We present an economic model of systemic risk in which undercapitalization the financial sector as a whole is assumed to harm real economy, leading externality. Each institution’s contribution can be measured its expected shortfall (SES), that is, propensity undercapitalized when system undercapitalized. SES increases leverage and marginal (MES), losses tail system’s loss distribution. demonstrate empirically ability components predict emerging during crisis 2007–2009.

The financial crisis of 2007-2009 has given way to the sovereign debt 2010-2012, yet many banking issues remain same. We discuss a method estimate capital that firm would need raise if we have another crisis. This measure shortfall is based on publicly available information but conceptually similar stress tests conducted by US and European regulators. argue this summarizes major characteristics systemic risk provides reliable interpretation past current crises.

Journal Article Why Do Security Prices Change? A Transaction-Level Analysis of NYSE Stocks Get access Ananth Madhavan, Madhavan University Southern California Address correspondence to Marshall School Business, California, Los Angeles, CA 90089-1421. Search for other works by this author on: Oxford Academic Google Scholar Matthew Richardson, Richardson New York and NBER Mark Roomans JP Morgan Investment Management Inc. The Review Financial Studies, Volume 10, Issue 4, October 1997, Pages...

Abstract This paper explores a model based on agents with heterogenous beliefs facing short sales restrictions, and its explanation for the rise, persistence, eventual fall of Internet stock prices. First, we document substantial sale restrictions stocks. Second, using data holdings block trades, show link between heterogeneity price effects Third, arguing that lockup expirations are loosening constraint, average, long‐run excess returns as low −33 percent stocks postlockup. We bubble burst...

ABSTRACT We investigate the empirical implications of using various measures payout yield rather than dividend for asset pricing models. find statistically and economically significant predictability in time series when (dividends plus repurchases) net repurchases minus issuances) yields are used instead yield. Similarly, we that (net payout) contains information about cross section expected stock returns exceeding yields, high low portfolio is a priced factor.

ABSTRACT Why did the popping of housing bubble bring financial system—rather than just sector economy—to its knees? The answer lies in two methods by which banks had evaded regulatory capital requirements. First, they temporarily placed assets—such as securitized mortgages—in off‐balance‐sheet entities, so that not have to hold significant buffers against them. Second, regulations also allowed reduce amount held assets remained on their balance sheets—if those took form AAA‐rated tranches...

The prevailing view in finance is that the evidence for long-horizon stock return predictability significantly stronger than short horizons. We show persistent regressors, a characteristic of most predictive variables used literature, estimators are almost perfectly correlated across horizons under null hypothesis no predictability. For persistence levels dividend yields, analytical correlation 99% between 1- and 2-year horizon 94% 5-year Common sampling error equations leads to ordinary...

Journal Article A tale of three schools: insights on autocorrelations short-horizon stock returns Get access J Boudoukh, Boudoukh Search for other works by this author on: Oxford Academic Google Scholar MP Richardson, Richardson RE Whitelaw The Review Financial Studies, Volume 7, Issue 3, July 1994, Pages 539–573, https://doi.org/10.1093/rfs/7.3.539 Published: 01 1994

ABSTRACT This paper develops tests of unconditional mean‐variance efflciency under weak distributional assumptions using a Generalized Method Moments framework. These are potentially more robust than commonly employed which rely on the assumption that asset returns normally distributed and temporarily i.i.d. Using for size‐based portfolios from 1926 to 1988 we show conclusion concerning effilciency market indexes can be sensitive test considered.

Journal Article Tests of Financial Models in the Presence Overlapping Observations Get access Matthew Richardson, Richardson University Pennsylvania, Philadelphia, USA Search for other works by this author on: Oxford Academic Google Scholar Tom Smith Fuqua School Business, Duke University, Durham, NC 27706, The Review Studies, Volume 4, Issue 2, April 1991, Pages 227–254, https://doi.org/10.1093/rfs/4.2.227 Published: 05 May 2015

Viral marketing takes advantage of networks influence among customers to inexpensively achieve large changes in behavior. Our research seeks put it on a firmer footing by mining these from data, building probabilistic models them, and using choose the best viral plan. Knowledge-sharing sites, where review products advise each other, are fertile source for this type data mining. In paper we extend our previous techniques, achieving reduction computational cost, apply them knowledge-sharing...

Previous research has investigated the multivariate normality of stock returns using tests based on marginal distribution returns. Due to contemporaneous correlation across asset returns, these are difficult interpret. We develop a general test procedure that takes account assets and focuses both joint distributions find highly significant evidence market-model residuals nonnormal. Moreover, this nonnormality appears in

ABSTRACT We investigate the cross‐sectional relation between industry‐sorted stock returns and expected inflation, we find that this is linked to cyclical movements in industry output. Stock of noncyclical industries tend covary positively with while reverse holds for industries. From a theoretical perspective, describe model captures both (i) variation these relations across industries, (ii) negative positive inflation at short long horizons, respectively. The developed an economic...

Recent empirical work has uncovered U-shaped patterns of large magnitude in the serial-correlation estimates multiyear stock returns. The current literature finance taken this evidence to mean that there exists a temporary component prices. This article provides an alternative explanation regarding these findings. Specifically, we show and their observed previous studies should be expected under null hypothesis serial independence.

A basic tenet of financial economics is that asset prices change in response to unexpected fundamental information.Since Roll's (1988) provocative presidential address showed little relation between stock and news, however, the finance literature has had limited success reversing this finding.This paper revisits topic a novel way.Using advancements area textual analysis, we are better able identify relevant both by type tone.Once news correctly identified manner, there considerably more...

We present an economic model of systemic risk and show that each financial institution's contribution to can be measured as its expected shortfall (SES), i.e., propensity undercapitalized when the system a whole is undercapitalized. SES increases in leverage marginal (MES), losses tail system's loss distribution. Institutions internalize their externality if they are "taxed" based on SES. demonstrate empirically ability components predict emerging during crisis 2007-2009, particular, (i)...