Research articles for the 2021-07-02

A Dynamic Measure of Intentional Herd Behavior Causing Excess Volatility in U.S. Stock Markets (미국 주식시장의 초과변동성과 의도적 무리행동의 동태적 측정)
Kim, Myung Joong,Park, Beum-Jo
English Abstract: This paper suggests a dynamic measure of intentional herding, causing the excess volatility or even systemic risk in financial markets, which is based on a new concept of cumulative returns in the same direction as well as the collective behavior of all investors towards the market consensus. Differing from existing measures, the measure allows us to directly detect time-varying and market-wide intentional herding using the model of Dynamic Conditional Correlation (DCC) (Engle, 2002) between the financial market and its components that is partially free of spurious herding due to the inclusion of the variables of the number of economic news announcements as a proxy of market information. Strong evidence in favor of the dynamic measure over the other measures is based on empirical application in the U.S. markets (DJIA and S&P100), supporting the tendency to exhibit time-varying intentional herding. More importantly, it is found that the impact of intentional herding on market volatility tends to be stronger during the periods of turbulent markets like the degradation of U.S. sovereign credit rating by S&P, and be more significant in S&P 100 than DJIA.Korean Abstract: 본 연구에서ëŠ" 금융시장에서 초과변동성과 구조적 위험 ë"±ì„ 야기하ëŠ" 의도적(intentional) 무리행동을 측정할 수 있ëŠ" 보다 향상된 방법론을 제시하고자 하였다. 특히 기존의 무리 행동 측정에서 주로 활용되던 횡단면 í'œì¤€íŽ¸ì°¨ 방법 대신 동태적 조건부 상관관계 모형(DCC)(Engle, 2000)을 ì¶"정함으로써 시변 동태적 무리행동을 직ì ' 관측하ëŠ" 방법을 사용하였으며, 이 과정에서 시장의 ì¶"세에 ë"°ë¼ 무리지어 거래하ëŠ" 투자자의 행태를 보다 명확히 관측하기 위해 일반적인 수익률 대신 가칭 CRS(Cunmulative Returns in the Same direction)를 활용하고, 공적 정보의 유입으로 발생하ëŠ" 허위 무리행동에 비해 상대적으로 의도적 형태로 발생하ëŠ" 무리행동을 구분하기 위해 정보의 강도(뉴스)를 통제하였다. 유럽의 재정위기 발생과 미국 ì‹ ìš©ë"±ê¸‰ ê°•ë"± 시기를 포함하ëŠ" 2010ë…„ 1ì›"부터 2013ë…„ 5ì›"까지 미국 금융시장(다우존스 산업지수와 S&P100 지수)을 대상으로 분석을 수행한 ê²°ê³¼ 시장 스트레스 기간 동안 미국 금융시장에도 유의미한 의도적 무리행동이 관측되었으며, 특히 이 시기 의도적 무리행동의 발생이 시장 수익률의 변동성에 미치ëŠ" 영향과 강도ëŠ" 다우존스 산업지수에 비해 S&P100 지수에서 ë" 강하게 나타나ëŠ" 것으로 관측되었다.

A Fiscal Theory of Money and Banking
He, Ping,Liu, Zehao,Xie, Chengbo
We introduce banks to the fiscal theory of price level to study the effectiveness of open market operations in correcting the distortions caused by an improper tax rate. A rise in the tax rate increases the real purchasing power of payment liquidity for short-term consumption, but reduces firms' incentive to take loans for long-term investment. An excessively low tax rate leads to an over-investment problem, which can be rectified by a combination of reverse repo operations and a positive reserve requirement. The optimal reverse repo rate is a function of the “fiscal gap”, that is, the difference between the optimal tax rate and the actual tax rate. By contrast, an excessively high tax rate leads to an under-investment problem. Open market operations are ineffective in this case as the zero lower bound of interest rates prevents the central bank from injecting additional credit to the economy.

A Network Theory of Safety Premium
Fan, Zhongjie,He, Ping,Liu, Zehao
Interconnected banks are prone to the propagation of negative shocks. In a network with banks borrowing from each other using collateral, the risk of financial contagion leads to the emergence of multiple equilibria, featuring different sizes of loans and collateral haircuts. Safe assets are traded at a premium because safe collateral helps the economy to deter the propagation of negative shocks. A small decrease in collateral quality, increasing the contagion risk, might lead to an equilibrium jump to one with a smaller amount of interbank lending, along with which the safety premium will suddenly increase.

Analysing sectoral capital flows: Covariates, co-movements, and controls
Lepers, Etienne,Mercado, Rogelio
This paper assembles a comprehensive sectoral capital flows dataset for 64 advanced and emerging economies from 2000-18. This includes direct, portfolio and other investments to and from five sectors: central banks (CB), general government (GG), banks (BKs), non-financial corporates (NFCs) and other financial corporates (OFCs) and a corresponding dataset on capital controls imposed on these sectors. The paper uses this data to examine the usefulness of a sectoral approach in assessing capital flow covariates, co-movements, and the effectiveness of capital controls. The findings show that: 1) private sectoral flows have varying sensitivities to global financial conditions and different cyclicality with respect to output growth. For instance, unlike other flows, NFCs respond to global commodity prices but not global risk aversion and, unlike banks, OFCs cut foreign investment in periods of domestic investment; 2) co-movements of resident and non-resident OFC sectoral flows add to the observed positive correlation between gross inflows and outflows; and, 3) the tightening of capital controls on NFCs and OFCs appear effective in reducing the volume of flows to these sectors.

Credit Information Sharing and Bank Stability: Evidence from SSA Countries
Kouevi Gath, Beni
We assess the effect of credit information sharing on bank stability for a sample of 161 banks located in 30 Sub-Saharan African (SSA) countries over 2004-2014. We find that banks become more stable as the quality of credit information sharing institutions improves. Moreover, despite foreign banks having an informational disadvantage with respect to domestic banks due to distance-related information frictions, and hence the assumption that they would benefit more from credit information sharing, the results indicate that both types of banks are affected in the same way. This suggests that foreign banks rely on alternative strategies to compensate for their informational disadvantage in local markets.

Deep Reinforcement Learning (DRL) for Portfolio Allocation
Benhamou, Eric,Saltiel, David,Ohana, Jean-Jacques,Atif, Jamal,Laraki, Rida
Deep reinforcement learning (DRL) has reached an unprecedent level on complex tasks like game solving (Go or StarCraft II), and autonomous driving. However, applications to real financial assets are still largely unexplored and it remains an open question whether DRL can reach super human level. In this ECML PKKDD demo, we showcase state-of-the-art DRL methods for selecting portfolios according to financial environment, with a final network concatenating three individual networks using layers of convolutions to reduce network's complexity. The multi entries of our network enables capturing dependencies from common financial indicators features like risk aversion, citigroup index surprise, portfolio specific features and previous portfolio allocations. Results on test set show this approach can overperform traditional portfolio optimization methods.

For the Love of the Environment: An Analysis of Green versus Brown Bonds During the COVID-19 Pandemic
Ayaydin, Hande,Danisoglu, Seza,Guner, Z. Nuray
Increased awareness among investors about environmental and social issues made green bonds a popular investment alternative over the last decade. This study analyzes whether the primary and secondary market return performance of green bonds is affected from the market conditions induced by the pandemic. Results presented in this study show that while both green and comparable conventional (brown) bonds experienced a decline in their primary market yields following the start of the pandemic, the decline for the green bonds was somewhat larger, resulting in an even larger ‘greenium’ during the pandemic (32 basis points for corporate and agency issuers). Secondary market results of the study confirm the strong demand for green bonds in this market as well and show that while both green and brown bonds experience a decline in their secondary market returns during the pandemic, the decrease in brown bond returns is 45 basis points larger compared to green bonds. Findings also suggest that failure to take into account issuer characteristics may lead to biased results when green bonds are compared against their conventional alternatives.

House Price Predictability and Demographic Structure: Evidence from a Long-horizon International Data (인구구조와 주택가격 예측: 장기 패널데이터를 이용한 실증분석)
Kim, Seong-Hoon,Moon, Seongman
English Abstract: We examine the predictability of real house price movements along with demographic shifts, using a long time series international panel data set that covers 17 advanced countries over the period of 1950-2015. Since demographic structures change slowly and housing markets adjust slowly to economic fundamentals, we conduct our analysis over forecast horizons of 1, 2, 5, and 10 years. We find that (1) two most relevant demographic predictors for the future house price movements both over short- and long-horizon are the proportion of ages 70 and above in population of 20 years old and above and the proportion of ages 25-44; and (2) if samples are spanning over relatively short period in time, one can be misled about the house price predictability of demographic structures. These new results help to reconcile mixed evidence from the existing studies.Korean Abstract: 본 연구ëŠ" 1950-2015년에 걸쳐 17 ê°œ 선진국을 포괄하ëŠ" 장기 패널 자료를 사용하여 인구구조 ë³€í™"ê°€ 미래 주택가격을 얼마나 예측하ëŠ"지를 ì¶"정한다. 인구구조가비교적 천천히 ë³€í™"하고 펀ë"멘털 ë³€í™"에 대한 주택가격의 ë°˜ì'속도가 느릴 수 있ëŠ" 점ë"¤ì„ 고려하여 본 연구에서ëŠ" 미래 주택가격 예측 기간을 1ë…„, 2ë…„, 5ë…„, 10년으로 설정하고 각각 분석하였다. 본 연구의 주ìš" ê²°ê³¼ëŠ" 다음과 같다. 첫째, 단기와 장기 모ë'ì—ì„œ 미래 주택가격의 변동을 가장 잘 설명하ëŠ" ë' 개의 인구 변수ëŠ", 20세 이상 인구 ì¤' 70세 이상 인구가 차지하ëŠ" 비율 및 25-44 세 인구가 차지하ëŠ" 비율이다. ë'˜ì§¸, 이 같은 인구구조와 주택가격 사이의 관계ëŠ" 기존 연구에서처럼 í'œë³¸ê¸°ê°„이 40ë…„ 전후로 비교적 짧은 경우 제대로 관찰되지 ì•ŠëŠ"다. 이러한 ê²°ê³¼ë"¤ì€ 왜 기존 연구ë"¤ì´ 서로 상충된 결과를 보고하거나 이론에 반하ëŠ" 결과를 보고하ëŠ"지를 이해하ëŠ"데 도움을 준다.

Mega-Events Tourism and Sustainability: A Critique
Mohanty, Priyakrushna,Singhania, Oshi,Hasana, Uswathul
Event tourism has emerged as one of the most influential and rapidly growing forms of international tourism in the face of its recent history. Considered as an intersection of event management and tourism management, event tourism has been applauded for influencing both tourism demand and supply. However, in the recent past, the concept of event tourism has seen its fair share of criticisms especially with regards to mega-events. While some of the scholars have criticized it for not addressing ‘difficult’ questions like fiscal reforms, global power structures, injustice, inequality, and environmental degradation, others have accused it of providing shelter to crony capitalism. Issues like gender parity or equality remain big question marks in the study of event tourism. Further, the recent outbreak of COVID-19 has exhibited the high vulnerability aspect of mega-events in general. It is argued that event tourism must be examined through the lens of critical inquiry for it to move forward while addressing its grey areas. Hence, attempts have been made in this current study to trace out the dark sides of event tourism which can challenge its sustainability. The work is based on a systematic desk-based review of secondary data. Thematic content analysis has been employed to analyze the data collected. The paper concludes that despite its rising popularity, event tourism has many critical features and weak links that need to be addressed to ensure its sustainability.

Negative Interest Rates, Excess Liquidity and Retail Deposits: Banks’ Reaction to Unconventional Monetary Policy in the Euro Area
Demiralp, Selva,Eisenschmidt, Jens,Vlassopoulos, Thomas
Negative interest rate policy (NIRP) is associated with a particular friction. The remuneration of banks´ retail deposits tends to be floored at zero, which limits the transmission of policy rate cuts to bank funding costs. We investigate whether this friction affects banks’ reactions under NIRP compared to a standard rate cut in the euro area. We argue that reliance on retail deposit funding and the level of excess liquidity holdings may increase banks’ responsiveness to NIRP. We find evidence that banks highly exposed to NIRP tend to grant more loans, i.e. NIRP is indeed expansionary for the levels of interest rates seen in the euro area so far. This confirms studies pointing to higher risk taking by banks under NIRP and sheds some new light on results that associate NIRP with a contraction in bank loans, albeit in specific market segments. We are the first to document the importance of banks’ excess liquidity holdings for the effectiveness of NIRP, pointing to a strong complementarity of NIRP with central bank liquidity injections, e.g. via asset purchases.

On Sustainable Aged Care Financing in Australia
Sherris, Michael
The Final Report of the Royal Commission into Aged Care Quality and Safety (2021) highlighted the challenges in developing a sustainable financing system for Aged Care in Australia. The Report recommended additional funding both in the short term and longer term, to provide an adequate level of aged care quality for older Australians including exploring an actuarially based contributory social insurance scheme for aged care. Sustainable financing of aged care requires a balance between government tax-based financing, individual contributions during working life through an aged care levy, co-payments for aged care costs for those receiving aged care and means testing for these co-payments. There should be a role for private market insurance and financing to supplement government financed aged care support.

Performance Analysis of Mobile Banking During the COVID-19 Pandemic Period Comparing with the Pre-Pandemic Period of COVID-19: An Empirical Study on Bangladesh
Amin, Md. Ruhul ,Nahiduzzaman, Md.
Objective - Mobile banking is a growing activity to engage the non-banking people in the banking system in Bangladesh, so researchers of this paper try to find out how much it is affected by the Coronavirus (COVID-19). Basically, this study is developed to assess the performance of mobile banking during the COVID-19 pandemic period comparing with the pre-pandemic period.Methodology/Technique - Authors use descriptive statistics to evaluate the performance of mobile bank during the study period from 2014 to August 2020.Findings - This paper finds that during the COVID period the average change of monthly number of active accounts & registered clients have increased, on the other hand the average change of monthly number of agents have decreased at the same time. Except cash in & cash out, all other types of transactions proportion of mobile banking have increased during the COVID-19 period.Novelty - As the mobile banking is a key resource for banking people as well as non-banking people to transact financial things at setting at the house, so this paper will be beneficial for mobile banking service provider organization to assess the whole things of mobile banking at this ongoing period, and they can take necessary action.Type of Paper - Empirical.

Proxy Advisory Firms and Corporate Shareholder Engagement
Dey, Aiyesha,Starkweather, Austin,White, Joshua T.
We examine the influence of proxy advisors on firms’ shareholder engagement behavior. Our analyses exploit a quasi-natural experiment using Say-On-Pay voting outcomes near a threshold that triggers a review of engagement activities by Institutional Shareholder Services (ISS). Firms receiving ISS treatment exhibit a swift and substantive increase in engagement, especially those with weaker ex-ante governance. The elevated engagement persists beyond the period of ISS scrutiny. Treated firms alter elements of compensation and pay transparency that align with shareholder feedback, and enjoy ex-post economic benefits. Our findings indicate a disciplinary spillover effect of ISS through enhanced and enduring firm-shareholder interactions.

Report on the Troubled Asset Relief Programâ€"July 2021
Office, Congressional Budget
Congress created the Troubled Asset Relief Program (TARP) in 2008 to stabilize financial markets. CBO estimates that the TARP’s net cost will be $31 billionâ€"about what it reported in March 2020 and $1 billion lower than OMB’s latest estimate.

Revisiting Graeber in the light of a medieval debt-enforcement custom: being hostage in an inn for a debt in the Low Countries between ca. 1250-1350
De Meulemeester, Jean Luc,Kusman, David
In this paper, we attempt to apply Graeber's model of "baseline communism" to a medieval financial custom that was widespread in the former Low Countries: the Inliggen custom. This custom implied that a well-off debtor (often a high aristocrat) could send pledges (often his vassals and councillors) in an inn, to remain hostages as long as his creditor was not reimbursed. Inns offered far more than just lodging facilities, and providing food and drinks; they were information hubs, providing the guest with banking services, brokerage facilities and commercial storage, hence, their intimate relationship to medieval bankers such as the Piedmontese moneylenders. Within the institutional framework of the Inliggen custom, the inn was at the centre of a social network linking the creditor, the debtor and his pledges and the hosteller. Bearing close resemblance to the Pilgrimage economy of the late Middle Ages, the sojourn of hostages in an inn as pledges had a positive impact on the urban economy: the pledges were supposed to eat, drink and sleep in a high-standing inn, following the patterns of a conspicuous consumption, the town administration levied fruitful taxes on the wine excises and the pledges could also entertain ties with the local merchants aiming at buying luxury products such as clothes or jewels.All in all, elements of a "baseline communism" surfaced within this extended credit network: the loaned capital often fuelled the urgent needs of a high aristocrat; the practice both relied on the hospitality custom and on the collective solidarity of the pledges for their overlord. Finally, the ambiguous position of the hosteller (host, broker and partner of the Piedmontese moneylenders) shows that the financial custom was a by-product of aggressive profit-seeking strategies for both the lenders and the hostellers. In this sense, and as recognised by Graeber himself, it was no naïve communism but rather a crucial component of the exchanges in a highly commercialised urban society. Ultimately, this custom could be viewed as a primitive contract-enforcement mechanism (CEM). But to prove its efficiency we need to collect a broader sample of quantitative data that is not easily available for the time span of our study.

Rola Uczenia Maszynowego w Sektorze Finansowym (Applications of Machine Learning in Financial Sector)
Dadej, Mateusz
Polish abstract: Celem niniejszego rozdziału jest przedstawienie teorii uczenia maszynowegooraz jego zastosowania w sektorze finansowym. W artykule przedstawionoalgorytmy z zakresu uczenia maszynowego oraz proces budowymodelu z ich wykorzystaniem, dające podstawę dla czytelnika do zrozumieniamożliwych zastosowań w finansach. Następnie przedstawiono wybraneczęści sektora finansowego, w których intensywnie wykorzystuję sięuczenie maszynowe oraz jego implikacje mikro oraz makroekonomiczne.English abstract: The aim of herein article is to investigate and present a machine learning theory and its application in financial sector. The article shows machine learning algorithms and a proccess of developing models, along with their further application in finance. Later part of the article presents a uses of machine learning in particular subsectors of financial industry, as well as its macro and microeconomic implications.

Social Media Sentiment and IPO Pricing
Xian, Ye
This study attempts to examine the impact of social media attention and sentiment on IPO pricing. Specifically, by using social media sentiment as a proxy for retail investors’ valuation, I attempt to examine the theoretical predictions in prior studies (Ljungqvist, Nanda and Sigh (2006), Cornelli, Goldreich, and Ljungqvist (2006), and Derrien (2005)) that overoptimism of sentiment investors leads to initial overpricing of IPO followed by long-term reversal. Using posts on Stocktwits during pre-IPO period, I have constructed measurements of investor attention and sentiment. The empiri- cal results are generally consistent with the theoretical predictions that retail investor overoptimism leads to higher IPO first day price run up and worse long-term perfor- mance. Additionally, using machine learning techniques to classify untagged posts, I have found similar results when sentiment measures are constructed by classified un- tagged posts. Results with sentiment measures constructed by these classified posts imply that more optimistic sentiment leads to a higher turnover rate shortly after IPO, indicating that informed investors are selling overpriced IPO shares to sentiment retail investors.

The Effects of Information Acquisition in M&As: Evidence from SEC EDGAR Web Traffic
Wang, Joanna (Xiaoyu)
This paper studies the effects of information acquisition in mergers and acquisitions (M&As). Information acquisition, proxied by downloads of filings on the SEC EDGAR website, improves the market’s assessment of deal synergies and the valuation of non-deal peer firms. Specifically, the information acquisition about merging firms enhances the relation between combined announcement-period abnormal returns and post-merger operating performance of the combined firm. The effects are stronger in deals that experience high institutional downloads and high trading volume. Furthermore, information acquisition in peer firms around M&A announcements strengthens the link between their short-term abnormal stock returns and long-term operating performance. Non-deal firms with greater download activity experience an increase in price informativeness and subsequent takeover probability. Overall, this paper provides supportive evidence that information acquisition improves the market’s assessment of the merger synergies and valuation on merger-related firms.

The Effects of Investors' Information Acquisition On Sell-Side Analysts Forecast Bias
Astaiza-Gómez, José
In this research I empirically study the effects of information acquisition by investors or traders on analysts' forecast bias. Based on the theoretical literature on sell-side analysts, I argue that forecast bias is correlated to investors' information gathering, in two opposite directions. On the one hand, higher levels of reading activities about individual firms by investors induce analysts to issue more optimistic forecasts if the potential for trading is higher. On the other hand, higher levels of reading activities about individual firms by investors help them identify opportunistic behaviors and thus to discipline analysts. I find that investors' information acquisition is positively related to analysts' optimism when the potential for trading is larger, and negatively related to optimism when investors are more likely to identify inflated forecasts. Together, these results suggest that information acquisition is not only correlated to analysts' optimism but also that its effect does not work trivially and solely in one direction but it activates two different incentives in analysts' decisions.

Variance Comparison between Infinitesimal Perturbation Analysis and Likelihood Ratio Estimators to Stochastic Gradient
Cui, Zhenyu,Liu, Yanchu,Wang, Ruodu
We theoretically compare variances between the Infinitesimal Perturbation Analysis (IPA) estimator and the Likelihood Ratio (LR) estimator to Monte Carlo gradient for stochastic systems. The conditions proposed in [Cui et al., 2020] when the IPA estimator has a smaller variance can yield sharper inequalities or be further relaxed. We also prove a practically interesting result that the IPA estimators to European vanilla and arithmetic Asian options' Delta, respectively, have smaller variance when the underlying asset's return process is independent of the initial price.

Who Pays the Price? Overdraft Fee Ceilings and the Unbanked
Dlugosz, Jennifer,Melzer, Brian,Morgan, Donald P.
Nearly 25 percent of low-income households in the United States are unbanked. High fees are often cited as a reason they remain unbanked, leading some to believe that limiting bank fees would improve financial inclusion. We use the federal preemption of state limits on overdraft fees to study the impact of fee ceilings on low-income households. After preemption, national banks raise overdraft fees relative to state-chartered banks in affected states. However, banks in affected states also provide more overdraft credit and bounce a smaller share of checks following preemption. The share of low-income households that are unbanked decreases, consistent with price ceilings causing the rationing of both overdraft and banking services.

주식네트워크를 통한 ì½"로나19 충격의 금융산업 시스템 위험에 대한 영향: 경제충격과의 비교 (Effects of COVID-19 Pandemic on Systemic Risk of Financial Industry through Stock Networks: Comparison with Economic Shocks)
Eom, Cheoljun
Korean Abstract: 본 연구ëŠ" ì½"로나19 충격이 금융산업의 주식ë"¤ ê°„ ì—°ê²° 관계에 미치ëŠ" 영향을 네트워크 관점에서 관찰한다. ì½"로나19 충격에 기인한 시장붕괴ëŠ" 경제충격의 경우와 매우 유사한 시계열 특징을 보인다. 최소 신장 트리의 주식네트워크에서, 경제충격은 사건일 후에 시장 조정을 통해 ê·¸ 효과가 약í™"되고 다른 구조의 주식ë"¤ ê°„ ì—°ê²° 관계를 보이ëŠ" 반면에, ì½"로나19 충격은 적극적 시장 조정에도 불구하고, 예상치 못한 충격이 계속 발생함에 ë"°ë¼ 유사한 주식ë"¤ 간의 ì—°ê²° 구조를 계속 유지한다. 그랜저 인과관계의 주식네트워크에서, 경제충격은 사건일 전에 전조증상의 유의적 정보흐름을 보이고 사건일 후의 상승ì¶"세ëŠ" 점진적으로 사라지ëŠ" 반면에, ì½"로나19 충격은 사건일 전에 전조증상의 유의적 정보흐름이 없고 사건일에 ê°'자기 증가하ëŠ" 정보흐름의 ì¶"이를 보이고, 특히 이후기간에 유의적 정보흐름의 상승 ì¶"이가 지속되ëŠ" 시계열 특징을 보인다. ê²°êµ­, 향후 금융산업의 시스템 위험에 관련된 연구ë"¤ì— 있어서, ì½"로나19와 같은 비경제적 사건ë"¤ì— 기인한 시장충격은 차별적 ì '근법이 í•„ìš"하다.English Abstract: This study empirically investigates the impacts of the COVID-19 pandemic on the linkage relationship among stocks in the financial industry through stock networks, comparing to economic shocks in the Korean stock market. The time-series characteristics of the market crash caused by the COVID-19 pandemic resemble that of economic shocks. In the stock network by the minimal spanning tree, economic shocks after events are weakened through the market correction and show different linkage structure of stock networks, while according to stronger shocks after the event continuously, COVID-19 pandemic maintain a similar structure of stock network, regardless of market correction. In the stock network with significant information flow determined by Granger causality, economic shocks show characteristics of significant information flow as a signal before the event day, and the increasing trend of significant information flow gradually disappears. However, the COVID-19 pandemic does not show the characteristic of significant information flow as a signal before the event, and suddenly, significant information flow appears with increasing trend on the day of the event, and in particular, this characteristic is continuously observed in the subsequent period. Consequently, these results suggest that future research related to systemic risk in the financial industry need differential approaches for investigating market crashes caused by non-economic shock such as the COVID-19 pandemic.

ì½"로나19ê°€ 금융 시스템리스크에 미친 영향 (The Effect of COVID19 on Systemic Risk: The Case of Korea)
Suh, Sangwon
Korean Abstract: 본 연구ëŠ" 하향식 스트레스 테스트 방법에 기반하여 ì½"로나19 위기가 한국의 금융 시스템리스크에 미친 영향을 분석하였다. 본 연구에서 감염ë³' 모형을 이용하여 분석한 ê²°ê³¼ ì½"로나19 위기의 조기 종식을 위해서ëŠ" ì½"로나19 백신개발이 ì¤'ìš"í•œ 것으로 예측되었다. 이러한 결과를 ë°"탕으로 본 연구ëŠ" ì½"로나19 위기 지속기간에 대하여 시나리오를 설정하고, 시나리오별로 기업부문은 규모 및 업종별로 구분하고 가계부문은 업무종사 형태별로 구분하여 ì½"로나19ë¡œ 인한 신용위험 증대효과를 ì¶"정하였다. 그리고 본 연구ëŠ" ì½"로나19 위기에 대ì'하기 위한 ì¤'앙은행의 금리인하 정책으로 인한 금융기관의 이자수익 감소효과도 ì¶"정하였다. 다음으로 본 연구ëŠ" 기업 및 가계부문의 신용위험 및 금융기관의 이자수익 충격을 반영하여 개별 금융회사의 부도확률을 산출하였다. 분석 ê²°ê³¼, 은행부문은 ì½"로나19 위기에도 불구하고 안정성을 유지하ëŠ" 것으로 나타났으나, 일부 상호저축은행 및 êµ­ë‚´ 생명보험회사ë"¤ì€ ì½"로나19 위기로 인해 위험도가 ë†'아지ëŠ" 것으로 나타났다.English Abstract: This study examines the effect of Covid19 on Korean financial systemic risks based on a top-down stress test approach. This study employs an epidemiology model and finds that it will be essential to develop effective vaccines for ceasing Covid19 in a timely manner. Based on this finding, this study constructs several scenarios on the duration of the Covid19 crisis and estimates size- and sector-differentiated firm credit risks and occupation-differentiated household credit risks under the scenarios. This study also estimates the effect on interest income shocks to financial institutions of monetary policy changes to respond the Covid19 crisis. This study then estimate default probabilities of individual financial institutions by combining the effects of Covid19 on firm and household credit risks and interest income shocks to financial institutions. This study finds that while the banking sector can remain robust to Covid19 shocks, several savings banks and life insurance companies may be significantly negatively affected.