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

Financial Markets with Trade on Risk and Return

2019 ◽  
Vol 32 (10) ◽  
pp. 4042-4078 ◽  
Author(s):  
Kevin Smith
Keyword(s):  
Stock Returns ◽  
Risk Premium ◽  
Private Information ◽  
Trading Volume ◽  
Variance Risk Premium ◽  
Oxford University ◽  
Editorial Decision ◽  
Variance Risk ◽  
The Relationship ◽  
Published Paper

Abstract In this paper, I develop a model in which risk-averse investors possess private information regarding both a stock’s expected payoff and its risk. These investors trade in the stock and a derivative whose payoff is driven by the stock’s risk. In equilibrium, the derivative is used to speculate on the stock’s risk and to hedge against adverse fluctuations in the stock’s risk. I analyze the derivative price and variance risk premium that arise in this equilibrium and their predictive power for stock returns. Finally, I examine the relationship between prices and trading volume in the stock and derivative. Received July 31, 2017; editorial decision December 3, 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 Resiliency of Environmental and Social Stocks: An Analysis of the Exogenous COVID-19 Market Crash

2020 ◽  
Vol 9 (3) ◽  
pp. 593-621 ◽  
Author(s):  
Rui Albuquerque ◽  
Yrjo Koskinen ◽  
Shuai Yang ◽  
Chendi Zhang
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Web Site ◽  
Return Volatility ◽  
Stock Market Crash ◽  
Profit Margins ◽  
Oxford University ◽  
Operating Profit ◽  
Editorial Decision ◽  
Published Paper

Abstract The COVID-19 pandemic and the subsequent lockdown brought about an exogenous and unparalleled stock market crash. The crisis thus provides a unique opportunity to test theories of environmental and social (ES) policies. This paper shows that stocks with higher ES ratings have significantly higher returns, lower return volatility, and higher operating profit margins during the first quarter of 2020. ES firms with higher advertising expenditures experience higher stock returns, and stocks held by more ES-oriented investors experience less return volatility during the crash. This paper highlights the importance of customer and investor loyalty to the resiliency of ES stocks. (JEL G12, G32, M14) Received: June 3, 2020; editorial decision June 24, 2020 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.

How Are Bankers Paid?

2021 ◽  
Author(s):  
Benjamin Bennett ◽  
Radhakrishnan Gopalan ◽  
Anjan Thakor
Keyword(s):  
Stock Returns ◽  
Short Term ◽  
Small Bank ◽  
Nonperforming Loans ◽  
Oxford University ◽  
Highly Sensitive ◽  
Demand Deposit ◽  
Editorial Decision ◽  
Published Paper ◽  
Measures Of Performance

Abstract We empirically examine bank CEOs’ compensation. We find that bank CEOs (a) are paid less than their nonfinancial counterparts, an effect driven by the CEOs of small bank; (b) experienced declining compensation during 2007–2009 (the hardest-hit banks cut compensation more) but pay is now 24% higher than precrisis levels; (c) are paid more at larger banks, those with less nonperforming loans, those with a higher proportion of noninterest income, and those with less demand-deposit dependence; and (d) have pay highly sensitive to ROA and ROE, but not stock returns. Tail risk is higher when compensation depends more on short-term measures of performance. (JEL, F34, G32, G33, G38, K42) Received July 3, 2019; editorial decision December 13, 2020 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.

A Transaction-Cost Perspective on the Multitude of Firm Characteristics

2020 ◽  
Vol 33 (5) ◽  
pp. 2180-2222 ◽  
Author(s):  
Victor DeMiguel ◽  
Alberto Martín-Utrera ◽  
Francisco J Nogales ◽  
Raman Uppal
Keyword(s):  
Transaction Costs ◽  
Stock Returns ◽  
Firm Characteristics ◽  
Pricing Models ◽  
Oxford University ◽  
Asset Pricing Models ◽  
Economic Rationale ◽  
Underlying Stocks ◽  
Different Characteristics ◽  
Published Paper

Abstract We investigate how transaction costs change the number of characteristics that are jointly significant for an investor’s optimal portfolio and, hence, how they change the dimension of the cross-section of stock returns. We find that transaction costs increase the number of significant characteristics from 6 to 15. The explanation is that, as we show theoretically and empirically, combining characteristics reduces transaction costs because the trades in the underlying stocks required to rebalance different characteristics often cancel out. Thus, transaction costs provide an economic rationale for considering a larger number of characteristics than that in prominent asset-pricing models. 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.

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