scholarly journals Historical Returns of the Market Portfolio

2019 ◽  
Vol 10 (3) ◽  
pp. 521-567 ◽  
Author(s):  
Ronald Doeswijk ◽  
Trevin Lam ◽  
Laurens Swinkels
Keyword(s):  
Standard Deviation ◽  
Asset Pricing ◽  
Corporate Finance ◽  
Set Covering ◽  
Data Set ◽  
Oxford University ◽  
Unique Data ◽  
Market Portfolio ◽  
Editorial Decision ◽  
Published Paper

Abstract We create an annual return index for the invested global multiasset market portfolio. We use a newly constructed unique data set covering the entire market of financial investors. We analyze returns and risk from 1960 to 2017, a period during which the market portfolio realized a compounded real return in U.S. dollars of 4.45%, with a standard deviation of annual returns of 11.2%. The compounded excess return was 3.39%. We publish these data on returns of the market portfolio, so they can be used for future asset pricing and corporate finance studies. Received March 4, 2019; editorial decision October 9, 2019 by Editor Jeffrey Pontiff. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals Multinational Banks and Supranational Supervision

2018 ◽  
Vol 32 (8) ◽  
pp. 2997-3035 ◽  
Author(s):  
Giacomo Calzolari ◽  
Jean-Edouard Colliard ◽  
Gyongyi Lóránth
Keyword(s):  
Organizational Structure ◽  
Organizational Structures ◽  
Unintended Consequences ◽  
Coordination Failures ◽  
The Public ◽  
Oxford University ◽  
Multinational Banks ◽  
Editorial Decision ◽  
Public Costs ◽  
Published Paper

Abstract Supervision of multinational banks (MNBs) by national supervisors suffers from coordination failures. We show that supranational supervision solves this problem and decreases the public costs of an MNB’s failure, taking its organizational structure as given. However, the MNB strategically adjusts its structure to supranational supervision. It converts its subsidiary into a branch (or vice versa) to reduce supervisory monitoring. We identify the cases in which this endogenous reaction leads to unintended consequences, such as higher public costs and lower welfare. Current reforms should consider that MNBs adapt their organizational structures to changes in supervision. Received January 9, 2017; editorial decision September 15, 2018 by Editor Philip Strahan. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals The Effects of Losing a Business Group Affiliation

2018 ◽  
Vol 32 (8) ◽  
pp. 3036-3074 ◽  
Author(s):  
Borja Larrain ◽  
Giorgo Sertsios ◽  
Francisco Urzúa I
Keyword(s):  
Business Group ◽  
The Other ◽  
Group Affiliation ◽  
Oxford University ◽  
Capital Misallocation ◽  
Editorial Decision ◽  
Business Group Affiliation ◽  
Industry Peers ◽  
Published Paper ◽  
Identification Strategy

Abstract We propose a novel identification strategy for estimating the effects of business group affiliation. We study two-firm business groups, some of which split up during the sample period, leaving some firms as stand-alone firms. We instrument for stand-alone status using shocks to the industry of the other group firm. We find that firms that become stand-alone reduce leverage and investment. Consistent with collateral cross-pledging, the effects are more pronounced when the other firm had high tangibility. Consistent with capital misallocation in groups, the reduction in leverage is stronger in firms that had low (high) profitability (leverage) relative to industry peers. Received July 3, 2017; editorial decision April 7, 2018 by Editor Wei Jiang. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals Noncognitive Abilities and Financial Distress: Evidence from a Representative Household Panel

2019 ◽  
Vol 32 (10) ◽  
pp. 3884-3919 ◽  
Author(s):  
Gianpaolo Parise ◽  
Kim Peijnenburg
Keyword(s):  
Financial Distress ◽  
Web Site ◽  
Income Shocks ◽  
Oxford University ◽  
Editorial Decision ◽  
Differential Exposure ◽  
Published Paper ◽  
Oxford University Press ◽  
Low Ability

AbstractThis paper provides evidence of how noncognitive abilities affect financial distress. In a representative panel of households, we find that people in the bottom quintile of noncognitive abilities are 10 times more likely to experience financial distress than those in the top quintile. We provide evidence that this relation largely arises from worse financial choices and lack of financial insight by low-ability individuals and reflects differential exposure to income shocks only to a lesser degree. We mitigate endogeneity concerns using an IV approach and an extensive set of controls. Implications for policy and finance research are discussed.Received September 24, 2017; editorial decision September 26, 2018 by Editor Stijn Van Nieuwerburgh. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals Contingent Capital Trigger Effects: Evidence from Liability Management Exercises

2019 ◽  
Vol 8 (2) ◽  
pp. 235-259 ◽  
Author(s):  
Boris Vallée
Keyword(s):  
Time Series ◽  
Cross Section ◽  
Web Site ◽  
Regulatory Capital ◽  
Oxford University ◽  
Contingent Capital ◽  
Liability Management ◽  
Editorial Decision ◽  
Debt Holders ◽  
Published Paper

AbstractThis paper studies liability management exercises (LME) by banks, which have comparable regulatory capital effects than contingent capital triggers. LMEs are concentrated on low capitalization situations, both in the cross-section and in the time series and are frequently associated with equity issuances. These exercises prove effective at improving bank capitalization levels. The market reaction to LMEs is positive and mostly accrues to debt holders. These findings strengthen the case for innovative liabilities securities as a tool to improve bank resilience.Received February 8, 2019; editorial decision May 16, 2019 by Editor Andrew Ellul. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Equity Is Cheap for Large Financial Institutions

2020 ◽  
Vol 33 (9) ◽  
pp. 4231-4271 ◽  
Author(s):  
Priyank Gandhi ◽  
Hanno Lustig ◽  
Alberto Plazzi
Keyword(s):  
Asset Pricing ◽  
Financial Crises ◽  
Capital Regulation ◽  
Pricing Model ◽  
Asset Pricing Model ◽  
Oxford University ◽  
Rare Disasters ◽  
Country Characteristics ◽  
Nonfinancial Firms ◽  
Published Paper

Abstract Across a wide panel of countries, the top-10% of financial stocks on average account for over 20% of a country’s market capitalization but earn on average significantly lower returns than do nonfinancial firms of the same size and risk exposures. In a bailout-augmented, rare disasters asset pricing model, the spread in risk-adjusted returns between large and small institutions depends on country characteristics that determine the likelihood of bailouts. Consistent with this model, we find larger spreads in countries with large and interconnected financial sectors, weaker capital regulation and corporate governance, and fiscally stronger governments. Valuation gaps increase in anticipation of financial crises. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals Auto Credit and the 2005 Bankruptcy Reform: The Impact of Eliminating Cramdowns

2019 ◽  
Vol 32 (12) ◽  
pp. 4734-4766 ◽  
Author(s):  
Rajashri Chakrabarti ◽  
Nathaniel Pattison
Keyword(s):  
Interest Rates ◽  
Strong Evidence ◽  
Web Site ◽  
Causal Effect ◽  
Oxford University ◽  
Editorial Decision ◽  
Historical Variation ◽  
The Impact ◽  
Published Paper ◽  
Rule Out

Abstract Auto lenders were perhaps the biggest winners of the 2005 Bankruptcy Reform, as Chapter 13 bankruptcy filers can no longer “cramdown” the amount owed on recent auto loans. We estimate the causal effect of this anticramdown provision on the price and quantity of auto credit. Exploiting historical variation in states’ usage of Chapter 13 bankruptcy, we find strong evidence that eliminating cramdowns decreased interest rates and some evidence that loan sizes increased among subprime borrowers. The decline in interest rates is persistent and is robust to a battery of sensitivity checks. We rule out other reform changes as possible causes. Received September 29, 2016; editorial decision January 15, 2019 by Editor Philip Strahan. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals Socioeconomic Status and Macroeconomic Expectations

2019 ◽  
Vol 33 (1) ◽  
pp. 395-432 ◽  
Author(s):  
Sreyoshi Das ◽  
Camelia M Kuhnen ◽  
Stefan Nagel
Keyword(s):  
Socioeconomic Status ◽  
Stock Market ◽  
Durable Goods ◽  
Low Ses ◽  
Market Returns ◽  
Stock Market Returns ◽  
Oxford University ◽  
Editorial Decision ◽  
Business Conditions ◽  
Published Paper

Abstract We show that individuals’ macroeconomic expectations are influenced by their socioeconomic status (SES). People with higher income or higher education are more optimistic about future macroeconomic developments, including business conditions, the national unemployment rate, and stock market returns. The spread in beliefs between high- and low-SES individuals diminishes significantly during recessions. A comparison with professional forecasters and historical data reveals that the beliefs wedge reflects excessive pessimism on the part of low-SES individuals. SES-driven expectations help explain why higher-SES individuals are more inclined to invest in the stock market and more likely to consider purchasing homes, durable goods, or cars. Received November 13, 2017; editorial decision February 12, 2019 by Editor Wei Jiang. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals The Wisdom of Crowds in FinTech: Evidence from Initial Coin Offerings

2021 ◽  
Author(s):  
Jongsub Lee ◽  
Tao Li ◽  
Donghwa Shin
Keyword(s):  
Career Concerns ◽  
Wisdom Of Crowds ◽  
Diverse Group ◽  
Oxford University ◽  
Long Run ◽  
Diverse Backgrounds ◽  
Editorial Decision ◽  
Published Paper ◽  
Initial Coin Offerings ◽  
The Wisdom Of Crowds

Abstract Certification by analysts on a FinTech platform that harnesses the “wisdom of crowds” is associated with successful initial coin offerings (ICOs). We show that favorable ratings by a group of analysts with diverse backgrounds positively predict fundraising success and long-run token performance. Analysts’ ratings also help detect potential fraud ex ante. We document that analysts have career concerns and are incentivized by the platform to issue informative ratings. Overall, our results suggest that a market-based certification process that relies on a diverse group of individuals is at play in financing blockchain startups. (JEL D82, G11, G24, G32, G34, L26). Received February 25, 2021; editorial decision July 7, 2021 by Editor Andrew Ellul. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals The Value of Offshore Secrets: Evidence from the Panama Papers

2019 ◽  
Vol 32 (11) ◽  
pp. 4117-4155 ◽  
Author(s):  
James O’Donovan ◽  
Hannes F Wagner ◽  
Stefan Zeume
Keyword(s):  
Web Site ◽  
Market Capitalization ◽  
Listed Firms ◽  
Oxford University ◽  
Editorial Decision ◽  
Published Paper ◽  
Oxford University Press

AbstractWe exploit one of the largest data leaks, to date, to study whether and how firms use secret offshore vehicles. From the leaked data, we identify 338 listed firms as users of secret offshore vehicles and document that these vehicles are used to finance corruption, avoid taxes, and expropriate shareholders. Overall, the leak erased $\$$174 billion in market capitalization among implicated firms. Following the increased transparency brought about by the leak, implicated firms experience lower sales from perceptively corrupt countries and avoid less tax. We conservatively estimate that 1 in 7 firms have offshore secrets.Received May 29, 2017; editorial decision December 2, 2018 by Editor Itay Goldstein. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals Stock Volatility and the Great Depression

2018 ◽  
Vol 32 (9) ◽  
pp. 3544-3570 ◽  
Author(s):  
Gustavo S Cortes ◽  
Marc D Weidenmier
Keyword(s):  
Stock Returns ◽  
Great Depression ◽  
Stock Volatility ◽  
Stock Return Volatility ◽  
Building Permits ◽  
Oxford University ◽  
The Great Depression ◽  
Editorial Decision ◽  
High Level ◽  
Published Paper

Abstract Stock return volatility during the Great Depression has been labeled a “volatility puzzle” because the standard deviation of stock returns was 2 to 3 times higher than any other period in American history. We investigate this puzzle using a new series of building permits and leverage. Our results suggest that volatility in building permit growth and financial leverage largely explain the high level of stock volatility during the Great Depression. Markets factored in the possibility of a forthcoming economic disaster. Received September 30, 2017; editorial decision August 27, 2018 by Editor Philip E. Strahan. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online

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