Research Outputs

Permanent URI for this communityhttps://hdl.handle.net/20.500.14288/2

Browse

Filters

Advanced Search

Filter by

Settings

Department: search.filters.department.Department of EconomicsSubject: search.filters.subject.Finance

Search Results

Now showing 1 - 10 of 30
  • Placeholder
    PublicationMetadata only
    A dynamic asset pricing model with time-varying factor and idiosyncratic risk
    (Oxford University Press (OUP), 2009) Department of Economics; Department of Economics; Glabadanidis, Paskalis; Faculty Member; College of Administrative Sciences and Economics; N/A
    This paper uses a multivariate GaRCH model to account for time variation in factor loadings and idiosyncratic risk in improving the performance of the CaPM and the three-factor Fama-French model. I show how to incorporate time variation in betas and the second moments of the residuals in a very general way. Both the static and conditional CaPM substantially outperform the three-factor model in pricing industry portfolios. Using a dynamic CaPM model results in a 30% reduction in the average absolute pricing error of size/book-to-market portfolios. ad hoc analysis shows that the market beta of a value-minus-growth portfolio decreases whenever the default premium increases as well as during economic recessions.
  • Placeholder
    PublicationMetadata only
    A note on the valuation of compound options
    (John Wiley & Sons Inc, 2002) N/A; Department of Economics; Department of Economics; Lajeri-Chaherli, Fatma; Faculty Member; College of Administrative Sciences and Economics; N/A
    The value of a compound option, an option on an option, has been derived by Geske (1976) using Fourier integrals. This article presents two alternative proofs to derive the value of a compound option. One proof is based on the martingale approach, which provides a simple and powerful tool for valuing contingent claims, The second proof uses the expectation of a truncated bivariate normal variable. These proofs allow for an intuitive interpretation of the three elements constituting the value of a compound option.
  • Placeholder
    PublicationMetadata only
    Aggregate earnings, firm-level earnings, and expected stock returns
    (Cambridge Univ Press, 2008) Tehranian, Hassan; Demirtaş Özgür; Department of Economics; Department of Economics; Bali, Turan; Other; College of Administrative Sciences and Economics; N/A
    This paper provides an analysis of the predictability of stock returns using market-, industry-, and firm-level earnings. Contrary to Lamont (1998), we find that neither dividend payout ratio nor the level of aggregate earnings can forecast the excess market return. We show that these variables do not have robust predictive power across different stock portfolios and sample periods. In contrast to the aggregate-level findings, earnings yield has significant explanatory power for the time-series and cross-sectional variation in firm-level stock returns and the 48 industry portfolio returns. The mean reversion of stock prices as well as the earnings' correlation with expected stock returns are responsible for the forecasting power of earnings yield. These results are robust after controlling for book-to-market, size, price momentum, and post-earnings announcement drift. At the aggregate level, the information content of firm-level earnings about future cash flows is diversified away and higher aggregate earnings do not forecast higher returns.
  • Placeholder
    PublicationMetadata only
    Analyzing federal reserve asset purchases: from whom does the Fed buy?
    (Elsevier Science Bv, 2015) Carpenter, Seth; Ihrig, Jane; Klee, Elizabeth; Department of Economics; Department of Economics; Demiralp, Selva; Faculty Member; College of Administrative Sciences and Economics; 42533
    Asset purchases have become an important monetary policy tool of the Federal Reserve in recent years. To date, most studies of the Federal Reserve's asset purchases have tried to measure the interest rate effects of the purchases, and several provide evidence that these purchases do have important effects on longer-term market interest rates. The theory of how asset purchases work, however, is less well developed. Some of the empirical studies point to "preferred habitat" models in which investors do not have the same objectives, and therefore prefer to hold different types and maturities of securities. To study this more closely, we exploit Flow of Funds data to assess the types of investors that are selling to the Federal Reserve and their portfolio adjustment after these sales, which could provide a view to the plausibility of preferred habitat models and the transmission of unconventional monetary policy across asset markets. We find that the Federal Reserve is ultimately buying from only a handful of investor types, primarily households (which includes hedge funds), with a different reaction to changes in Federal Reserve holdings of longer-term versus shorter-term assets. Although not evident for all investors, the key participants are shown to rebalance their portfolios toward more risky assets during this period. These results can be interpreted as supporting, at least in part, the preferred habit theory and the view that the monetary policy transmission is working across asset markets.
  • Placeholder
    PublicationMetadata only
    Discount window borrowing after 2003: the explicit reduction in implicit costs
    (Elsevier Science Bv, 2010) Department of Economics; Department of Economics; Department of Economics; Artuç, Erhan; Demiralp, Selva; Faculty Member; Faculty Member; College of Administrative Sciences and Economics; College of Administrative Sciences and Economics; N/A; 42533
    In 2003, the Federal Reserve introduced primary credit as its main discount window lending program. This program replaced the adjustment credit program, which, subject to a number of restrictions, had generated a stigma associated with borrowing from the Federal Reserve. Lessening the stigma of borrowing was viewed as essential for reducing the reluctance to borrow from the Federal Reserve. We develop a structural model of daily borrowing. Using this model, we estimate the implicit cost associated with borrowing. Our results suggest that the stigma of borrowing is significantly reduced. (C) 2009 Elsevier B.V. All rights reserved.
  • Placeholder
    PublicationMetadata only
    Financial crisis wealth losses and responses among older households in England
    (Wiley-Blackwell, 2013) Banks, James; Crawford, Rowena; Emmerson, Carl; Department of Economics; Department of Economics; Crossley, Thomas Fraser; Faculty Member; College of Administrative Sciences and Economics; N/A
    Prices of real and financial assets fell substantially in the UK during 2008-09. The fourth wave of the English Longitudinal Study of Ageing (ELSA) was in the field throughout this financial crisis'. We use these data, and earlier ELSA waves, to document the effect of the crisis on those aged 50 and over in England, importantly taking into account that a significant proportion of the wealth of these households is held in forms such as state pensions that will not be directly affected by movements in asset prices. We find that the median fall in wealth among individuals was 8 per cent of total household gross wealth with, on average, richer individuals having experienced a larger decline. We find some evidence that those who experienced greater wealth shocks were more likely to reduce their expected chance of leaving a large bequest and to reduce their spending on certain semi-luxury' items such as clothing and food consumed out of the home.
  • Placeholder
    PublicationMetadata only
    Household consumption through recent recessions
    (Wiley, 2013) Low, Hamish; O'Dea, Cormac; Department of Economics; Department of Economics; Crossley, Thomas Fraser; Faculty Member; College of Administrative Sciences and Economics; N/A
    This paper examines trends in household consumption and saving behaviour in each of the last three recessions in the UK. The Great Recession' has been different from those that occurred in the 1980s and 1990s. It has been both deeper and longer, but also the composition of the cutbacks in consumption expenditures differs, with a greater reliance on cuts to nondurable expenditure than was seen in previous recessions, and the distributional pattern across individuals differs. The young have cut back expenditure more than the old, as have mortgage holders compared with renters. By contrast, the impact of the recession has been similar across education groups. We present evidence that suggests that two aspects of fiscal policy in the UK in 2008 and 2009 - the temporary reduction in the rate of VAT and a car scrappage scheme - had some success in encouraging households to increase durable purchases.
  • Placeholder
    PublicationMetadata only
    How connected is the global sovereign credit risk network?
    (Elsevier, 2020) Bostanci, Gorkem; Department of Economics; Department of Economics; Yılmaz, Kamil; Faculty Member; College of Administrative Sciences and Economics; 6111
    This paper estimates the global network structure of sovereign credit risk by applying the Diebold-Yilmaz connectedness methodology on sovereign credit default swaps (SCDSs). The level of credit risk connectedness among sovereigns, which is quite high, is comparable to the connectedness among stock markets and foreign exchange markets. In the aftermath of the recent financial crises that originated in developed countries, emerging market countries have played a crucial role in the transmission of sovereign credit risk, while developed countries and debt-ridden developing countries have played marginal roles. Secondary regressions show that both trade and capital flows are important determinants of pairwise connectedness across countries. The capital flows became increasingly important after 2013, while the effect of trade flows decreased during the crisis and did not recover afterwards.
  • Placeholder
    PublicationMetadata only
    Human capital and sorting models reconsidered
    (Bilgesel Yayincilik San and Tic Ltd, 2010) Department of Economics; Department of Economics; Yüret, Tolga; Teaching Faculty; College of Administrative Sciences and Economics; N/A
    Turkey changed its compulsory attendance law in the 1997-1998 academic year the requirement increased from five to eight years of primary education. after the law change, there is an abrupt increase in the high school enrollment rate. This is despite the fact that the law does not cover high school education. By using the 2003 household budget survey and differences in differences methodology we find that a typical student is 3.2 percent more likely to have high school education if he is subject to the new law Moreover the largest increase in the likelihood of having high school education is attained by the students who have the weakest socioeconomic background. these findings are consistent with the standard sorting model but contrast the standard human capital model. / Türkiye 1997-1998 akademik yılında ilkokul/ilköğretime devam zorunluluğunu değiştirmiştir. Daha önce beş sene olan bu zorunluluk kanunla sekiz seneye çıkartılmıştır. Kanun değişikliğinden sonra liseye devam etme oranında da ciddi bir artış meydana gelmiştir. Kanun değişikliği lise eğitimini kapsamadığından bu değişim şaşırtıcıdır. Biz 2003 hanehalkı bütçe anketini ve değişim içinde değişimi bulan ekonometri yöntemini kullanarak bu artışın ne kadarının kanun yüzünden olduğunu bulmaya çalıştık. Bulgularımıza göre, yeni kanuna tabi olanların liseye gitme oranı eski kanuna tabi olanlardan yüzde 3,2 oranında fazladır. Ayrıca, liseye gitme oranını en fazla geliştirenlerin en zayıf sosyo-ekonomiye sahip anne-babaların çocukları olduğunu bulduk. Bu bulgularımız sıralama teorisine uymakla beraber standart beşeri kapital modeliyle bir tezat oluşturmaktadır.
  • Placeholder
    PublicationMetadata only
    Imported machinery for export competitiveness
    (Oxford University Press (OUP), 2002) Mody, Ashoka; Department of Economics; Department of Economics; Yılmaz, Kamil; Faculty Member; College of Administrative Sciences and Economics; 6111
    This article analyzes the relationship between export competitiveness and investment in machinery, allowing for imperfect substitution between domestically produced and imported machinery. A translog export price function is estimated for developed, exportoriented developing, and import-substituting developing economies in a panel data setting. Between 1967 and 1990 imported machinery helped lower export prices for export-oriented developing economies. Moreover, throughout the period imported machinery was not a substitute for domestic machinery. Import-substituting developing economies were unable to harness imported machinery to reduce costs early in the period, but from about the early 1980s, with the opening of their trade regimes, they were able to benefit from the cost-reducing effect. The results imply that innovative effort based on imported technologies can be a precursor to the development of domestic innovation capabilities.