines the lending behavior of foreign subsidiaries in host countries during both tranquil and difficult economic times. We employed a dataset of foreign-owned banks originating from 49 home countries and operating in 47 host countries during the period 1996â€"2018. We found that, in general, only certain dimensions of the home country culture of multinational banks influence lending activities of the foreign bank subsidiaries. However, the impact of home country culture strengthens significantly during crises. Interestingly, we established that the cultural values of the home country are more important than the cultural distances between home and host countries in explaining foreign bank lending attitudes.

Friends in low places: The impact of political scandals on connected firms' stock prices
Preuss, Susanne
Prior literature suggests that capital market participants reward firms’ political connections. More recently, shareholders and scholars have argued that political affiliations may also inflict reputational risk on firms when the connected politician is involved in dubious activities or shares ideologies that are not in line with company values. To study the costs of such connections, I analyse the abnormal returns of firms that contribute to politicians around a hand-collected sample of 218 political scandals. Scandals are exogenous shocks to investors’ perceptions of politicians and their close affiliates and returns to scandals may thus be a first indication of the expected consequences that come with backing controversial politicians. My results show that connected firms experience negative abnormal returns when scandals involve other firms or lobbyists. Further analyses indicate that the reaction is not primarily driven by an expected loss in political benefits, but by reputation spillover and investors updating their beliefs about the risks inherent in political contributions.

From orders to prices: A stochastic description of the limit order book to forecast intraday returns
Johannes Bleher,Michael Bleher,Thomas Dimpfl

We propose a microscopic model to describe the dynamics of the fundamental events in the limit order book (LOB): order arrivals and cancellations. It is based on an operator algebra for individual orders and describes their effect on the LOB. The model inputs are arrival and cancellation rate distributions that emerge from individual behavior of traders, and we show how prices and liquidity arise from the LOB dynamics. In a simulation study we illustrate how the model works and highlight its sensitivity with respect to assumptions regarding the collective behavior of market participants. Empirically, we test the model on a LOB snapshot of XETRA, estimate several linearized model specifications, and conduct in- and out-of-sample forecasts.The in-sample results based on contemporaneous information suggest that our model describes returns very well, resulting in an adjusted $R^2$ of roughly 80%. In the more realistic setting where only past information enters the model, we observe an adjusted $R^2$ around 15%. The direction of the next return can be predicted (out-of-sample) with an accuracy above 75% for time horizons below 10 minutes. On average, we obtain an RMSPE that is 10 times lower than values documented in the literature.

Functional portfolio optimization in stochastic portfolio theory
Steven Campbell,Ting-Kam Leonard Wong

In this paper we develop a concrete and fully implementable approach to the optimization of functionally generated portfolios in stochastic portfolio theory. The main idea is to optimize over a family of rank-based portfolios parameterized by an exponentially concave function on the unit interval. This choice can be motivated by the long term stability of the capital distribution observed in large equity markets, and allows us to circumvent the curse of dimensionality. The resulting optimization problem, which is convex, is flexible as various regularizations and constraints can be imposed on the generating function. We prove that the optimization problem is well-posed and provide a stability estimate in terms of a Wasserstein metric of the input measure. We then give a careful treatment of its discretization and the optimization algorithm. Finally, we present empirical examples using CRSP data from the US stock market.

Getting Schooled: The Role of Universities in Attracting Immigrant Entrepreneurs
Amornsiripanitch, Natee,Gompers, Paul A.,Hu, George,Vasudevan, Kaushik
Immigrant founders of venture capital-backed companies have been critical to the entrepreneurial ecosystem. We document the channels through which immigrant founders find their way to the United States and how those channels have changed over time. Immigrants have been an important source of founders for venture capital-backed startups accounting for roughly 20% of all founders over the past 30 years. Immigrants coming to the United States for their education have been the primary source of founders with those coming after being educated abroad and then arriving for work decreasing in importance over time. The importance of undergraduate education as a channel for immigrant founders has increased over time. Immigrant founders coming for education are likely to start their companies in the state in which they were educated, especially states where they received their graduate education, leading to potentially large local economic benefits. The results of this paper have important policy implications for the supply of entrepreneurial talent and efforts to promote entrepreneurial ecosystems.

Global Minimum Variance Portfolio Optimisation under Some Model Risk: A Robust Regression-based Approach
Maillet, Bertrand B.,tokpavi, sessi,Vaucher, Benoit
The global minimum variance portfolio computed using the sample covariance matrix is known to be negatively affected by parameter uncertainty, an important component of model risk. Using a robust approach, we introduce a portfolio rule for investors who wish to invest in the global minimum variance portfolio due to its strong historical track record, but seek a rule that is robust to parameter uncertainty. Our robust portfolio corresponds theoretically to the global minimum variance portfolio in the worst-case scenario, with respect to a set of plausible alternative estimators of the covariance matrix, in the neighbourhood of the sample covariance matrix. Hence, it provides protection against errors in the reference sample covariance matrix. Monte Carlo simulations illustrate the dominance of the robust portfolio over its non-robust counterpart, in terms of portfolio stability, variance and risk-adjusted returns. Empirically, we compare the out-of-sample performance of the robust portfolio to various competing minimum variance portfolio rules in the literature. We observe that the robust portfolio often has lower turnover and variance and higher Sharpe ratios than the competing minimum variance portfolios.

Housing Finance and Inclusive Growth in Africa: Benchmarking, Determinants and Effects
Nguena, Christian-Lambert,Tchana Tchana, Fulbert,Zeufack, Albert
Using a panel database of 48 Sub-Saharan African countries from 2000 to 2012 that we partially constructed, this paper analyses the structure of housing finance in Africa, its determinants, and its impact on inclusive growth. We find that market capitalization and urbanization are key positive determinants of housing finance, while a post-conflict environment is conducive to greater housing finance development. This result suggests that housing finance is driven by standard market forces of demand and supply. Besides, we find that housing finance development in Africa is not yet an effective tool for reducing economic inequality, at its current, very earlier stage. However, we show that above a given threshold, housing finance could be efficient at reducing inequality. Finally, there is a slightly positive relationship between housing finance and greater economic development in Africa. All these findings suggest that policies to boost housing finance development in Africa would be fruitful in the medium to long terms.

Hurst Dynamics of S&P500 Returns: Implications and Impact on Market Efficiency, Long Memory, Multifractality and Financial Crises Predictability
Vogl, Markus,Roetzel, Peter Gordon
In this study, we apply a rolling window approach to wavelet-filtered (denoised) S&P500 returns (2000â€"2020) to obtain time varying Hurst exponents. We analyse the dynamics of the Hurst exponents by applying statistical tests (e.g., for stationarity, Gaussianity and self-similarity), a recurrence quantification analysis (RQA) and a wavelet multi-resolution analysis (MRA). Moreover, we discuss the implications of Hurst dynamics in terms of market efficiency, long memory, multifractal properties and financial crises predictability. Besides, we display academic literature by applying a bibliometric- and referring citation network analysis, state research streams and critically elaborate on the impact and future prospects.

IPO Peer Effects
Aghamolla, Cyrus,Thakor, Richard T.
This study investigates whether a private firm's decision to go public affects the IPO decisions of its competitors. Using detailed data from the drug development industry, we identify a private firm's direct competitors at a precise level through a novel approach using similarity in drug development projects based on disease targets. The analysis shows that a private firm is significantly more likely to go public after observing the recent IPO of a direct competitor, and this effect is distinct from "hot" market effects or other common shocks. Furthermore, our effects are centered on firms that operate in more competitive areas. We additionally explore peer effects in private firm funding propensities more broadly, such as through venture capital or being acquired, and find results consistent with a competitive channel.

Interactions of capital and liquidity requirements: a review of the literature
Vo, Quynh-Anh
One prominent feature of the regulatory framework put in place after the global financial crisis of 2008 is its reliance on multiple regulatory metrics, which has prompted new research on the interactions between them. This paper reviews the growing literature on the interactions between capital and liquidity requirements â€" the two primary requirements of the Basel III framework â€" with the focus on what the literature conveys on the extent to which capital and liquidity requirements are substitutes or complements. The paper also identifies gaps for further research.

Measuring of Concentration and Competition: Serbian Banking Sector
Bukvic, Rajko
The author in this paper considers the question of the use of indices of concentration and competition in the banking market. As example he chose the Serbian banking sector during the second half of the 2010s. The analyses are based on the data of bank financial statements for relevant years, as well as the results of other researchers. Тhe traditional concentration indicators (CRn and HH indices) are used, as well as the Gini coefficients and Rosenbluth and Tideman-Hall index and coefficient of entropy. At the end author calculated Linda Indices, the rarely used indicators not only in Serbia, and new Svetunkov’s approach and coefficients of the model based on Gauss exponential curve. The concentration degree in all cases is calculated based on five variables: total assets, deposits, capital, bank operating income and loans. Although these variables are highly correlated, the results show relatively important differences of its use. In the case of such variable as capital, the Linda indices suggested the existence of an oligopoly structure. In conclusion, it was demonstrated that in the case of the relatively large number of banks in Serbia, the existing concentration degree is generally moderately low, which provides suitable conditions for the development of healthy competition among them. At the end, there is necessary to emphasize different capability of information respective indicators and its different discriminative power. In future research this is fact that is it undoubtedly necessary particularly not to ignore.

More Value, Less Profit: The Value and Organization of an Internally Financed Firm
Sobel, Matthew J.
Problem definition: Profit maximization is the default criterion in operations management and much of economics, but its pursuit achieves a firm's financial value only under stringent conditions. Otherwise: (A) Profit optimization is sub-optimal, but the proper operational criterion to maximize value can be determined clearly for a firm that is financed internally. (B) Identification of the organizational structure to coordinate decisions regarding working capital and operations properly is a by-product of the answer to (A).Methodology/results: The results emerge from the analysis of a Markov decision process model of a firm that makes periodic decisions regarding operations and working capital. The value of the firm is the maximal expected present value of the time stream of net payouts (cash dividends, stock dividends, and stock buybacks). That is one end of an axis on which the other end is profit. (a) Simple formulas connect the two criteria on the axis. The value corresponds to a perturbed profit criterion in which revenue is deflated. (b) Thus, the use of a straightforward profit criterion compromises value. (c) The analysis depends on whether a bankruptcy risk is present or not and, if present, how it is modeled. The paper analyzes two cases: no risk of bankruptcy, and risk of bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. (d) If there is no risk of bankruptcy, profit-optimal and value-optimal decision rules have the same qualitative features, and the management of working capital should be subordinated to operations management. (e) These results are applied to models of inventory, a vertically integrated supply chain, a fishery and capacity management.Managerial implications: CFOs should mandate lower inventories than operations managers deem profit-optimal. CEOs should not subordinate operations management to working capital management.

Order flow in the financial markets from the perspective of the Fractional L\'{e}vy stable motion
Vygintas Gontis

It is a challenging task to identify the best possible models based on given empirical data of real stochastic time series. Though the financial markets provide us with a vast amount of empirical data, the best model selection is still a big challenge for researchers. The widely used long-range memory and self-similarity estimators give varying values of the parameters as these estimators themselves are developed for the specific models of time series. Here we investigate the order disbalance time series constructed from the limit order book data of the financial markets under fractional L\'{e}vy stable motion assumption. Our results suggest that previous findings of persistence in order flow are related to the power-law distribution of order sizes. Still, orders have stable estimates of anti-correlation for the 18 randomly selected stocks, when Absolute value and Higuchi's estimators are implemented. The burst duration analysis based on the first passage problem of time series and implemented in this research gives different estimates of the Hurst parameter more consistent with the uncorrelated increment cases.

Post-Merger Restructuring of the Labor Force
Gehrke, Britta,Maug, Ernst G.,Obernberger, Stefan,Schneider, Christoph
We study the restructuring of the labor force after mergers and acquisitions. Overall restructuring is large. Net employment of targets declines by more than half within two years after acquisitions relative to a matched sample, and is concentrated in targets that close all establishments. There is a substantial increase in employee turnover, which is larger if the merging partners have a more similar workforce. Growth and turnover are both higher for managers. Acquirers have a better-educated, better-paid, and more qualified workforce than targets. Newly-hired workers are much younger and less expensive. Firms become more hierarchical if they grow and if they become more diversified. Mergers create internal labor markets, which are more active if firms have more managerial capacities. However, most hiring is external, especially for managers. We interpret our findings within a framework in which acquirers seek growth options from targets and provide managerial capabilities to organize production more efficiently.

Quasi-Indexer Ownership and Insider Trading: Evidence from Russell Index Reconstitutions
Hillegeist, Stephen A.,Weng, Liwei
Understanding the association between quasi-indexer ownership and insider trading is important given the externalities that insider trading can impose on shareholders, the importance of quasi-indexers in the capital markets, and their mixed monitoring incentives. The prior literature has produced an inconsistent set of results regarding this association. These results are difficult to interpret because the association between them is likely endogenous, and prior studies have not employed effective identification strategies to address this issue. In this study, we examine the effects of quasi-indexer institutional ownership on insider trading using the plausibly exogenous discontinuity in quasi-indexer ownership around the Russell 1000/2000 index cutoff. Using both regression discontinuity and instrumental variable research designs, we find higher quasi-indexer ownership leads to less insider trading (both buys and sells) and less profitable sell trades. The effects for sells are concentrated among insider trades that, ex ante, are more likely to be based on private information. Our evidence on the profitability of buys is mixed. In addition, we find firms with higher quasi-indexer ownership are more likely to have and/or more strictly enforce blackout policies. Overall, our results suggest that quasi-indexers can reduce the agency costs associated with insider trading through their direct and indirect monitoring activities.

Regulatory (In)Attention and Earnings Management
Black, Dirk E.,Melessa, Sam,Yuan, Ming (Mike)
We examine the relation between regulatory attention and earnings management. We provide evidence that securities regulators provide most of their comment letters for new accounting standards in the first or second year of new standard effectiveness, consistent with regulators expending more regulatory resources on financial accounts altered by new accounting standards. We expect that firms anticipate where regulators spend regulatory resources and adjust financial reports accordingly to meet earnings expectations. We test this expectation surrounding a recent major accounting standard change for revenue recognition in the U.S. â€" ASU 2014-09. Consistent with this expectation, we find that firms that just meet or beat analysts’ consensus earnings expectations do so using expenses rather than revenues in the first years of the new revenue recognition standard’s effectiveness. We also find that discretionary revenue is lower for all sample firms and that research and development expenditure is lower for firms that just meet or beat analysts’ earnings expectations in sample years following ASU 2014-09. Finally, we find lower levels of discretionary spending for firms that just meet or beat analysts’ earnings expectations in the post-period vs. the pre-period, with strong evidence for firms that normally focus on revenue maximization. Our evidence suggests that firms understand regulatory resource constraints and manage their financial reports to achieve earnings objectives.

Reset Required: The Euro Area Crisis Management and Deposit Insurance Framework
Huertas, Thomas
[The crisis management and deposit insurance (CMDI) framework in the euro area requires a reset. Currently the framework is far more likely to manufacture a crisis rather than enable the authorities to manage one. Specifically, the current framework is far more likely to trigger the doom loop between weak banks and weak governments than to terminate or untie it. Nor will the current framework necessarily protect deposits. There is no guarantee that a euro in covered deposits will remain a euro, if the bank in which the deposit is held fails, and/or the Member State in which the failing bank is headquartered defaults.The CMDI framework aims to enhance financial stability, limit recourse to taxpayer money, promote competition and protect depositors. These policy objectives remain valid. What needs to change is the method that authorities use to achieve those objectives. First, the approach needs to integrate micro- and macro- aspects of crisis management. In particular, the approach needs to take account of the prospective roles of the European Stability Mechanism, both as a provider of credit to Member States as well as a guarantor of the Single Resolution Fund. Second, the approach needs encompass the central bank as a provider of liquidity to banks individually and to the market as a whole. Finally, the approach needs to recognize that by the time any reform proposed as a result of this review would become effective, the SRB and the significant institutions in the euro area will have completed the transition and become fully resolvable via bail-in. This affords the euro area the opportunity to reset expectations about resolution.The euro area should take this opportunity to make the crisis management and deposit insurance framework more European and more uniform. Specifically, there should be a single presumptive path for dealing with failed banks: the use of bail-in to facilitate the orderly liquidation under a solvent- wind down strategy. This will protect deposits and set the stage for the transformation of the Single Resolution Fund (SRF) into the Single Deposit Guarantee Scheme (SDGS) with a backstop from the European Stability Mechanism (ESM). In addition, measures should be taken to avoid forbearance, including the transfer of responsibility for emergency liquidity assistance (ELA) from national central banks to the ECB to create a single lender of last resort. Finally, national deposit guarantee schemes should become investors of last resort in the gone-concern capital of the failing bank. This will ensure that the orderly liquidation approach extends to all banks, including those without access to capital markets. Together, these measures would complete Banking Union, promote market discipline, avoid imposing additional burdens on taxpayers, help untie the doom loop between weak banks and weak governments, strengthen the euro and enhance financial stability

Risk and Ambiguity in Turbulent Times
Brenner, Menachem,Izhakian, Yehuda (Yud)
This paper focuses on the 2008 to 2020 period during which two major crises, affecting the economy and the financial markets, occurred. Between 2008 and 2020, there were less extreme tail events, including the lingering Eurozone and Greece crises. In particular, after extremely high stock market volatility and volatility of volatility (VoV) during 2008, the long-run average volatility declined to about 20% and the VoV to around 100%. This paper analyzes this period through the lens of risk and ambiguity (uncertainty). It aims to address the question: what are the financial markets that trade risk---the volatility derivatives markets---telling us? To this end, this paper uses several measures of uncertainty. This paper reviews the history of volatility and uncertainty measures and discusses their informativeness. It then discusses the information derived from volatility derivatives.

Role of Commercial Banks in Achieving Financial Inclusion â€" A Comparative Study of Canara Bank and Corporation Bank
P S, Meghana
Financial inclusion has become one amongst the vital aspects within the context of inclusive growth and sustainable development. It helps to scale back the income disparity and poverty alleviation. Financial Inclusion is the process of ensuring access to appropriate financial products and services needed by vulnerable groups like fragile sections and low-income groups at a reasonable charge in a just and pellucid manner by mainstream institutional players. In India, Reserve Bank of India formulates various financial inclusion programs with a view to supply financial services to the deprived class of the nation. Commercial banks play key role in implementation of financial inclusion plans under the guidance of RBI. The present study focuses on financial inclusion through commercial banks namely Canara bank and Corporation bank. The paper discuses basics of financial inclusion and financial inclusion policy initiatives in India. The study attempts to collate the contributions of Canara bank and Corporation bank in financial inclusion. Objectives of the study are to know the financial inclusion policy initiatives in India and to compare the contributions of Canara bank and Corporation bank in achieving financial inclusion. This research relies mainly on secondary data and required data are collected from the annual reports of the banks and RBI website. The information has been analysed using various statistical tools and hypothesis is tested by using t-test. Finally, efforts are made to supply recommendations supported findings.

Simulation and estimation of a point-process market-model with a matching engine
Ivan Jericevich,Patrick Chang,Tim Gebbie

The extent to which a matching engine can cloud the modelling of underlying order submission and management processes in a financial market remains an unanswered concern with regards to market models. Here we consider a 10-variate Hawkes process with simple rules to simulate common order types which are submitted to a matching engine. Hawkes processes can be used to model the time and order of events, and how these events relate to each other. However, they provide a freedom with regards to implementation mechanics relating to the prices and volumes of injected orders. This allows us to consider a reference Hawkes model and two additional models which have rules that change the behaviour of limit orders. The resulting trade and quote data from the simulations are then calibrated and compared with the original order generating process to determine the extent with which implementation rules can distort model parameters. Evidence from validation and hypothesis tests suggest that the true model specification can be significantly distorted by market mechanics, and that practical considerations not directly due to model specification can be important with regards to model identification within an inherently asynchronous trading environment.

Simultaneous supply and demand constraints in input-output networks: The case of Covid-19 in Germany, Italy, and Spain
Anton Pichler,J. Doyne Farmer

Natural and anthropogenic disasters frequently affect both the supply and demand side of an economy. A striking recent example is the Covid-19 pandemic which has created severe disruptions to economic output in most countries. These direct shocks to supply and demand will propagate downstream and upstream through production networks. Given the exogenous shocks, we derive a lower bound on total shock propagation. We find that even in this best case scenario network effects substantially amplify the initial shocks. To obtain more realistic model predictions, we study the propagation of shocks bottom-up by imposing different rationing rules on industries if they are not able to satisfy incoming demand. Our results show that economic impacts depend strongly on the emergence of input bottlenecks, making the rationing assumption a key variable in predicting adverse economic impacts. We further establish that the magnitude of initial shocks and network density heavily influence model predictions.

Slow recoveries, endogenous growth and macroprudential policy
Bonciani, Dario,Gauthier, David,Kanngiesser, Derrick
Banking crises have severe short and longâ€'term consequences. We develop a general equilibrium model with financial frictions and endogenous growth in which macroprudential policy supports economic activity and productivity growth by strengthening bank’s resilience to adverse financial shocks. The improved intermediation capacity of a safer banking system leads to a higher steady state growth rate. The optimal bank capital ratio of 18% increases welfare by 6.7%, 14 times more than in the case without endogenous growth. When the economy enters a liquidity trap, the effects of financial disruptions and thus the benefits of macroprudential policy are even more significant.

Sovereign Bond Spreads and Credit Sensitivity
Schefer, Ricardo
Sovereign Bond Spreads and Credit SensitivityRicardo Schefer October, 2020.AbstractExpectations of risky bond payments are unobservable and recovery rates for sovereigns are hard to estimate because they have no contractual claims to defined assets and samples of defaults are limited. A geometric version of credit spread is used to derive expected payments, dependent on idiosyncratic risk and unrelated to interest rates. The expectations are used to define a measure of price sensitivity to credit risk perceptions, or credit duration, improving the ambiguity of modified yield duration. 1Universidad del CEMA. Buenos Aires, Argentina. e-mail: The author's views do not necessarily represent the position of Universidad del CEMA. The author thanks Aquiles Almansi and Edgardo Zablotzky for their ideas on a prior related work. Mistakes are my own.

Sustainability of Collusion and Market Transparency in a Sequential Search Market: a Generalization
Jacopo De Tullio,Giuseppe Puleio

The present work generalizes the analytical results of Petrikaite (2016) to a market where more than two firms interact. As a consequence, for a generic number of firms in the oligopoly model described by Janssen et al (2005), the relationship between the critical discount factor which sustains the monopoly collusive allocation and the share of perfectly informed buyers is non-monotonic, reaching a unique internal point of minimum. The first section locates the work within the proper economic framework. The second section hosts the analytical computations and the mathematical reasoning needed to derive the desired generalization, which mainly relies on the Leibniz rule for the differentiation under the integral sign and the Bounded Convergence Theorem.

The Capital Asset Pricing Model as Modern Austrian Business Cycle Theory
Krainer, Robert
According to Austrian macroeconomic theory, capital accumulation today generates supply tomorrow. Will that supply match tomorrows demand? In this paper we study this question in a multi-good and risky environment with an efficient financial system. Towards this end we develop a model based on the Capital Asset Pricing Model (CAPM), Rational Expectations, and Linear Homogeneous Production Functions. Within this framework we show how the financial system in the form of CAPM allocates resources across the different sectors in the economy so as to maximize the ratio of expected returns to a measure of risk like the standard deviation of returns for some initial time period t=0. In t=1 a Linear Homogeneous Production Function subject to a random productivity shock determines actual output and the structure of production. The link between t=0 and t=1 is Rational Expectations, the assumption that the subjective probability distribution in t=0 on which real investment decision are made is equivalent to the objective distribution generating the actual output/income in t=1. If total output is more (or less) than expected in t=0, we have a cyclical expansion (or recession) the magnitude of which depends on the spread of the subjective probably distribution in t=0. With this model we discuss: 1) monetary policy under a full reserve banking system with Central bank digital accounts for all; 2) an all-inclusive transaction tax to substitute for the U.S. present tax system; 3) the trade-off between economic growth and the cyclical volatility of the economy; and 4) the advantages and disadvantages of trade deficits.

The Cross-Section of Household Preferences
Calvet, Laurent E.,Campbell, John Y.,Gomes, Francisco,Sodini, Paolo
This paper estimates the cross-sectional distribution of Epstein-Zin preference parameters in a Large administrative panel of Swedish households. We consider a life-cycle model of saving and portfolio choice that incorporates risky labor income, safe and risky financial assets inside and outside retirement accounts, and real estate. We study middle-aged stockowning households grouped by education, industry of employment, and birth cohort as well as by their accumulated wealth and risky portfolio shares. We find some heterogeneity in risk aversion (a standard deviation of 0.47 around a mean of 5.24 and median of 5.30) and considerable heterogeneity in the time preference rate (standard deviation 6.0% around a mean of 6.2% and median of 4.1%) and elasticity of intertemporal substitution (standard deviation 0.96 around a mean of 0.99 and median of 0.42). Risk aversion and the EIS are almost cross-sectionally uncorrelated, in contrast with the strong negative correlation that we would find if households had power utility with heterogeneous risk aversion. The TPR is weakly negatively correlated with both the other parameters. We estimate lower risk aversion for households with riskier labor income and higher levels of education, and a higher TPR and lower EIS for households who enter our sample with low initial wealth.

The Economic Consequences of Firms’ Commitment to ESG Policies
Amiram, Dan,Gavious, Ilanit,Jin, Chao,Li, Xinlei
The largest U.S. banks have adopted, in a staggered manner, an environmental and social risk management framework. Based on a large sample of borrowers, utilizing a staggered difference-in-differences design, we document a significant increase in environmental protection provisions in the loan contract for borrowers that borrow from banks that adopted the framework. Moreover, we reveal a significant reduction in loan spreads, especially among borrowers who borrow from early EP adopters and borrowers who actively switch to banks that adopted the framework. Additionally, the cost of equity decreases for borrowers from banks that adopted the framework. Lastly, we document an increase in environmental performance for these borrowers after the contract. Taken together, our findings are consistent with firms being able to reduce their cost of capital by opting to commit to environmental protection through loan contracts.

The role of peer effects in corporate employee welfare policies
Ali-Rind, Asad,Akbar, Saeed,Boubaker, Sabri,Jarjir, Souad Lajili,Mollah, Sabur
This paper investigates the role of peer effects in the employee welfare policies of organizations. Using US panel data for a sample of 11,451 firm-year observations from 1996 to 2017, we find that firms’ employee welfare decisions are driven by their peers and show that peer firms play a significant role in defining corporate employee welfare policies. Our findings are robust to various sensitivity checks, including alternative definitions of employee welfare, alternative peer proxies, and several identification strategies. Our additional analysis shows that herding behaviour is prevalent in followers, who mimic leaders' behaviour, but we do not find any such relationship for industry leaders. Further, we show evidence suggesting that mimetic and normative isomorphic pressures are driving the peer effects. Finally, we document the economic consequence of peer mimicking in employee welfare policies. Our findings on firms’ peer effects and herding behaviour have policy implications.

Volatility Modeling and Forecasting of the Egyptian: Stock Market Index using ARCH Models
Ebeid, Said T.,Bedeir Alkholi, Gamal B. A.
This paper estimates and evaluates the forecasting performance of four alternative ARCH- type Models for predicting stock price index volatility using daily Egyptian data. The competing Models include GARCH, EGARCH, GJR and APAPCH used with four different distributions, Gaussian normal, Student-t, Generalized Error Distribution and skewed Studentâ€"t. The estimation results show that the forecasting performance of asymmetric GARCH Models (GJR and APARCH),especially when fat-tailed asymmetric densities are taken into account in the conditional volatility, is better than symmetric GARCH. Moreover, it is found that the APAPCH (1,1) Model Provides the best out-of-sample forecasts among all the candidate Models and the skewed Student-t density is more appropriate for modeling the Egyptian stock market index volatility.

What triggers consumer adoption of Central Bank Digital Currency?
Bijlsma, Michiel,van der Cruijsen, Carin,Jonker, Nicole,Reijerink, Jelmer
Central banks around the world are examining the possibility of introducing Central Bank Digital Currency (CBDC). The public’s preferences concerning the usage of CBDC for paying and saving are important determinants of the success of CBDC. Using data from a representative panel of Dutch consumers we find that roughly half of the public would open a CBDC current account. The same holds for a CDBC savings account. Thus, we find clear potential for CBDC in the Netherlands. This suggests that consumers perceive CBDC as distinct from current and savings accounts offered by traditional banks. Intended adoption is positively related to respondents’ knowledge of CBDC and trust in banks and in the central bank. Price incentives matter as well. The amount respondents want to deposit in the CBDC savings account depends on the interest rate offered. Furthermore, intended usage of the CBDC current account is highest among people who find privacy and security important and among consumers with low trust in banks in general. These results suggest that central banks can steer consumers’ adoption of CBDC via the interest rate, by a design of CBDC that takes into account the public’s need for security and privacy, and by clear communication about what CBDC entails.

When Trading in Emerging Markets, Assess Liquidity Risks
Al Janabi, Mazin A. M.
Calculating liquid asset risk can be useful for any investor with a trade portfolio, as well as for financial institutions, as liquidity crises have been the force behind many bankruptcies. That is why more and more financial entities are using L-VaR techniques to measure the different trade risks. Specifically, they turn to custom-made internal risk-assessment models to respond to the traits of each institution.

Whether auditors’ resignation affects India’s corporate governance standards: A stricter regime to curb the same?
Papdiwal, Tanisha
In the recent decades, India has witnessed huge number of corporate scandals which have severely endangered the economic progress of the country. The increase in corporate frauds poses questions on the effectiveness of present corporate governance regime and often calls for a complete overhaul and redemption of the system. The phenomenon of auditor resignation is not a new anomaly and unprecedented but the rate at which it is increasing is quite alarming. During the past few years, audit as a profession has faced several challenges in India. The audit failures had gone unnoticed but the innumerable auditor resignations and increased regulatory scrutiny have brought the issue into spotlight. The issue of auditor resignation is of sufficient interest to the legal community as accounting scandals adversely affects the entire stakeholder community including shareholders and investors. In response to recent spate in auditors’ resignation, the new Companies Act 2013, Securities and Exchange Board of India (SEBI) and National Finance Reporting Authority (NFRA) have taken up several measures to act against erring auditors and improve the overall audit system. However, as the clamour grows for strict action against the auditors, the profession finds itself at a crossroads hinting upon the weak regulations and enforcement strategies.This paper focuses primarily on the issue of resignation of statutory auditors as there is a recent surge in the auditors’ resignation. The first part of the paper provides a background about the issue of auditor resignation and the law governing it. The second part focuses on the cases of auditor resignation in India and analyses the reasons behind such resignations. The third part engages in the critical analysis of the existing legal framework and the recent developments in terms of regulations and enforcement mechanism that have come in place to tackle and prevent such audit failures. The fourth part concludes the paper by giving plausible reforms and suggestions to redefine and structure the existing legal framework.

Who Are I: Time Inconsistency and Intrapersonal Conflict and Reconciliation
Xue Dong He,Xun Yu Zhou

Time inconsistency is prevalent in dynamic choice problems: a plan of actions to be taken in the future that is optimal for an agent today may not be optimal for the same agent in the future. If the agent is aware of this intra-personal conflict but unable to commit herself in the future to following the optimal plan today, the rational strategy for her today is to reconcile with her future selves, namely to correctly anticipate her actions in the future and then act today accordingly. Such a strategy is named intra-personal equilibrium and has been studied since as early as in the 1950s. A rigorous treatment in continuous-time settings, however, had not been available until a decade ago. Since then, the study on intra-personal equilibrium for time-inconsistent problems in continuous time has grown rapidly. In this chapter, we review the classical results and some recent development in this literature.

Американский план помощи вызывает повышение инфляционных ожиданий (обзор мировых финансовых рынков с 16 января по 15 марта 2021 г.) (US Stimulus Plan Raises Inflation Expectations (Review of Financial Markets from January 16 through March 15, 2021))
Abramov, Alexander E.,Kosyrev, Andrey,Radygin, Alexander,Chernova, Maria
Russian Abstract: Расширение программ государственной поддержки экономики в США вызывает опасения относительно ускорения инфляции и роста стоимости активов не только в этой стране, но и во всем мире. Ð' среднесрочной перспективе российская экономика и ее финансовый рынок могут стать бенефициарами роста бюджетных расходов в США. Ð"орогостоящие антикризисные меры способны вызвать повышение цен на нефть, иные сырьевые ресурсы и, соответственно, рост стоимости акций российских компаний. Однако такой эффект будет носить временный характер.English Abstract: The expansion of the US government economic stimulus package has raised concerns about accelerating inflation and rising asset values not only inside the country, but throughout the world. In the medium term, the Russian economy and financial market may benefit from climbing US budget spending. The expensive relief measures may push up prices for oil and other raw materials and, accordingly, produce an increase in the value of shares issued by Russian companies. However, this effect is expected to be temporary.

Ð'анковские ресурсы в 2020 г.: структура остается прежней (Bank Reserves in 2020: The Structure Remains the Same)
Zubov, Sergey
Russian Abstract: Фондирование банковского сектора в 2020 г. оставалось достаточно сбалансированным: существенных изменений в структуре ресурсной базы кредитных организаций зафиксировано не было. Снижение процентных ставок по депозитам способствует постепенному изменению поведения банковских клиентов и увеличению спроса на ценные бумаги, золото, паи ПИФов и другие инструменты сберегательно-инвестиционного характера.English Abstract: In 2020, the funding of the banking sector remained rather balanced: the funding base structure of credit institutions did not shift notably. Decline in deposit interest rates boost gradual change in behavior of bank customers and accelerate demand for securities, gold, PIF shares and other tools of investment and saving nature.

Хозяйственное обозрение (декабрь 2020 â€" март 2021 гг.) (Survey of Current Business (December 2020 â€" March 2021))
Aukutsionek, Sergey,Yegorov, Andrey S.,Serzhantova, Tatyana V.,Belyakov, Stanislav V.
Russian Abstract: Ð"екабрь 2020 г. по ряду ключевых показателей продемонстрировал рекордно высокие значения. Максимальных â€" почти за 30 лет наблюдений â€" значений достигли уровень загрузки производственных мощностей (86%) и уровень загрузки рабочей силы (96%). Уровень наполненности портфеля заказов достиг 92% â€" выше он поднимался только дважды в 2007 г. Заметно лучше предыдущего месяца были: диффузный индекс заработной платы (+17 п.п.), выпуска и закупок оборудования (+10 п.п. каждый), портфеля заказов (+7 п.п.). Роста цен на покупаемую продукцию через три месяца ожидают 89% предприятий, участвовавших в опросе. Ð"о 93% вырос и соответствующий диффузный индекс, который не был столь высоким около двух лет.English Abstract: December 2020 showed record high values for a number of key indicators. Capacity utilization rate (86%) and labor utilization rate (96%) reached maximum values for almost 30 years of observation. The order-book level reached 92%; it was higher only twice in 2007. The diffusion indices of wages (+17 percentage points), production and purchases of equipment (+10 pp each), order-book level (+7 pp) were noticeably better than in November. At the same time, 89% of enterprises participating in the survey expect an increase in prices for purchased products in three months. The corresponding diffusion index, which had not been so high for about two years, also rose to 93.