The integration of mortgage and capital markets: a tale of two administrations

2019 ◽  
Vol 11 (3) ◽  
pp. 405-431
Author(s):  
Dror Parnes ◽  
Srinivas Nippani
Keyword(s):  
Time Series ◽  
Interest Rates ◽  
Capital Markets ◽  
Financial Regulation ◽  
Time Frame ◽  
Obama Administration ◽  
Content Type ◽  
Corporate Capital ◽  
Mortgage Rates ◽  
Trump Administration

Purpose This study aims to extend the literature by exploring the degrees of integration of both fixed and adjustable mortgage rates and diverse riskless (Treasury) and risky (corporate) interest rates in the capital markets from January 1, 2010, until November 7, 2018. This period is uniquely characterized by a sharp conversion on January 20, 2017, from enhanced financial regulation during the Obama administration to major deregulatory ambitions during the first 22 months of the Trump administration. Design/methodology/approach The authors use the augmented Dickey and Fuller and the Phillips and Perron unit root tests to examine time series stationarity and the Johansen cointegration rank and the Stock-Watson common trends tests to inspect various cointegrations and regressions of time series pairs to explore different effects. The authors deploy these techniques over the entire time frame, as well as for distinct sub-periods of similar length. Findings The authors conclude that a deregulatory setting favors cointegration between mortgage and non-corporate capital markets. However, an enriched regulatory environment supports cointegration between mortgage and corporate capital markets. In addition, the Dodd-Frank Wall Street Reform and Consumer protection Act from July 21, 2010, created a unique though short-term effect on the relationships between Treasury and corporate bonds and fixed-rate mortgages. Practical implications The journey contributes to the overall understanding of the interactions among US financial markets. They are considered efficient, competitive and fully developed if their prices quickly adjust to economic changes and regulatory transformations. Originality/value The authors study the degrees of integration of various conventional and adjustable mortgage rates and different fixed and floating interest rates in the US capital markets from January 1, 2010, until November 7, 2018. This recent time frame has yet to be examined in the economic literature. This period is also characterized by a sharp transformation on January 20, 2017, from enhanced financial regulation during the Obama administration to major deregulatory drives during the first 22 months of the Trump administration.

Market concentration and market power of the Swedish mortgage Sector – a wavelet panel efficiency analysis

2018 ◽  
Vol 22 (4) ◽  
Author(s):  
Kristofer Månsson ◽  
Pär Sjölander ◽  
Ghazi Shukur
Keyword(s):  
Time Series ◽  
Interest Rates ◽  
Efficiency Analysis ◽  
Price Transmission ◽  
Unique Contribution ◽  
Data Set ◽  
Wavelet Method ◽  
Asymmetric Price Transmission ◽  
Mortgage Rates ◽  
Mortgage Lenders

AbstractBased on a panel wavelet efficiency analysis, we conclude that there is a systematic pattern of positive asymmetric price transmission inefficiencies in the interest rates of the largest Swedish mortgage lenders. Thus, there seems to be a higher propensity for mortgage lenders to swiftly increase their customers’ mortgage interest rates subsequent to an increase in its borrowing costs, than to decrease their customers’ mortgage rates subsequent to a corresponding decrease in the cost of borrowing. A unique contribution is our proposed wavelet method which enables a robust detection of positive asymmetric price transmission effects at various time-frequency scales, while simultaneously controlling for non-stationary trends, autocorrelation, and structural breaks. Since traditional time-series analysis methods essentially implies that several wavelet time scales are aggregated into one single time series, the blunt traditional error correction analysis totally failed to discover APT effects for this data set. In summary, using the wavelet method we show that even though the customers in the end finally will benefit from decreases in the mortgage lenders’ financing costs, the lenders wait disproportionally long before the customers’ mortgage rates are decreased.

The dynamics of housing affordability and housing demand analysis in Ankara

2018 ◽  
Vol 11 (5) ◽  
pp. 828-851 ◽  
Author(s):  
Akin Öztürk ◽  
Yunus Emre Kapusuz ◽  
Harun Tanrıvermiş
Keyword(s):  
Time Series ◽  
Real Estate ◽  
Time Series Analysis ◽  
Interest Rates ◽  
Housing Demand ◽  
Housing Affordability ◽  
Housing Supply ◽  
Macroeconomic Factors ◽  
Policy Makers ◽  
Content Type

Purpose Information about the current and future composition of the population in terms of household size and the desired housing preferences provides a good foundation for determining current and future housing needs. The policy-makers and developers can also use such knowledge as a starting point in their housing and commercial real estate investment decisions. In Turkey, urbanization and housing issues have accompanied the growth of industrialization. Within the scope of the country’s urbanization history, various instruments have been used to solve the lack of housing issues. The constructed houses should be accessible or affordable by fixed-income earners in the middle and lower socio-economic classes, who are mostly excluded. In particular, the real estate development sector has taken manageable risks by closely following the changing social and economic conditions and developing a variety of housing concepts. The purpose of this paper is to investigate the housing sector situation and affordability issues and then use time series analysis to present relationships between macroeconomic factors and housing demand in Ankara region. Design/methodology/approach The approach uses a survey of recent housing projects cover 2016 to 2018 for housing affordability conditions. Also, the study uses the Johansen co-integration test, variance analysis and impulse-response test to explain the relationships between macroeconomic indicators and housing demand for Ankara. Findings According to the results of time series analysis, the macroeconomic factors are affecting the demand and the number of houses sold. The research results try to find a negative or positive correlation between the numbers of houses sold and the monthly macroeconomic variables. Mortgage interest rates, usage permits, construction permits and household expenditure were found the most correlated with housing sold as a representative proxy of housing demand. This paper claims that current housing affordability is related to current housing supply and demand variables. If housing supply (as construction and usage permits) and income (as interest rates and expenditures) are at favorable levels, then housing transaction volumes increase. Research limitations/implications This paper highlights the need to examine how to assist developers to more rapidly develop knowledge and experience to reflect the implications of change in practice. This paper is formulating a housing demand model for real estate developers, using number of house sales and other administrative statistics in Ankara region. Practical implications If macroeconomic conditions are stable, then this encourages consumers to invest for housing whether they are affordable or not. According to the results, key factors of housing market are based on interest rates, income expectation and gaining social status. The consumers anymore not only want to buy a house to live and also want to gaining prestige. Originality/value The paper not only shows that current price is affordable or not but also supports why price is going up although price is not affordable. The findings identify how the market is developing and adhering to a product model development theory. The paper is different from previous studies because of the use of monthly income and supply proxies together in Turkey with time series model. These results are close to the theoretical expectations and provide good indicators for policy-makers.

LIBOR, base rate spreads and the UK housing market

2015 ◽  
Vol 8 (1) ◽  
pp. 118-134 ◽  
Author(s):  
Martin Hinch ◽  
Jim Berry ◽  
William McGreal ◽  
Terry Grissom
Keyword(s):  
Time Series ◽  
Interest Rates ◽  
House Prices ◽  
House Price ◽  
Base Rate ◽  
Percentage Change ◽  
Content Type ◽  
Change Models ◽  
The Uk ◽  
The Impact

Purpose – The purpose of this paper is to analyse how London Interbank Offered Rate Index (LIBOR) and the spread between LIBOR and the base rate of interest as set by the Bank of England (BoE) influences the variation in house prices in the UK. Design/methodology/approach – This paper uses monthly data over a long time series, since 1986, to investigate the relationships between house price and LIBOR. Data are drawn from several different sources to include housing, financial and macro-economic variables. The time series is sub-divided into a series of splines based on stages in the economic and property market cycle. Both value-based and percentage change models are developed. Findings – The results show that BoE base/LIBOR margin variable has a strong positive and significant effect on house price; however, the percentage change model infers a weaker and inverse relationship. The spline analysis re-emphasised the significance of the BoE base/LIBOR margin variable. Where variation between base rates and LIBOR is reduced, a significant positive effect can be observed in the average house price; however, where significant variation exists, the BoE base/LIBOR margin has little effect and LIBOR itself becomes a significant driver. Research limitations/implications – The results highlight that the predictive qualities of the BoE base/LIBOR margin, as the contribution of this margin to the explanation of house price, exceeds both the base rate and LIBOR variables individually. Also highlighted is the contribution of unemployment to the explanation of house price. In both the value and percentage change models, unemployment is shown as a negative and highly significant contributor. Originality/value – Previous papers have demonstrated the important linkage between house price and interest rates, the originality in this paper lies in examining the impact of LIBOR and the spreads between LIBOR and base rate as key variables influencing variation in UK house prices.

Trump will deprioritise banking reform despite talk

2017 ◽  
Keyword(s):  
Interest Rates ◽  
Financial Regulation ◽  
Donald Trump ◽  
Wall Street ◽  
Banking Reform ◽  
Content Type ◽  
Democratic Candidate ◽  
The Great Depression ◽  
2016 Election ◽  
Compliance Requirements

Subject President Donald Trump and banking reform. Significance President Donald Trump attacked Democratic candidate Hillary Clinton ahead of the November 2016 election over her paid speaking appearances at Wall Street financial institutions before her second presidential run. Although he has appointed several former bankers to administration positions and advanced a deregulatory agenda as president, as a candidate Trump criticised big banks and proposed restoring the Glass-Steagall rule separating commercial and investment banking in the 1933 US Banking Act, enacted during the Great Depression but repealed in 1999. The idea has gained some traction in Congress and Trump called for a “21st century version” of Glass-Steagall in a May 1 interview. Impacts When the Fed normalises interest rates, it will help US banks’ profitability when combined with less-stringent compliance requirements. Stricter stances on financial regulation are likely to be an ideological litmus test for Democratic candidates seeking nomination. Finance-friendly appointments to and legislative restrictions on federal agencies will curtail Washington’s regulatory power.

scholarly journals The relative importance of mortgage pricing determinants in mortgage affordability in Ghana

2016 ◽  
Vol 14 (3) ◽  
pp. 563-579 ◽  
Author(s):  
D. Owusu-Manu ◽  
E.A. Pärn ◽  
K. Donkor-Hyiaman ◽  
D.J. Edwards ◽  
K. Blackhurst
Keyword(s):  
Interest Rates ◽  
Risk Premium ◽  
Best Practice ◽  
Relative Importance ◽  
Data Set ◽  
Content Type ◽  
Mortgage Pricing ◽  
Policy Interventions ◽  
Ex Post ◽  
Mortgage Rates

Purpose The purpose of this study is to explore the mortgage affordability problem in Ghana, an issue that has been associated inter alia with high mortgage rates, which results from the high cost of capital, an unstable macroeconomy and unfavourable borrowers’ characteristics. Concurrent improvements in both the macroeconomy and borrowers’ characteristics have rendered the identification of the most problematic mortgage pricing determinant difficult, consequently making the targeting of policy interventions problematic. Design/methodology/approach This research sought to resolve this aforementioned difficulty by providing empirical evidence on the relative importance of mortgage pricing determinants. A data set of mortgage rates of selected Ghanaian banking financial institutions from 2003 to 2013 was examined and analysed by applying Fisher’s model of interest rates and an ex post analysis of the standard regression coefficients. Findings The risk premium factor emerged as the most important determinant in Ghana compared with the inflation premium and the real risk-free rate, although all are statistically significant and strongly correlated with mortgage rates. Originality/value This study provides an insight on the relative importance of mortgage pricing determinates and subsequent macro-economic guidance to support policy interventions which could reduce mortgage rates/enhance mortgage affordability. The paper specifically aims to engender wider debate and provide guidance to the Ghanaian Government and/or private enterprises that seek to provide affordable mortgages. Further research is proposed which could explore ways of reducing mortgage rates as a means of engendering social equality and adopt innovative international best practice that has already been tried and tested in countries such as South Africa and the USA.

High corporate debt risks Brazil's post-COVID recovery

2021 ◽  
Keyword(s):  
Interest Rates ◽  
Capital Markets ◽  
Small Businesses ◽  
Government Support ◽  
Economic Recovery ◽  
Corporate Debt ◽  
Small Companies ◽  
Content Type ◽  
Debt Issuance ◽  
The Impact

Significance Small companies have been the most affected. Government programmes have supplied credit but struggled to channel funds to the neediest companies, especially at the beginning of the pandemic last year. Large companies, although remaining the major credit borrowers, have also accessed funding via debt issuance and stock offerings in capital markets. Impacts Companies’ financial obligations will increase along with recent rises in interest rates. Lack of adequate government support this year may delay economic recovery. New investments are less likely in face of mounting corporate debt. The impact of rising liabilities will be more prolonged for small businesses.

Construct Validity

2017 ◽  
Author(s):  
Richard McCleary ◽  
David McDowall ◽  
Bradley J. Bartos
Keyword(s):  
Time Series ◽  
Construct Validity ◽  
Hypothesis Test ◽  
Secondary Data ◽  
Time Frame ◽  
Primary Data ◽  
Optimal Time ◽  
Intervention Model ◽  
Right Hand ◽  
The Right

Chapter 8 focuses on threats to construct validity arising from the left-hand side time series and the right-hand side intervention model. Construct validity is limited to questions of whether an observed effect can be generalized to alternative cause and effect measures. The “talking out” self-injurious behavior time series, shown in Chapter 5, are examples of primary data. Researchers often have no choice but to use secondary data that were collected by third parties for purposes unrelated to any hypothesis test. Even in those less-than-ideal instances, however, an optimal time series can be constructed by limiting the time frame and otherwise paying attention to regime changes. Threats to construct validity that arise from the right-hand side intervention model, such as fuzzy or unclear onset and responses, are controlled by paying close attention to the underlying theory. Even a minimal theory should specify the onset and duration of an impact.

Trust and Regulation in Corporate Capital Markets before 1914

2018 ◽  
Author(s):  
Leslie Hannah
Keyword(s):  
Capital Markets ◽  
Stock Exchange ◽  
Legal Regulation ◽  
Securities Market ◽  
Market Development ◽  
Shareholder Rights ◽  
London Stock Exchange ◽  
Local Elites ◽  
Corporate Capital ◽  
Trust Networks

Historians have struggled to explain how stock markets could develop—with notable vigour in many countries before 1914—before modern shareholder protections were legally mandated. Trust networks among local elites—and/or information signalling to public investors—substituted for legal regulation, but this chapter suggests real limits to such processes. They are especially implausible when applied to giant companies with ownership substantially divorced from control, of which there were many with—nationally and internationally—dispersed shareholdings. In London—the largest pre-1914 securities market—strong supplementary supports for market development were provided by mandatory requirements for transparency and anti-director rights in UK statutory companies and by low new issue fees. There were also stringent London Stock Exchange requirements for other companies wanting the liquidity benefits of official listing. Shareholder rights were similarly achieved in Brazil and other countries and colonies dependent on British capital.

Development and validation of financial well-being related scales

2019 ◽  
Vol 37 (4) ◽  
pp. 1025-1040 ◽  
Author(s):  
Farah Diba M.A. Abrantes-Braga ◽  
Tania Veludo-de-Oliveira
Keyword(s):  
Interest Rates ◽  
Credit Card ◽  
Discriminant Validity ◽  
Well Being ◽  
Confirmatory Factor Analyses ◽  
Content Type ◽  
Convergent And Discriminant Validity ◽  
Group Interviews ◽  
Development And Validation ◽  
Additional Income

PurposeThe purpose of this paper is to develop valid and reliable scales for assessing a driver and two obstacles potentially related to financial well-being (FWB): financial preparedness for emergency, beliefs of credit limits as additional income and risky indebtedness behaviour.Design/methodology/approachThe scales were developed from scratch across six studies, employing a two-step methodology, which encompassed both qualitative (e.g. focus group, interviews) and quantitative (i.e. online surveys) data collection. Exploratory and confirmatory factor analyses were employed to test and validate the proposed scales.FindingsThis study provides a set of three parsimonious, self-reported behavioural measures that could be employed in conjunction with objective economic indicators to identify individuals who are financially ill prepared and potential candidates for delinquency. The three proposed scales achieved satisfactory levels of reliability and convergent and discriminant validity.Research limitations/implicationsThe resulting scales still need to be tested for predictive validity and in different consumer groups. The scales were validated in a single culture population (Brazil, a country that presents extraordinarily high credit card interest rates), and they should be tested cross-culturally in countries with different economic and credit policies.Originality/valueThe literature on FWB has traditionally employed objective financial indicators as an attempt to measure the concept of FWB and its elements. Self-reported behavioural measures of such constructs are scant to the point of being non-existent for some elements. This study is the first to offer scales for measuring the elements of financial preparedness for emergency, beliefs of credit limits as additional income and risky indebtedness behaviour.

Making investment decisions in stock markets using a forecasting-Markowitz based decision-making approaches

2019 ◽  
Vol 15 (2) ◽  
pp. 647-659 ◽  
Author(s):  
Zahra Moeini Najafabadi ◽  
Mehdi Bijari ◽  
Mehdi Khashei
Keyword(s):  
Decision Making ◽  
Time Series ◽  
Stock Markets ◽  
Time Series Prediction ◽  
Investment Decisions ◽  
Rate Of Return ◽  
Expected Returns ◽  
Prediction Methods ◽  
Content Type ◽  
Markowitz Model

Purpose This study aims to make investment decisions in stock markets using forecasting-Markowitz based decision-making approaches. Design/methodology/approach The authors’ approach offers the use of time series prediction methods including autoregressive, autoregressive moving average and artificial neural network, rather than calculating the expected rate of return based on distribution. Findings The results show that using time series prediction methods has a significant effect on improving investment decisions and the performance of the investments. Originality/value In this study, in contrast to previous studies, the alteration in the Markowitz model started with the investment expected rate of return. For this purpose, instead of considering the distribution of returns and determining the expected returns, time series prediction methods were used to calculate the future return of each asset. Then, the results of different time series methods replaced the expected returns in the Markowitz model. Finally, the overall performance of the method, as well as the performance of each of the prediction methods used, was examined in relation to nine stock market indices.

Sign in / Sign up

Export Citation Format

Share Document