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Displaying results 26 to 34 of 34.

  1. Borrow now, pay even later
    a quantitative analysis of student debt payment plans
    Author: Boutros, Michael; Clara, Nuno; Gomes, Francisco J.
    Published: [2023]
    Publisher:  Bank of Canada, [Ottawa]

    In the United States, student debt currently represents the second largest component of consumer debt, just after mortgage loans. Repayment of those loans reduces disposable income early in the borrower's lifecycle, when marginal utility is... more

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    In the United States, student debt currently represents the second largest component of consumer debt, just after mortgage loans. Repayment of those loans reduces disposable income early in the borrower's lifecycle, when marginal utility is particularly high, and limits their ability to build a buffer stock of wealth to insure against background risks. In this paper, we study alternative student debt contracts that offer a 10-year deferral period. Borrowers defer either principal payments only ("Principal Payment Deferral", PPD) or all payments ("Full Payment Deferral", FPD) with the missed interest payments added to the value of the debt outstanding. We first calibrate an equilibrium with the current contracts, and then solve for counterfactual equilibria with the PPD or FPD contracts. We find that both alternatives generate economically large welfare gains, which are robust to different assumptions about the behavior of the lenders and borrower preferences. We decompose the gains into the percentages resulting from loan repricing and from the deferral of debt repayments. We compare these alternative contracts with the changes to Income Driven Repayment Plans being proposed by the current U.S. administration and show that they dominate such proposals. Crucially, the PPD and FPD contracts deliver similar welfare gains to the debt relief program considered by the administration, with no impact on the government budget constraint.

     
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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
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    Edition: Last updated: October 27, 2023
    Series: Staff working paper / Bank of Canada ; 2023, 54
    Subjects: Asset pricing; Economic models; Financial markets; Labour markets; Market structure and pricing
    Scope: 1 Online-Ressource (circa 63 Seiten), Illustrationen
  2. The impact of green investors on stock prices
    Author: Cheng, Gong; Jondeau, Eric; Mojon, Benoît; Vayanos, Dimitri
    Published: 09 March 2024
    Publisher:  Centre for Economic Policy Research, London

    We study the impact of green investors on stock prices in a dynamic equilibrium model where investors are green, passive or active. Green investors track an index that progressively excludes the stocks of the brownest firms; passive investors hold a... more

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    Staats- und Universitätsbibliothek Bremen
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    Technische Universität Hamburg, Universitätsbibliothek
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    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
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    Bibliotheks-und Informationssystem der Carl von Ossietzky Universität Oldenburg (BIS)
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    Universität Potsdam, Universitätsbibliothek
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    We study the impact of green investors on stock prices in a dynamic equilibrium model where investors are green, passive or active. Green investors track an index that progressively excludes the stocks of the brownest firms; passive investors hold a value-weighted index of all stocks; and active investors hold a mean-variance efficient portfolio of all stocks. Contrary to the literature, we find large drops in the stock prices of the brownest firms and moderate increases for greener firms. These effects occur primarily upon the announcement of the green index's formation and continue during the exclusion phase. The announcement effects imply a first-mover advantage to early adopters of decarbonisation strategies.

     
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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Series: Array ; DP18906
    Subjects: Asset pricing; green investing; passive investing; portfolio rebalancing
    Scope: 1 Online-Ressource (circa 42 Seiten), Illustrationen
  3. Pricing indefinitely lived assets
    experimental evidence
    Author: Duffy, John; Jiang, Janet Hua; Xie, Huan
    Published: [2023]
    Publisher:  Bank of Canada, [Ottawa]

    We study indefinitely lived assets in experimental markets and find that the traded prices of these assets are, on average, about 40% of the risk-neutral fundamental value. Neither uncertainty about the value of total dividend payments nor horizon... more

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    We study indefinitely lived assets in experimental markets and find that the traded prices of these assets are, on average, about 40% of the risk-neutral fundamental value. Neither uncertainty about the value of total dividend payments nor horizon uncertainty about the duration of trade can account for this low traded price. An Epstein and Zin (1989) recursive preference specification that models the dynamic realization of dividend payments and incorporates risk preferences can rationalize the low traded price observed in our indefinitely lived asset market.

     
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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
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    Edition: Last updated: April 24, 2023
    Series: Staff working paper / Bank of Canada ; 2023, 25
    Subjects: Asset pricing; Financial markets
    Scope: 1 Online-Ressource (circa 52 Seiten), Illustrationen
  4. Limited memory, time-varying expectations and asset pricing
    Author: Ascari, Guido; Zhang, Yifan
    Published: [2023]
    Publisher:  Università di Pavia, Department of Economics and Management, Pavia

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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Series: DEM working paper series ; # 211 (07-23)
    Subjects: Asset pricing; Expectations; Limited memory; Equity premium
    Scope: 1 Online-Ressource (circa 76 Seiten), Illustrationen
  5. Two Essays on Demand-Based Asset Pricing
    Author: Huebner, Paul
    Published: 2023

    In Chapter 1, I develop a framework to quantify which features of investors’ trading strategies lead to momentum in equilibrium. Specifically, I distinguish two channels: persistent demand shocks, capturing underreaction, and the term structure of... more

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    In Chapter 1, I develop a framework to quantify which features of investors’ trading strategies lead to momentum in equilibrium. Specifically, I distinguish two channels: persistent demand shocks, capturing underreaction, and the term structure of demand elasticities, representing an intensity of arbitrage activity that decreases with investor horizon. I introduce both aspects of dynamic trading into an asset demand system and discipline the model using the joint behavior of portfolio holdings and prices. I estimate the demand of institutional investors in the U.S. stock market between 1999 and 2020. On average, investors respond more to short-term than longer-term price changes: the term structure of elasticities is downward-sloping. My estimates suggest that this channel is the primary driver of momentum returns. Moreover, in the cross-section, stocks with more investors with downward-sloping term structures of elasticities exhibit stronger momentum returns by 7% per year.In Chapter 2 (with Valentin Haddad and Erik Loualiche), we develop a framework to theoretically and empirically analyze how investors compete with each other in financial markets. In the classic view that markets are fiercely competitive, if a group of investors changes its behavior, other investors adjust their strategies such that nothing happens to prices. We propose a demand system with a flexible degree of strategic response and estimate it for institutional investors in the U.S. stock market. Investors react to the behavior of others in the market: when less aggressive traders surround an investor, she trades more aggressively. However, this strategic reaction is not nearly as strong as the classic view. Our estimates suggest that when a group of investors changes its behavior, the response of other investors only counteracts half of the direct impact. This result implies that the rise in passive investing over the last 20 years has led to substantially more inelastic aggregate demand curves for individual stocks by about 15%.

     
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    Source: Union catalogues
    Language: English
    Media type: Dissertation
    Format: Online
    ISBN: 9798379523527
    Series: Dissertations Abstracts International
    Subjects: Finance; Asset pricing; Investors; Dynamic trading; Inelastic aggregate; Stock market
    Scope: 1 Online-Ressource (262 p.)
    Notes:

    Source: Dissertations Abstracts International, Volume: 84-11, Section: A. - Advisor: Haddad, Valentin P

    Dissertation (Ph.D.), University of California, Los Angeles, 2023
  6. Elections Have Consequences
    The Impact of Political Agency on Climate Policy and Asset Prices
    Author: Cassidy, William Morgan
    Published: 2023

    I study the origin and pricing of climate policy uncertainty. Using tools from natural language processing, I construct a novel dataset of timestamped climate policy announcements. Analyzing high-frequency returns around these announcements, I find a... more

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    I study the origin and pricing of climate policy uncertainty. Using tools from natural language processing, I construct a novel dataset of timestamped climate policy announcements. Analyzing high-frequency returns around these announcements, I find a significant climate policy risk premium. This premium is larger when political constraints are more lax. To interpret these results, I build a model combining political economy and climate finance. In the model, climate policy uncertainty emerges endogenously because governments have private information about their future policies; this uncertainty generates a risk premium because climate policies affect cash flows and aggregate output. Political constraints affect the magnitude of the premium both by preventing implementation of extreme policies and altering the informativeness of policy communication.

     
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    Source: Union catalogues
    Language: English
    Media type: Dissertation
    Format: Online
    ISBN: 9798379706623
    Series: Dissertations Abstracts International
    Subjects: Finance; Political science; Asset pricing; Climate finance; Political economy; Political agencies; Elections
    Scope: 1 Online-Ressource (140 p.)
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    Source: Dissertations Abstracts International, Volume: 84-12, Section: A. - Advisor: Pastor, Lubos

    Dissertation (Ph.D.), The University of Chicago, 2023
  7. Do Subjective Growth Expectations Matter for Asset Prices?
    Author: Chaudhry, Aditya
    Published: 2023

    I find that the causal effect of subjective growth expectations on asset prices is far smaller than standard models suggest. To quantify this causal effect, I construct an asset demand model in which Bayesian investors learn from analysts and other... more

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    I find that the causal effect of subjective growth expectations on asset prices is far smaller than standard models suggest. To quantify this causal effect, I construct an asset demand model in which Bayesian investors learn from analysts and other signals. A 1% rise in annual investor growth expectations raises price by 60% to 90% less than in standard models. This small causal effect arises from the limited passthrough of beliefs to asset demand, and is consistent with small price elasticities of demand. To reconcile this small causal effect with the strong correlation of growth expectations and prices, I provide evidence of reverse causality. Using flow-induced trading to instrument for prices, I find that prices cause growth expectations.

     
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    Source: Union catalogues
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    Media type: Dissertation
    Format: Online
    ISBN: 9798379706166
    Series: Dissertations Abstracts International
    Subjects: Finance; Asset demand; Asset pricing; High-frequency identification; Machine learning; Subjective beliefs
    Scope: 1 Online-Ressource (219 p.)
    Notes:

    Source: Dissertations Abstracts International, Volume: 84-12, Section: A. - Advisor: Nagel, Stefan;Koijen, Ralph

    Dissertation (Ph.D.), The University of Chicago, 2023
  8. Retail Trading and Asset Prices
    The Role of Changing Social Dynamics
    Author: Li, Fulin
    Published: 2023

    Social-media-fueled retail trading poses new risk to institutional investors. This paper examines the origin and pricing of this new risk. I first present stylized facts on prices, quantities, and retail investors’ beliefs for a set of meme stocks. I... more

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    Social-media-fueled retail trading poses new risk to institutional investors. This paper examines the origin and pricing of this new risk. I first present stylized facts on prices, quantities, and retail investors’ beliefs for a set of meme stocks. I establish that aggregate fluctuations in retail sentiment originated from a growing and concentrated social network. The retail sentiment fluctuations induced changes in investor composition. As sentiment increased throughout 2020 and 2021, retail investors built up long positions, while price-sensitive long-only institutions have gradually exited the market since early 2020. Short interest stayed high in 2020, but dropped sharply following the price surge in January 2021 and remained low for the rest of the year. Motivated by these facts, I develop a model of the interaction between three groups of investors – retail investors, long-only institutions, and short sellers. I calibrate the model to match the price, quantity, and retail sentiment dynamics during this period. Then I use the calibrated model to demonstrate that social network dynamics shape the distribution of retail sentiment and have an economically large impact on asset prices. In the model, retail investors participate in a social network with concentrated linkages. This implies that their idiosyncratic sentiment shocks can lead to aggregate fluctuations in retail sentiment. Aggregate retail sentiment shocks shift investor composition, which in turn determines the price of retail sentiment risk. Following an increase in the aggregate retail sentiment, price-sensitive long-only institutions first hit their short-sale constraints, leading to a decrease in the aggregate demand elasticity in the market for an individual stock. Then a “small” positive retail sentiment shock can have a “large” price impact and even squeeze the short sellers.

     
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    Source: Union catalogues
    Language: English
    Media type: Dissertation
    Format: Online
    ISBN: 9798379708269
    Series: Dissertations Abstracts International
    Subjects: Finance; Web studies; Asset pricing; Retail trading; Social network; Individual stock; Institutional investors
    Scope: 1 Online-Ressource (159 p.)
    Notes:

    Source: Dissertations Abstracts International, Volume: 84-12, Section: A. - Advisor: Koijen, Ralph;Nagel, Stefan

    Dissertation (Ph.D.), The University of Chicago, 2023
  9. Generalized autoregressive gamma processes
    Author: Feunou, Bruno
    Published: [2023]
    Publisher:  Bank of Canada, [Ottawa]

    We introduce generalized autoregressive gamma (GARG) processes, a class of autoregressive and moving-average processes that extends the class of existing autoregressive gamma (ARG) processes in one important dimension: each conditional moment dynamic... more

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    We introduce generalized autoregressive gamma (GARG) processes, a class of autoregressive and moving-average processes that extends the class of existing autoregressive gamma (ARG) processes in one important dimension: each conditional moment dynamic is driven by a different and identifiable moving average of the variable of interest. The paper provides ergodicity conditions for GARG processes and derives closed-form conditional and unconditional moments. The paper also presents estimation and inference methods, illustrated by an application to European option pricing where the daily realized variance follows a GARG dynamic. Our results show that using GARG processes reduces pricing errors by substantially more than using ARG processes does.

     
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    Edition: Last updated: August 2, 2023
    Series: Staff working paper / Bank of Canada ; 2023, 40
    Subjects: Econometric and statistical methods; Asset pricing
    Scope: 1 Online-Ressource (circa 80 Seiten), Illustrationen