Financial Markets, Institutions & Instruments

- Publisher:
- Wiley
- Publication date:
- 2021-02-01
- ISBN:
- 0963-8008
Issue Number
- Nbr. 27-2, May 2018
- Nbr. 27-1, February 2018
- Nbr. 26-5, December 2017
- Nbr. 26-4, November 2017
- Nbr. 26-3, August 2017
- Nbr. 26-2, May 2017
- Nbr. 26-1, February 2017
- Nbr. 25-5, December 2016
- Nbr. 25-4, November 2016
- Nbr. 25-3, August 2016
- Nbr. 25-2, May 2016
- Nbr. 25-1, January 2016
- Nbr. 24-5, December 2015
- Nbr. 24-2-3, May 2015
- Nbr. 23-5, December 2014
- Nbr. 23-4, November 2014
- Nbr. 23-2, May 2014
- Nbr. 22-5, December 2013
- Nbr. 22-4, November 2013
- Nbr. 22-2, May 2013
Latest documents
- Issue Information
- A skeptical appraisal of the bootstrap approach in fund performance evaluation
It has become standard practice in the fund performance evaluation literature to use the bootstrap approach to distinguish “skills” from “luck”, while its reliability has not been subject to rigorous statistical analysis. This paper reviews and critiques the bootstrap schemes used in the literature, and provides a simulation analysis of the validity and reliability of the bootstrap approach by applying it to evaluating the performance of hypothetical funds under various assumptions. We argue that this approach can be misleading, regardless of using alpha estimates or their t‐statistics. While alternative bootstrap schemes can result in improvements, they are not foolproof either. The case can be worse if the benchmark model is misspecified. It is therefore only with caution that we can use the bootstrap approach to evaluate the performance of funds and we offer some suggestions for improving it.
- Issue Information
- The interplay between quantitative easing, risk and competition: The case of Japanese banking
The Japanese economy is infamous for the magnitude of bank nonperforming loans that have originated back in the 1990s, whereas they are still causing controversies. Japan is also known for an extended quantitative easing programme of unprecedented scale. Yet the links between risk‐taking activities, quantitative easing and bank competition are largely unexplored. This paper employs, for the first time, the Boone indicator to measure bank competition in Japan to examine these underlying linkages. Given the scale of nonperforming loans, we explicitly measure bank risk‐taking based on a new data set of bankrupt and restructured loans. The dynamic panel threshold and panel Vector Autoregression analyses show that enhancing quantitative easing and competition would reduce bankrupt and restructured loans, but it would negatively affect financial stability. Given the recent adoption of negative rates in January 2016 by the Bank of Japan, our study provides new insights as clearly there is a trade‐off between quantitative easing and financial stability beyond a certain threshold. Caution, therefore, regarding further scaling up quantitative easing is warranted.
- The rise of China's securitization market
We study the development of asset securitization markets in China. We manually collect all asset securitization projects and securities data from 2005 to 2015. Inspection of this sample combined with related policy changes reveals distinct characteristics and some potential problems. At the macro level, asset securitization market in China is policy driven, regulation‐segmented, and highly illiquid. At the micro level, the underlying assets are mainly corporate loans or assets, rather than mortgage or consumption loans as in the US and European markets. State owned commercial banks and enterprises enjoy significantly lower interest rates when issuing securitization bonds. Finally, risk‐isolation and credit enhancing techniques significantly improve the rating of asset‐backed securities.
- Issue Information
- Do multinational banks create or destroy shareholder value? A cross‐country analysis
We question whether the international diversification of multinational banks creates or destroys shareholder value. Based on a sample of 384 listed banks from 56 countries we provide new and robust evidence that bank cross‐border activities create shareholder value, as shown by an economically and statistically significant premium for international diversification. Our results are confirmed controlling for bank fixed effects, time‐varying bank characteristics, reverse causality, functional diversification, and instrumenting for the choice to expand abroad. The increase in shareholder value is slightly larger for banks in the middle range of international diversification and in the case of expansion towards less developed countries.
- Does political pressure matter in bank lending? Evidence from China
Using provincial data from China between 2002 and 2011, we find substantial evidence indicating a positive association between the growth of bank loans issued by commercial banks and the political pressures faced by provincial leaders. This association is particularly true for state‐owned banks, which are much more politically pressurized than others, but is relatively attenuated in provinces with a more developed banking sector. We also find that bank loans issued under greater political pressures are less commercially oriented and have lower quality. Our findings are robust to a variety of sensitivity analyses and alternative measures of political pressure. Overall, our study contribute to a growing literature emphasizing the role of the political incentives of government officials in fuelling economic growth through credit allocation.
- Issue Information
- Too big to fail: Measures, remedies, and consequences for efficiency and stability*
This paper evaluates whether reform efforts addressing “too big to fail” actually enhance the stability of the financial system, and whether trade‐offs exist between stability and efficiency. We also present and discuss various measures of bank size and complexity since such measures are essential for implementing appropriate corrective remedies. As we will show, there are no unambiguous measures of size or complexity that can fully capture a bank's contribution to systemic risk. Their effects on efficiency are also impossible to capture with certainty. While we recognize the need for additional research and empirical evidence, we do identify weaknesses and strengths of proposed and implemented reforms that could have consequences for bank stability and efficiency.
Featured documents
- Too big to fail: Measures, remedies, and consequences for efficiency and stability*
This paper evaluates whether reform efforts addressing “too big to fail” actually enhance the stability of the financial system, and whether trade‐offs exist between stability and efficiency. We also present and discuss various measures of bank size and complexity since such measures are essential...
- On Regulatory Responses to the Recent Crisis: An Assessment of the Basel Market Risk Framework and the Volcker Rule
Banks around the world suffered huge trading losses in the recent crisis. In response, the Basel Committee on Banking Supervision () provides a revised framework to determine the minimum capital requirements for their trading portfolios. Moreover, the Dodd‐Frank Wall Street Reform and Consumer...
- Bankruptcy Remoteness and Incentive‐compatible Securitization
Securitization involves both the risk allocation and claims' transferability/liquidity. A key ingredient of liquidity/claim‐transferability is bankruptcy remoteness of the securitized assets. We analyze the implications of the bankruptcy‐remoteness created by securitization on risk allocation and...
- A Long‐Term Perspective on the Determinants of Treasury Bond Stripping Levels
We examine the proportion of individual Treasury bonds held as strips over the entire history of the STRIPS program. First, we document a secular decline in the Treasury bond stripping levels from 1985 to 2010, coincidental with the long‐term decline in the interest rates. This pattern suggests...
- A New Data Set On Competition In National Banking Markets
We estimate the degree of competition in the banking sectors of 148 countries over the period 1997–2010 using three methods: the Lerner index, the adjusted Lerner index, and the profit elasticity. Marginal cost estimates required for all methods are obtained using a flexible semi‐parametric...
- High Frequency Trading and US Stock Market Microstructure: A Study of Interactions between
Complexities, Risks and Strategies Residing in U.S. Equity Market Microstructure
We examine the conditions, complexities and risks of a fragmented market microstructure to contextualize the role of algorithmic and high frequency trading in the US equity markets. The establishment of a national market system and Regulation NMS was meant to promote competition, recognizing the...
- Managerial gaming of stock and option grants
In this paper, we examine managerial gaming of different types of equity grants, both at the initial award of the equity grants (front‐end gaming) and the unwinding of the equity holdings in the future (back‐end gaming). We find that the potential gains from stock price manipulation vary...
- Understanding the Components of Bank Failure Resolution Costs
In this paper, we demonstrate how the resolution costs associated with over 1,000 bank failures from 1986 to 2007 are distributed across the method of resolution, bank size, regulatory periods, and the existence of fraud. In addition, we document the time spent in the resolution by the resolution...
- The Role of Sovereign Ratings in M&A Markets: Empirical Evidence from Latin America and South East Asia
Sovereign ratings have not only been regarded as an indicator of country risk for foreign investors, but also as a determining factor for capital market conditions of domestic firms. Although they have attracted growing interest in academic research, the extant literature has so far rendered only...
- A skeptical appraisal of the bootstrap approach in fund performance evaluation
It has become standard practice in the fund performance evaluation literature to use the bootstrap approach to distinguish “skills” from “luck”, while its reliability has not been subject to rigorous statistical analysis. This paper reviews and critiques the bootstrap schemes used in the literature,...