Articles scientifiques

Ambiguity Aversion and Household Choice Puzzles: Empirical Evidence

S. G. DIMMOCK, R. KOUWENBERG, O. S. MITCHELL, K. PEIJNENBURG

Journal of Financial Economics

mars 2016, vol. 119, pp.559-577

Départements : Finance, GREGHEC (CNRS)

Mots clés : Ambiguity aversion; Stock market participation; Household portfolio puzzles; Home-bias; Own-company stock puzzle; Portfolio under-diversification; Household finance; Financial literacy

http://www.sciencedirect.com/science/article/pii/S0304405X16000040?via%3Dihub


We test the relation between ambiguity aversion and five household portfolio choice puz- zles: nonparticipation in equities, low allocations to equity, home-bias, own-company stock ownership, and portfolio under-diversification. In a representative US household survey, we measure ambiguity preferences using custom-designed questions based on Ellsberg urns. As theory predicts, ambiguity aversion is negatively associated with stock market partic- ipation, the fraction of financial assets in stocks, and foreign stock ownership, but it is positively related to own-company stock ownership. Conditional on stock ownership, am- biguity aversion is related to portfolio under-diversification, and during the financial crisis, ambiguity-averse respondents were more likely to sell stocks

Debt decisions in deregulated industries

A. OVTCHINNIKOV

Journal of Corporate Finance: Contracting, Governance and Organization

février 2016, vol. 36, pp.230-254

Départements : Finance, GREGHEC (CNRS)

Mots clés : Debt decisions, Debt maturity, Public and private debt issues, Deregulation

http://dx.doi.org/10.2139/ssrn.2314302


Deregulation significantly affects firms’ debt decisions. Prior to deregulation, regulated firms depend more on long-term and public debt but reduce this dependence considerably during deregulation. Cross-sectional analysis shows that the lower use of long-term and public debt results from changing firm sensitivities to determinants of debt decisions triggered by deregulation. Consistent with credit and liquidity risk theories of debt maturity, the concave relation between firm quality and debt maturity is attenuated among regulated firms. Inconsistent with these theories, the convex relation between firm quality and public debt issues exists only among regulated firms. I find limited support for other theories

Fed Funds Futures Variance Futures

D. FILIPOVIC, A. TROLLE

Quantitative Finance

2016, vol. 16, n°9, pp.1413-1422

Départements : Finance

Mots clés : fed funds futures, Funding costs, Unsecured interbank money market

http://www.tandfonline.com/doi/full/10.1080/14697688.2016.1152391


We develop a novel contract design, the fed funds futures (FFF) variance futures, which reflects the expected realized basis point variance of an underlying FFF rate. The valuation of short-term FFF variance futures is completely model-independent in a general setting that includes the cases where the underlying FFF rate exhibits jumps and where the realized variance is computed by sampling the FFF rate discretely. The valuation of longer-term FFF variance futures is subject to an approximation error which we quantify and show is negligible. We also provide an illustrative example of the practical valuation and use of the FFF variance futures contract

Information asymmetry, the cost of debt, and credit events: Evidence from quasi-random analyst disappearances

F. DERRIEN, A. KECSKÉS, S. A. MANSI

Journal of Corporate Finance: Contracting, Governance and Organization

aout 2016, vol. 39, pp.295-311

Départements : Finance, GREGHEC (CNRS)

Mots clés : Information asymmetry, Cost of debt, Default, Bankruptcy, Natural experiment, Matching estimators, Difference-in-differences, Equity research analysts, Creditors

https://doi.org/10.1016/j.jcorpfin.2016.05.002


We hypothesize that greater information asymmetry causes greater losses to debtholders. To test this, we identify exogenous increases in information asymmetry using the loss of an analyst that results from broker closures and broker mergers. We find that the loss of an analyst causes the cost of debt to increase by 25 basis points for treatment firms compared to control firms, and the rate of credit events (e.g., defaults) is roughly 100–150% higher. These results are driven by firms that are more sensitive to changes in information (e.g., less analyst coverage). The evidence is broadly consistent with both financing and monitoring channels, although only a financing channel explains the impact of the loss of an analyst on firms' cost of debt

International Correlation Asymmetries: Frequent-but-Small and Infrequent-but-Large Equity Returns

B. SOLNIK, T. WATEWAI

Review of Asset Pricing Studies

décembre 2016, vol. 6, n°2, pp.221-260

Départements : Finance

Mots clés : G01 - Financial Crises G11 - Portfolio Choice; Investment Decisions G15 - International Financial Markets

https://academic.oup.com/raps/article/6/2/221/2526567/International-Correlation-Asymmetries-Frequent-but


We propose a novel regime-switching model to study correlation asymmetries in international equity markets. We decompose returns into frequent-but-small diffusion and infrequent-but-large jumps and derive an estimation method for many countries. We find that correlations due to jumps, not diffusion, markedly increase in bad markets, leading to correlation breaks during crises. Our model provides a better description of correlation asymmetries than do GARCH, copula, and stochastic volatility models. Good and bad regimes are persistent. Regime changes are detected rapidly, and risk diversification allocations are improved. Asset allocation results in- and out-of-sample are superior to other models, including the 1/N strategy


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