Research articles for the 2021-06-01

$N$-player and Mean-field Games in It\^{o}-diffusion Markets with Competitive or Homophilous Interaction
Ruimeng Hu,Thaleia Zariphopoulou

The paper introduces and analyzes $N$-player and common-noise mean-field games in It\^{o}-diffusion environments, in the context of both complete and incomplete financial markets. The players invest in a finite horizon and in a common market by either competitive or homophilous interactions. In both kinds of market environments, the players have individual risk tolerance coefficients. In the incomplete market setting, these risk tolerances are constants (CARA utilities), while in the complete market, they are assumed to be wealth-independent random variables depending, among others, on upcoming market information. For all these distinct models, we derive explicit or closed-form solutions for the optimal policies and optimal wealth processes, as well as for the related game values.

A Bayesian realized threshold measurement GARCH framework for financial tail risk forecasting
Chao Wang,Richard Gerlach

In this paper, an innovative threshold measurement equation is proposed to be employed in a Realized-GARCH framework. The proposed framework employs a nonlinear threshold regression specification to consider the leverage effect and model the contemporaneous dependence between the observed realized measures and hidden volatility. A Bayesian Markov Chain Monte Carlo method is adapted and employed for the model estimation and forecasting, with its validity assessed via a simulation study. The usefulness of the proposed measurement equation in a Realized-GARCH model has been evaluated via a comprehensive empirical study, by forecasting the 1% and 2.5% Value-at-Risk and Expected Shortfall on six market indices. The proposed framework is shown to be capable of producing competitive tail risk forecasting results, compared to the original Realized-GARCH. Especially, the proposed model is favoured during the high volatility 2008 Global Financial Crisis period.

A Robust Approach to Optimal Portfolio Choice with Parameter Uncertainty
Lassance, Nathan,Martin-Utrera, Alberto,Simaan, Majeed
Kan and Zhou (2007) introduce a framework to portfolio selection under estimation risk that consists in finding an optimal three-fund portfolio that maximizes the investor's out-of-sample utility mean. In this paper, we extend the analysis of Kan and Zhou and propose a methodology that accounts for both the mean and the variance of the investor's out-of-sample utility. Our framework delivers robust portfolios that tend to outperform those that ignore either estimation risk or the investor's out-of-sample utility variance in the presence of parameter uncertainty.

A Shot in the Arm: The Effect of COVID-19 Vaccine News on Financial and Commodity Markets
Kucher, Oleg,Kurov, Alexander,Wolfe, Marketa
We analyze the impact of vaccine news announcements by leading vaccine companies on the financial and commodity markets from January to December 2020. We show that the vaccine announcements moved stock prices of the leading vaccine companies, stock markets in the U.S. and Europe (but not in Asia and Australia), interest rates, transportation commodities (but not construction commodities), and foreign exchange markets with an especially strong impact on commodity currencies. We also show that important announcements about successful initiation and completion of the research and discovery stage, three phases of clinical development, regulatory approvals, and government funding and supply agreements moved the markets more than other vaccine announcements. The impact was stronger during the bear market (mainly from February through April 2020) than the bull market.

Asymmetries and the Market for Put Options
Farago, Adam,Khapko, Mariana,Ornthanalai, Chayawat
We study implications of asymmetries in both preferences and fundamentals for put option demand across investors and the resulting market behavior. A heterogenous-agent model populated by investors with asymmetric preferences alongside standard risk-averse agents rationalizes the size and the dynamics of the put option market, the expensiveness of put options, and the link between put option demand and the stock market in equilibrium. Disappointment-averse investors take long positions in put options, but only if their reference point is lower than the certainty equivalent. In the cross-section of options with multiple strikes, disappointment-averse investors’ open interest peaks for the at-the-money contracts.

Beyond Value at Risk for Developing Markets
Yahayah, Ibraheem Abiodun,Olowoyo, Monsur Bolaji,Abbott, Ken
The standard metric for assessing risk in the financial realm has been the Value-at-Risk (VaR) with several parametric and non-parametric approaches and its derivatives which is Conditional Value-at-Risk (CVaR). The inability of VaR to tell loss severity beyond the confidence threshold and its incoherency gave birth to CVaR which accounted for both shortcomings and is also sub-additive. However, backtesting a 1-day CVaR model is almost impossible and VaR estimates gives better accuracy for fat tails than CVaR which makes CVaR also defective. Hence, there is need for a better measure which will capture the shortcomings of both metrics. This research will employ other risk measures beyond the conventional VaR and CVaR using the historical return of developing markets; South African Stock exchange (JTOPI-40) and the Nigerian Stock Exchange (NSE-30). In Particular, we will consider Hull-White Value-at-Risk (HWVaR) and Bubble Value-at-Risk (BVaR) and finally compare and contrast them with the two conventional metrics.

Beyond cost reduction: Improving the value of energy storage in electricity systems
Maximilian Parzen,Fabian Neumann,Addrian H. Van Der Weijde,Daniel Friedrich,Aristides Kiprakis

An energy storage technology is valuable if it makes energy systems cheaper. Traditional ways to improve storage technologies are to reduce their costs; however, the cheapest energy storage is not always the most valuable in energy systems. This paper reviews techno-economic storage valuation methods and expands them by the introduced market potential method. The market potential method derives the value of technologies by examining common deployment signals from energy system model outputs in a structured way. We apply and compare this method to cost evaluation approaches in a renewables-based European power system model, covering diverse energy storage technologies. We find that characteristics of high-cost hydrogen storage can be equally or even more valuable than low-cost hydrogen storage. Additionally, we show that modifying the freedom of storage sizing and component interactions can make the energy system 10% cheaper and impact the value of technologies. The results suggest to look beyond the pure cost reduction paradigm and focus on developing technologies with value approaches that can lead to cheaper electricity systems in future. One practical and useful value method guiding energy storage innovation could be the market potential method.

Bitcoin’s Value Proposition: Shorting Expansionary Monetary Policies
Morillon, Thibaut G.
In this paper I discuss Bitcoin’s defining features that make it a unique asset. I argue that Bitcoin should not be considered as a single purpose asset only, but rather as a new digital financial asset serving several function. In addition to functioning as a means of payment (at least partially) and a diversification tool, I argue that part of Bitcoin’s value proposition stems from its worth as a short position on modern expansionary monetary policies. Indeed, Bitcoin’s value should rise if expansionary monetary policies are maintained, amounting to a tool to short these policies, which should be considered in future attempts to value Bitcoin. I discuss the role of Bitcoin in the traditional financial system, contrast Bitcoin to gold, consider the implications of the continuance of expansionary policies on Bitcoin, and discuss the impact of the emergence of cryptocurrencies as a new asset class on public policies.

Board Member Financial Literacy Framework for NFPs
Outa, Erick Rading
Purpose: The purpose of this paper is to develop a framework that identifies financial literacyconcepts that board members in NFP’s should read, understand and apply their minds toeffectively perform their duties.Design: We address this through qualitative and quantitative methods with group and purposive sampling where we bring together experts in this area to explore, debate and identify the concepts that lead to an appropriate framework. The study builds on agency theory where the role of directors is to monitor management on behalf of the stakeholders.Findings: From the responses and debates among experts, we provide an NFP board memberdefinition of what a financial literate board member should read (Financial statements),understand (18 concepts) and apply his or her mind on. We provide this through a robust butsimple framework that NFP members will find easy to follow.Originality/Value: Our framework responds to the Financing Reporting Councils’ (FRC)contention that financial literacy for board members in Australia is deficient. Simultaneously, weaddress ASICs National Financial Literacy Strategy which suggests improving financial literacyby improving research, measurement and evaluation. The framework also addresses the needs of NFPs currently known to experience governance issues in spite of the existing resources. SuchNFPs spectrum are found in indigenous communities, voluntary associations (Clubs, Churches,) and well-known sectors like local authorities, health board of hospitals, water, mines and housingboards.

Britain and Brexit: A Forecast of the Future of Employment Protection during Corporate Insolvency]
Gant, Jennifer L. L.
The pending spectre of Brexit and its impact on Europe and the United Kingdom (UK) along with the political uncertainty of a major world power in turmoil following the 2016 United States elections, calls into question the path that many social and economic policies may take in the future. The balance of social policy and economic efficiency is nowhere more evident than in the treatment of employees during bankruptcy/insolvency procedures, which may provide a barometer of changes yet to come. As a member of the European Union (EU), the UK continues to be subject to Regulations and Directives that implement EU social policy objectives and influence the functioning of the rescue culture throughout the Member States. The EU has had a significant influence on the direction the UK has taken in matters of social policy since its accession in 1973. Arguably, this has forced the UK into a socially liberal and protective framework that it might not otherwise have adopted to such a degree had it not been within the EU’s sphere of influence. EU policy also had an influence on the UK’s adoption of the rescue culture, which is now the foundation for insolvency systems throughout the EU and in many modern world economies, though it is possible that the UK may have been a natural development on the legal path of the of the British insolvency system. Now that Article 50 of the Treaty of Lisbon has been invoked, the UK is making its way toward a deal or no deal Brexit scenario. If and when Brexit becomes a reality, and Britain begins to untangle itself from the influence of the EU, how will the rescue culture and the social protections present within it under the current legal regime be changed? In what direction is the UK likely to go? While difficult to predict, the direction that the UK may take in the event that the European Communities Act of 1972 is eventually repealed and the UK is once again left to its own legislative devices, current conversations in Parliament give a certain flavour of potential futures. In addition, a consideration of different jurisdictions, such as America, Canada and Australia, each having a similar English common law origin and historical links to the UK, can be instructive in relation to which direction the UK may have taken had it never joined the EU. An analysis of this counterfactual position may then also provide a clue as to the direction that the UK may take The UK has ever been the “odd man out” in the EU, springing as it does from a significantly different legal origin than the Franco/German model at the heart of the EU. By examining the developmental path of the United States, Australia and the UK in this area of law prior to EU accession, the behaviour and reactions of the UK during EU membership, and comparing this to similar developments in the comparator countries, it may be possible to forecast the eventual direction that the law of Post-Brexit Britain may take in relation to the social protections that may or may not be available during insolvency procedures in the future.

Cash versus Kind: Benchmarking a Child Nutrition Program against Unconditional Cash Transfers in Rwanda
Craig McIntosh,Andrew Zeitlin

We benchmark a multi-dimensional child nutrition intervention against an unconditional cash transfer of equal cost. Randomized variation in transfer amounts allows us to estimate impacts of cash transfers at expenditure levels equivalent to the in-kind program, as well as to estimate the return to increasing cash transfer values. While neither the in-kind program nor a cost-equivalent transfer costing \$124 per household moves core child outcomes within a year, cash transfers create significantly greater consumption than the in-kind alternative. A larger cash transfer costing \$517 substantially improves consumption and investment outcomes and drives modest improvements in dietary diversity and child growth.

Competition Laws, Governance, and Firm Value
Levine, Ross,Lin, Chen,Xie, Wensi
Do antitrust laws influence corporate valuations? We evaluate the relationship between firm value and laws limiting firms from engaging in anticompetitive agreements, abusing dominant positions, and conducting M&As that restrict competition. Using firm-level data from 99 countries over the 1990-2010 period, we discover that valuations rise after countries strengthen competition laws. The effects are larger among firms with more severe pre-existing agency problems: firms in countries with weaker investor protection laws, with weaker firm-specific governance provisions, and with greater opacity. The results suggest that antitrust laws that intensify competition exert a positive influence on valuations by reducing agency problems.

Conspicuous Consumption: Vehicle Purchases by the Credit Constrained
Di, Wenhua,Su, Yichen
Consumers with higher income often spend more on luxury goods. As a result, lower-income consumers who seek to increase their perceived income and social status may be motivated to purchase conspicuous luxury goods. Lower-income consumers may also desire to emulate the visible consumption displayed by their wealthier peers. Using a unique vehicle financing dataset, we find that consumers with lower credit scores value vehicle brand prestige more compared with average consumers. The stronger preferences for prestige leads nonprime consumers to purchase more expensive vehicles than they otherwise would have. We find evidence that the preferences for prestige are driven both by status signaling and peer emulation motives. Furthermore, we show that larger vehicle purchases financed by auto loans leads to worse loan performance and credit standing for nonprime consumers.

Corporate Governance, CEO Turnover, and Firm Performance: Evidence from India
Jatana, Chhavi
Purpose- The present study examines the impact of corporate governance (CG) on chief executive officer turnover (CTURN) and turnover-firm performance relationship (TPR) in Indian listed firms.Design/methodology/approach- Logistic (fixed-effect) regression using a balanced panel of the companies included in the S&P BSE 500 Index from 2014 to 2018 was employed.Findings- Accounting performance (ACCP) didn’t have any relationship with CTURN, whereas a weak link was found between market performance (MKTP) and CTURN. Among CG variables, none of the CG mechanisms were significantly associated with CTURN and TPR except board size in the case of ACCP. Board size was positively associated with CTURN but played an insignificant role in influencing the TPR. Concerning MKTP, block and promoter ownership significantly weaken, whereas institutional ownership significantly strengthens the TPR. Other CG variables played no role in influencing CTURN or TPR.Originality- This study contributes to the literature by assessing the impact of various ownership and board-related variables on CTURN decision in the emerging economy of India that would be of interest to regulatory bodies, practitioners, and academic researchers.

Cryptocurrency Factor Portfolios: Performance, Decomposition and Pricing Models
Han, Weihao,Newton, David,Platanakis, Emmanouil,Sutcliffe, Charles,Ye, Xiaoxia
The empirical distributions of cryptocurrency returns are highly non-normal, casting doubt on the performance metrics. So we apply almost stochastic dominance (ASD), which does not require any assumption about the return distribution, to examine cryptocurrency factor portfolios. Using portfolios based on factors that can be constructed from available market information, we find 13 factor portfolios that dominate our four benchmarks. The long-only strategy contributes more to this dominance than does the short-only strategy. We test whether returns on the 13 dominant factor portfolios can be explained by a coin market three-factor model. This model has limited success, and its performance is significantly improved by the inclusion of a mispricing factor.

Decision Towards Green Careers and Sustainable Development
Adam Sulich,Malgorzata Rutkowska,Uma Shankar Singh

The graduates careers are the most spectacular and visible outcome of excellent university education. This is also important for the university performance assessment when its graduates can easily find jobs in the labor market. The information about graduates matching their qualifications and fields of studies versus undertaken employment, creates an important set of data for future students and employers to be analyzed. Additionally, there is business environment pressure to transform workplaces and whole organizations towards a more green and sustainable form. Green Jobs (GJ) are the elements of the whole economic transformation. This change is based on the green qualifications and green careers which translate theoretical assumptions into business language. Therefore, the choice of future career path is based on specified criteria, which were examined by surveys performed among graduates by the career office at Wroclaw University of Technology (WUT) in Poland. The aim of this article was to address the question about the most significant criteria of green career paths among graduates of WUT in 2019. Special attention was paid to the GJ understood as green careers. In this article, the multi-criteria Bellinger method was explained, presented, and then used to analyze chosen factors of choice graduates career paths and then compared with Gale-Shapley algorithm results in a comparative analysis. Future research can develop a graduate profile willing to be employed in GJ.

Deep Reinforcement Learning in Quantitative Algorithmic Trading: A Review
Tidor-Vlad Pricope

Algorithmic stock trading has become a staple in today's financial market, the majority of trades being now fully automated. Deep Reinforcement Learning (DRL) agents proved to be to a force to be reckon with in many complex games like Chess and Go. We can look at the stock market historical price series and movements as a complex imperfect information environment in which we try to maximize return - profit and minimize risk. This paper reviews the progress made so far with deep reinforcement learning in the subdomain of AI in finance, more precisely, automated low-frequency quantitative stock trading. Many of the reviewed studies had only proof-of-concept ideals with experiments conducted in unrealistic settings and no real-time trading applications. For the majority of the works, despite all showing statistically significant improvements in performance compared to established baseline strategies, no decent profitability level was obtained. Furthermore, there is a lack of experimental testing in real-time, online trading platforms and a lack of meaningful comparisons between agents built on different types of DRL or human traders. We conclude that DRL in stock trading has showed huge applicability potential rivalling professional traders under strong assumptions, but the research is still in the very early stages of development.

Digital Economy Financial Applications
Panova, Galina
The article presents discussion on innovative transformation of financial instruments, which definitions, classification and role in the economy has remained debatable. In the face of changes in the economy under the influence of the coronavirus pandemic, the technological transformation of the business and the introduction of more stringent international regulations financial intermediaries seek to solve a three-pronged problem: to ensure high profitability of their business while maintaining liquidity and minimizing risks. The aim and importance of the study is to identify the conceptual apparatus and financial tools of the digital economy, as well as to solve problems and determine development prospects. Various approaches to the interpretation and regulation of digital financial assets have been analyzed. Discussion issues of theoretical understanding and practical application of crypto currencies are presented. The author's interpretation and classification of crypto currencies and digital currencies of central banks is proposed. Approaches to classification of crypto assets vary, but in general they can be identified mainly as private assets, which exist in the form of digital records which can be used for investment purposes and/or to provide access to a product or service. The modern tools of financial markets are diverse, so the importance of the study is determined by the need to develop unified approaches, principles and regulations for digital financial instruments in global and national financial markets.

Does credit information sharing reduce discouraged borrowers?
Giang, Vu Thi Le
Information asymmetry is a fundamental problem creating malfunctions in the credit market. On the supply side, credit information sharing is recognized as an effective solution to mitigate asymmetric information. On the demand side, however, its impact on discouraged borrowers is missing in empirical research. Using data from the Enterprise Survey of The World Bank and information sharing data from Doing Business for developing countries worldwide, this research highlights the effectiveness of information sharing in reducing discouraged borrowers, especially information sharing through public credit registries. More interestingly, the non-linear effect of increased information on discouraged borrowers, predicted in the theory of Kon and Storey (2003), is also found. There is evidence to confirm that information sharing through private credit bureaus discourages firms from applying for loans if their coverage is low, while it enhances the demand for bank credit if their coverage reaches a sufficient level.

Effectives of monetary policy under the high and low economic uncertainty states: Evidence from the major Asian economies
Balcilar, Mehmet,Ozdemir, Zeynel Abidin,Ozdemir, Huseyin,Aygun, Gurcan,Wohar, Mark E.
This study examines the monetary policy effectiveness of five major Asian countries (China, Hong Kong, India, Japan, and South Korea) using a quantile vector autoregression (QVAR) model-based spillover estimation approach of Balcilar et al. (2020b) at different quantile paths. To do this, we first obtain the spillover index from interest rate to industrial production and consumer price index under the high and low levels of uncertainty. The full sample results from our analysis provide partial supporting evidence for the economic theory, which asserts that monetary policy efficiency must fall during periods of high economic uncertainty. Furthermore, this approach also allows us to uncover asymmetric effects of economic policy uncertainty and lending rate on macroeconomic indicators. The impacts of interest rate and domestic and foreign (both the EPU of US and EU) uncertainty shocks on major Asian markets present significant asymmetric characteristics. Moreover, our time-varying results suggest that monetary policy shocks are more effective and potent on Asian economies during the low and high uncertainty periods than normal economic periods.

Estimating and Testing Long-Run Risk Models: International Evidence
Fulop, Andras,Li, Junye,Liu, Hening,Yan, Cheng
We estimate and test long-run risk models using international macroeconomic and financial data. The benchmark model features a representative agent who has recursive preferences with a time preference shock, a persistent component in expected consumption growth, and stochastic volatility in fundamentals characterized by an autoregressive Gamma process. We construct a comprehensive dataset with quarterly frequency in the post-war period for ten developed countries and employ an efficient likelihood-based Bayesian method that exploits up-to-date sequential Monte Carlo methods to make full econometric inference. Our estimation provides international evidence in support of long-run risks, time-varying preference shocks, and countercyclicality of the stochastic discount factor.

Euro Area Sovereign Bond Risk Premia During the COVID-19 Pandemic
Corradin, Stefano,Grimm, Niklas,Schwaab, Bernd
We decompose euro area sovereign bond yields into five distinct components: i) expected future short-term risk-free rates and a term premium, ii) default risk premium, iii) redenomination risk premium, iv) liquidity risk premium, and a v) segmentation (convenience) premium. Identification is achieved by considering sovereign bond yields jointly with other rates, including sovereign credit default swap spreads with and without redenomination as a credit event feature. We apply our framework to study the impact of European Central Bank (ECB) monetary policy and European Union (E.U.) fiscal policy announcements during the Covid-19 pandemic recession. We find that both monetary and fiscal policy announcements had a pronounced effect on yields, mostly through default, redenomination, and segmentation premia. While the ECB's unconventional monetary policy announcements benefited some (vulnerable) countries more than others, owing to unprecedented flexibility in implementing bond purchases, the E.U.’s fiscal policy announcements lowered yields more uniformly.

Global Versus Non-Global Banks: A Capital Ratios-Based Analysis
Drakos, Konstantinos,Malandrakis, Ioannis
This paper examines the Leverage Ratio and Total Capital Ratio of global versus non-global banks in both the pre- and postcrisis periods. A panel data set of 165 global and non-global financial institutions from 38 countries is used for the period 1999-2015 and a random effects model is employed to examine whether global banks perform better or not compared to their non-global counterparts.This study comes up with two important findings. First, global banks do not exhibit heterogeneous behaviour with respect to both ratios neither in the pre- and especially nor in the post-crisis period. Second, the Leverage Ratio is crisis-insensitive, but the Total Capital Ratio isnot. Our findings encourage further research on the topic of the contribution of global banks to the financial crisis propagation (at least as far as leverage is concerned).

Good Connections: Bank Specialization and the Tariff Elasticity of Exports
RPS Submitter, Banque de France,Berthou, Antoine,Mésonnier, Jean-Stéphane,Mayer, Thierry
In this paper, we show that exporters react more strongly to a cut in tariffs by a distant countrywhen their banks have already been specializing in funding exports to this country. To make ourcase, we build upon a theoretical model where an informational advantage provided by theexporter's bank results in a lower distribution cost in the destination country. We test theimplications of this model for French exporters using the 2011 free trade agreement between theEuropean Union and South-Korea as a quasi-natural experiment. We measure a bank'sspecialization in Korea using granular information on bank-firm credit lines and firm-level exportsin the years preceding the agreement. We assess how customers of different banks react to this tradeliberalization episode using detailed information on the bilateral tariff cuts and disaggregated dataon French export flows at the firm-product level. We find robust evidence that the specializedlenders help exporters to respond more strongly to changes in tariffs. The effect is strong for allfirms along the extensive margin, but only for less productive exporters along the intensive margin.

Income inequality, mortgage debt and house prices
Kösem, Sevim
This paper studies housing and credit market implications of increasing income inequality and discusses how a low interest rate environment can alter its consequences. I develop an analytical general equilibrium model with a novel borrower risk composition channel of income inequality. Following a rise in income inequality house prices and mortgage debt decline, and aggregate default risk increases. I then show that low real rates mitigate the depressing effect of inequality on house prices at the cost of amplifying the aggregate default risk. Using a panel of US states and instrumental variables approach, I verify the model’s predictions.

Index Providers: Whales Behind the Scenes of ETFs
An, Yu,Benetton, Matteo,Song, Yang
Most ETFs passively replicate the performance of an index that is constructed and maintained by an index provider. We show that index providers possess strong market power and charge large markups to ETFs, which are passed onto investors through management fees. We document three stylized facts about index providers: (i) the ETF indexing market is dominated by a few large index providers, (ii) when choosing ETFs, investors care about the identities of index providers, although index providers explain little variation in ETF returns, and (iii) about one-third of the ETF management fees are paid as index licensing fees to index providers. Through a structural model that incorporates the two-tier competition between index providers for ETFs and between ETFs for investors, we estimate that about 75% of licensing fees are markups charged by index providers. Eliminating the market power of index providers can reduce ETF management fees by 26%.

Investor Orientations and Endowment Portfolio Investments in German Foundations
Kremer, Maximilian,Achleitner, Ann‐Kristin
Germany benefits from an especially lively philanthropic sector, with over twenty three thousand active charitable foundations. An empirical assessment of the portfolio preferences of German foundations yields fundamental intragroup differences in their approach to asset allocation. We build on entrepreneurial orientation theory to explore these differences in behavior, motives, rationales and portfolio investment preferences and extract a typology along a commercial and mission orientation in charitable foundations’ investment orientation. We suggest an explanatory model that improves our understanding of the observed differences foundations exhibit in their investment orientation and enables a more structured understanding of the sources of capital for differing commercial and social endeavors.

JCOERE - Judicial Co-Operation in the European Union: Insolvency and Rescue
Lynch Fannon, Irene,Gant, Jennifer L. L.
This Chapter will begin with a snapshot of the JCOERE Project teasing out some implications connected to the Preventive Restructuring Directive and the cooperation obligations under the EIR Recast against the backdrop of emerging European debates. It will go on to consider how the PRD reflects a range of preventive restructuring processes that already exist in the EU with a particular focus on the Irish Examinership process. When one considers the interface between the PRD and the co-operation obligations in the EIR Recast it should be noted that not all of these processes will be covered by the EIR Recast. In Ireland, for example, there is one process that is specifically included in Annexe A of the EIR Recast (Examinership) and one that is not (Schemes of Arrangement),7 which is modelled exactly on the UK scheme of arrangement8 and which has been part of Irish law since at least 1948). The Chapter will continue with a focus on the Irish Examinership process and consider the substantive rules which are part of a robust restructuring framework in light of the 30 years of experience with Examinership in the Irish courts. It will consider these rules in light of significant cases by the Irish courts and this discussion will add to the theoretical debate currently being conducted in Member States regarding implementation of the PRD.

Judicial Co-Operation in the European Union: Insolvency and Rescue
Lynch Fannon, Irene,Gant, Jennifer L. L. ,Finnerty, Aoife
JCOERE â€" Judicial Co-Operation for Economic Recovery in Europe is a research action project funded by the EU Commission DG Justice. The project has a number of research goals:-The most important part of the project focuses on the obligation imposed on courts in the Recast Regulation 848/2015 to co-operate in insolvency matters. Focussing on restructuring and rescue frameworks, the project is designed to consider obstacles, both substantive and procedural, to co-operation. The project will engage proactively with European judiciary to document their perception of this obligation in practise including possible obstacles and proposed resolutions. The project includes a consideration of guidelines provided to facilitate co-operation. Dissemination of practical information and guidance is a key part of the project.To compliment this broader context, there is a focus on rescue frameworks in the EU which will deliver the following:- A study on the history and enactment of the Preventive Restructuring Directive (now passed by the European Parliament and awaiting enactment- COM (2016) 723 FINAL - 2016/0359 (COD)).A comparative study on preventive restructuring frameworks in a number of EU member states benchmarked against the provisions of the Directive. These will include legislative frameworks which pre-existed the Directive such as the Irish Examinership process, the French sauvegarde process, and those which were enacted in anticipation of the Directive including the Netherlands and Spain. The study will range over additional member states including Austria, Germany and will benchmark the UK.Key issues will include the provision of a stay or moratorium, cram-down provisions regarding approval, treatment of rights in rem and priority for the rescue financier. It is with the obstacles identified in relation to these specific provisions in the directive in mind that the project will then engage with the judiciary to discover how these may be dealt with in their efforts to satisfy the obligation to cooperate with a view to providing guidance and practical information to the European judiciary at large in how such matters could be dealt with in cross-border insolvency cases.

Litigation Finance Investing: Alternative Investment Returns in the Presence of Information Asymmetry
McDonald, Michael,Healey, Thomas J.
Litigation finance is a rapidly growing niche asset class focused on debt and equity investments in litigation claims and law firms. We find that in-sample returns in the space have been in excess of 20% annually with limited correlation to other investment areas. This apparent excess return may be due to information asymmetry and barriers to entry in the space. Our findings highlight the opportunities and risks for investors in this nascent asset classes and suggest such excess returns are due in part to limits to the speed with which efficient markets take hold.

Management qualifications is very important for socitey.
Shaukat, Dr. Iqbal
Management is very important for one society.with out qualifications devlopment is not possible.

Mapping the NFT revolution: market trends, trade networks and visual features
Matthieu Nadini,Laura Alessandretti,Flavio Di Giacinto,Mauro Martino,Luca Maria Aiello,Andrea Baronchelli

Non Fungible Tokens (NFTs) are digital assets that represent objects like art, videos, in-game items and music. They are traded online, often with cryptocurrency, and they are generally encoded as smart contracts on a blockchain. Media and public attention towards NFTs has exploded in 2021, when the NFT art market has experienced record sales while celebrated new star artists. However, little is known about the overall structure and evolution of the NFT market. Here, we analyse data concerning 6.1 million trades of 4.7 million NFTs generating a total trading volume of 935 millions US dollars. Our data are obtained primarily from the Ethereum and WAX blockchains and cover the period between June 23, 2017 and April 27, 2021. First, we characterize the statistical properties of the market. Second, we build the network of interactions and show that traders have bursts of activity followed by inactive periods, and typically specialize on NFTs associated to similar objects. Third, we cluster objects associated to NFTs according to their visual features and show that NFTs within the same category tend to be visually homogeneous. Finally, we investigate the predictability of NFT sales. We use simple machine learning algorithms and find that prices can be best predicted by the sale history of the NFT collection, but also by some features describing the properties of the associated object (e.g., visual features of digital images). We anticipate that our analysis will be of interest to both researchers and practitioners and will spark further research on the NFT production, adoption and trading in different contexts.

Market Response to Macroeconomic Announcements under Optimal Attention Allocation: Theory and Evidence
Wang, Yu (Yvonne)
I develop a model of investor behavior around prescheduled macroeconomic announcements. My model analyzes the optimal allocation of investor attention between systematic and idiosyncratic risk factors when a macroeconomic announcement is anticipated. Skilled investors, when producing information under a limited attention capacity, optimally allocate more of their attention to analyzing the idiosyncratic risk factor when they anticipate more precise public information about the systematic risk factor from the macroeconomic announcement. Consequently, my model predicts that, the more informative (precise) the macroeconomic announcement is expected to be about the underlying risk factors, ceteris paribus, the more uncertainty pre-announcement, the more resolution of uncertainty post-announcement, and the higher the trading volume around the announcement on the market index. My empirical analysis of trading by investors around both FOMC and CPI announcements support my model's predictions. In particular, my empirical findings are consistent with model predictions about the effect of the anticipated macroeconomic announcement precision on investor attention allocation, the effect of investor attention on the levels of pre-announcement and post-announcement trading volumes, and the effect of investor attention on the ratio of post-announcement trading volume over the pre-announcement trading volume.

Measure for measure: evidence on the relative performance of regulatory requirements for small and large banks
Saunders, Austen,Willison, Matthew
This paper compares the performance of regulatory thresholds as predictors of distress for large banks with their performance for small banks. Using a data set of capital and liquidity ratios for a sample of UKâ€'focused banks in 2007, we apply simple threshold-based rules to assess how regulatory thresholds might have identified banks that subsequently became distressed. We compare results for large banks with results for small banks, optimising thresholds separately for the two groups. Our results suggest that the regulatory ratios we use are better aligned with risks which cause distress of large banks than with those which cause distress of small banks. We find that when thresholds are set to correctly identify a high proportion of banks which subsequently became distressed, they generate materially lower false alarm rates for large banks than for small. This result is robust to definitional choices and to resampling. We also test whether supervisors’ judgements about the quality of banks’ governance have predictive power with regard to distress. We find that adding supervisors’ judgements to regulatory ratios improves predictions for small banks but not for large banks.

Menuless and Preference-Free Screening Contracts for Fund Managers
He, Xue Dong,Hu, Sang,Kou, Steven
We propose a family of incentive contracts that can attract some fund managers who are favored by investors and deter any manager who is unfavorable to some investors. The contract problem has hidden types, hidden actions, hidden knowledge of preferences, and opportunity cost. In contrast to standard screening contracts, our contracts neither depend explicitly on the utilities of the managers and investors nor have a menu of choices. The contracts have two crucial components: (i) a first- loss deposit to be used to offset some of the principal’s losses and (ii) a liquidation boundary. A case study is also given.

Mobility and Economic Impact of COVID-19 Restrictions in Italy using Mobile Network Operator Data
Michele Vespe,Umberto Minora,Stefano Maria Iacus,Spyridon Spyratos,Francesco Sermi,Matteo Fontana,Biagio Ciuffo,Panayotis Christidis

This work presents the analysis of the impact of restrictions on mobility in Italy, with a focus on the period from 6 November 2020 to 31 January 2021, when a three-tier system based on different levels of risk was adopted and applied at regional level to contrast the second wave of COVID-19. The impact is first evaluated on mobility using Mobile Network Operator anonymised and aggregate data shared in the framework of a Business-to-Government initiative with the European Commission. Mobility data, alongside additional information about electricity consuption, are then used to assess the impacts on an economic level of the three-tier system in different areas of the country.

Mutual Fund Liquidity Management, Stock Liquidity, and Corporate Disclosure
Weng, Liwei
This study presents novel evidence that mutual fund liquidity management affects stock liquidity. Exploiting a proposal by the U.S. Securities and Exchange Commission (SEC) as an exogenous shock to mutual fund liquidity management, I find that mutual fund liquidity management improves stock liquidity of firms in mutual fund portfolios. This improvement is more pronounced when mutual funds have stronger incentives to improve portfolio liquidity and more resources to influence firms and when portfolio firms have lower stock liquidity prior to the SEC proposal. Consistent with mutual funds influencing portfolio firms to be more transparent, I further show that improving disclosure among portfolio firms is one mechanism through which stock liquidity is improved. Overall, the results indicate that liquidity management at the fund level has important implications for stock liquidity and information disclosure of portfolio firms.

New evidence on the value premium in Thailand
Saengchote, Kanis
While asset pricing models are theoretically motivated, they are evaluated empirically via factor-mimicking portfolios, so one set of empirical facts can be consistent with multiple theories, and construction methodology can influence the outcome. In an investigation of recent asset pricing models in Thailand, we find that higher dimension sorts with more frequent rebalancing (similar to the q-factor methodology of Hou et al., 2015) produce a value premium of 1.1% per month with t-statistic of 5.30, almost twice those of the Fama-French HML of 0.6% and 3.05. We show that our alternative asset pricing model with market risk, size, profitability and value factors constructed based on the q-factor methodology outperforms the Fama-French and the original q-factor models.

On the Effectiveness of Macroprudential Policy
Ampudia, Miguel,Lo Duca, Marco,Farkas, Mátyás,Perez-Quiros, Gabriel,Rünstler, Gerhard,Tereanu, Eugen
Since the global financial crises, many countries have implemented macroprudential policies with the aim to render the financial system more resilient to shocks and limit the procyclicality of the financial system. We present theoretical and empirical evidence on the effectiveness of macroprudential policy, on both, financial stability and economic growth focussing on capital measures and borrower-based measures.

Optimal Claiming of Social Security Benefits
Steven Diamond,Stephen Boyd,David Greenberg,Mykel Kochenderfer,Andrew Ang

Using a lifecycle framework with Epstein-Zin (1989) utility and a mixed-integer optimization approach, we compute the optimal age to claim Social Security benefits. Taking advantage of homogeneity, a sufficient statistic is the ratio of wealth to the primary insurance amount (PIA). If the investor's wealth to PIA ratio exceeds a certain threshold, individuals should defer Social Security for at least a year. The optimal threshold depends on mortality assumptions and an individual's utility preferences, but is less sensitive to capital market assumptions. The threshold wealth to PIA ratio increases from 5.5 for men and 5.2 for women at age 62 to 11.1 for men and 10.4 for women at age 69. Below the threshold wealth to PIA ratio, individuals claim Social Security to raise consumption. Above this level, investors can afford to fund consumption out of wealth for at least one year, and then claim a higher benefit.

Productivity growth in Indian banking: Who did the gains accrue to?
Sengupta, Rajeswari
In this paper we analyse the beneficiaries of productivity gains in the Indian banking sector during the period from 1992 to 2019. We document therelative efficiency of different groups of banks by ownership. We find thatthe Indian banking sector, particularly the public sector banks experiencedsteady productivity growth from the mid 1990s till about 2010. We conducta detailed descriptive analysis to examine the various stakeholders that theproductivity gains have accrued to, over the years and across bank groups.We conclude that most of the gains may have accrued to the shareholderswhich for the public sector banks would mean the government. These gainspresumably helped reduce the burden on the government of capitalising thepublic sector banks, especially during the 1997-2002 period of sharp rise innon performing assets.

Public-Private Mortgage Co-financing
Colonnello, Stefano,Dal Borgo, Mariela
In some emerging economies, housing provident funds (HPFs) are the main institutions that mobilize long-term funds for mortgage lending. Co-financing arrangements are often proposed to promote cooperation between these public funds and private lenders. Using supervisory loan-level data, we compare mortgages entirely funded by banks and the ones co-financed with the main HPF in Mexico. Our results provide evidence on co-financing potential to enhance mortgage conditions for borrowers (e.g., through higher loan volumes, reduced down payments), without increasing ex-post credit risk. Banks set aside substantially lower loan loss reserves for co-financed mortgages, but the pass-through of these gains into the interest rate is small. Finally, we study how a new credit plan launched by the HPF that shifts the co-financing supply towards higher-income borrowers affects banks' mortgage portfolios. The new plan is plausibly exogenous only for smaller banks. For this group, we find no negative impact when more generous lending conditions are offered by the HPF: They affect the mortgage portfolio composition (co-financed or traditional), but not the average volume. These findings generally support the use of public-private co-financing schemes among under-performing HPFs. They also call for a revision of banks' expected loss measures for co-financed mortgages.

Role of Professional bodies in the era of globalization.
Shaukat, Dr. Iqbal
Role of Professional bodies in the era of globalization.

SPAC IPOs and Sponsor Network Centrality
Lin, Chen,Lu, Fangzhou,Michaely, Roni,Qin, Shihua
The structure of a special purpose acquisition company (SPAC) provides a special role for its sponsors. We show that while few characteristics can explain SPACs' returns, sponsors' connections and network, measured by their centrality, explain a large portion of return variation in the cross-section. A one standard deviation increase in sponsors' network centrality leads to a 3.7% higher merger and acquisition success probability and a 2.1% higher post-merger monthly abnormal return. We attribute this outperformance of firms with high network centrality to superior deal sourcing and fundraising abilities. Overall, we show that the network connections of the SPAC management teams can add value to SPACs' deals despite the general underperformance of SPACs after business combinations.

State Space Model to Detect Cycles in Heterogeneous Agents Models
Gusella, Filippo,Ricchiuti, Giorgio
We propose an empirical test to depict possible endogenous cycles within Heterogeneous Agent Models (HAMs). We consider a 2-type HAM into a standard small-scale dynamic asset pricing framework. On the one hand, fundamentalists base their expectations on the deviation of fundamental value from market price expecting a convergence between them. On the other hand, chartists, subject to self-fulling moods, consider the level of past prices and relate it to the fundamental value acting as contrarians. These pricing strategies, by their nature, cannot be directly observed but can cause the response of the observed data. For this reason, we consider the agents' beliefs as unobserved state components from which, through a state space model formulation, the heterogeneity of fundamentalist-chartist trader cycles can be mathematically derived and empirically tested. The model is estimated using the S&P500 index, for the period 1990-2020 at different time scales, specifically, daily, monthly, and quarterly.

Systemic Risk and Monetary Policy: The Haircut Gap Channel of the Lender of Last Resort
Jasova, Martina,Laeven, Luc,Mendicino, Caterina,Peydró, José-Luis,Supera, Dominik
We show that lender of the last resort (LOLR) policy contributes to higher bank interconnectedness and systemic risk. Using novel micro-level data, we analyze the haircut gap channel of LOLR â€" the difference between the private market and central bank haircuts. LOLR increases interconnectedness by incentivizing banks to pledge higher haircut gap bonds, especially issued by similar banks and by systemically important banks. LOLR also exacerbates cross-pledging of bank bonds. Higher haircut gaps only incentivize banks, not other intermediaries without LOLR access, to increase bank bond holdings. Finally, LOLR revives bank bond issuance associated with higher haircut gaps.

The Causal Effect of Transport Infrastructure: Evidence from a New Historical Database
Lindgren Erik,Per Pettersson-Lidbom,Bjorn Tyrefors

In this paper, we analyze the effect of transport infrastructure investments in railways on three measures of local economic activity: real nonagricultural income, agricultural land values and population size. As a testing ground, we use data from a new historical database that includes annual panel data on approximately 2,400 Swedish geographical units, i.e., local governments, during the period 1860-1917. We use a staggered event study design that is robust to treatment effect heterogeneity. Importantly, we find extremely large reduced-form effects of having access to railways. For real nonagricultural income, the cumulative treatment effect is approximately 120% after 30 years. Therefore, this effect is 20 times larger than most reduced-form effects found in previous works on the effect of transport infrastructure on economic activity. Equally important, we also show that our reduced-form effect reflects growth rather than a reorganization of existing economic activity.

The Effect of an Income Shock on Subnational Debt: Micro Evidence from Mexico
Dal Borgo, Mariela
This paper examines how the borrowing decisions of local governments, often financially constrained, respond to a shock that affects the distribution of revenue from the central government. The shock stems from the discrete updating of population census data that is plausibly uncorrelated with short-term financing needs. For a five-year increase in population of 10%, I find that federal transfers to Mexican municipalities increase by 3% over the first two post-census years. Using supervisory loan-level data, I show that the probability of municipalities being indebted declines by 0.2 percentage points over the same period. This response is driven by governments with relatively more own-source revenue and, hence, less dependent on transfers, which lenders perceive as more creditworthy. Despite that the main lender is a development bank, the shock only affects local debt granted by private institutions. Most of the additional revenue goes to finance short-term, current expenditures, especially by the more transfer-dependent governments. These findings reveal a small capacity to smooth shocks in credit markets, restricted to few goverments with a diversified revenue base that borrow from private intermediaries. Additionally, not even for the development bank there is evidence of a positive association between transfers and debt that would suggest overborrowing.

The Green Management Towards a Green Industrial Revolution
Malgorzata Rutkowska,Adam Sulich

Green Management (GM) is now one of many methods proposed to achieve new, more ecological, and sustainable economic models. The paper is focused on the impact of the developing human population on the environment measured by researched variables. Anthropopressure can have both a positive and a negative dimension. This paper aims to present an econometric model of the Green Industrial Revolution (GIR) impact on the Labour Market. The GIR is similar to the Fourth Industrial Revolution (FIR) and takes place as the next stage in the development of humanity in the perception of both machines and devices and the natural environment. The processes of the GIR in the European Union can be identified based on selected indicators of Sustainable Development (SD), in particular with the use of indicators of the Green Economy (GE) using taxonomic methods and regression analysis. The GM strives to implement the idea of the SD in many areas, to transform the whole economy, and elements of this process are visible Green Labour Market (GLM). The adopted direction of economic development depends on the as-sumptions of strategic management, which can be defined, for example, with green management, which is mainly manifested in the creation of green jobs.

The Oil Futures and Options Markets in 2020: The
Ronn, Ehud I.
This paper considers the response of the equity and oil markets to the onset of crisis conditions after Feb. 15, 2020. Based on derivative markets for equities and WTI (West Texas Intermediate) crude-oil futures contracts, implied equity and oil volatilities quantify the depth of the crisis and contrast it with previous ones. The estimated Black (1976) vol skew and Merton (1976) option model parameters are able to discern between demand- and supply-side facets. The time when the futures curve is in contango identifies the beginning and, to date, conclusion of the crisis. Using the CAPM, co-movement of oil and equity prices permits computing forecasts of spot oil prices. In considering these events, we recognize the essential role of prices in financial markets: They are conveyors of information, the "Message from Markets," in which financial theory proves useful, practical and applicable.

The causal effect of political power on the provision of public education: Evidence from a weighted voting system
Lindgren Erik,Per Pettersson-Lidbom,Bjorn Tyrefors

In this paper, we estimate the causal effect of political power on the provision of public education. We use data from a historical nondemocratic society with a weighted voting system where eligible voters received votes in proportion to their taxable income and without any limit on the maximum of votes, i.e., the political system used in Swedish local governments during the period 1862-1909. We use a novel identification strategy where we combine two different identification strategies, i.e., a threshold regression analysis and a generalized event-study design, both of which exploit nonlinearities or discontinuities in the effect of political power between two opposing local elites: agricultural landowners and emerging industrialists. The results suggest that school spending is approximately 90-120% higher if the nonagrarian interest controls all of the votes compared to when landowners have more than a majority of votes. Moreover, we find no evidence that the concentration of landownership affected this relationship