This study investigates the use of HMDA data for CRA-rated (Community Reinvestment Act) banks to study possible bank loan discrimination against minorities from 2007 to 2016. We examine banks rated ...Outstanding for compliance with the CRA, which means that regulators believe that these banks are doing an outstanding job at serving low- and moderate-income neighborhoods. We expect that CRA Outstanding rated banks are unlikely to commit taste-based discrimination. We find that these banks have statistical discrimination in loan approvals for Asian, Black, Hispanic, and women borrowers. We also find that these banks have statistical discrimination against white males
without
co-applicants relative to the omitted group of white males
with
co-applicants. This result is inconsistent with taste-based discrimination. We conclude that either the models or the HMDA data are ill-suited for studying lending discrimination.
We are the first to examine how intraday changes in retail investor attention, measured by hourly Google searches, affect trading activity and informativeness of trades. High levels of Google search ...activity are followed in the next hour by more intensive trading in all stocks. The increased trading activity is initiated by retail investors as evidenced by the reduced size of new orders. After googling a company, retail investors do not become informed in the traditional sense; rather, they act as noise traders, who mistake noise for information, as their orders are picked off by truly informed traders.
The search for a new reference rate Baig, Ahmed; Winters, Drew B.
Review of quantitative finance and accounting,
04/2022, Letnik:
58, Številka:
3
Journal Article
Recenzirano
The LIBOR manipulation scandal of 2008 spurred extensive policy debates regarding the importance of market-based reference rates. The alternative reference rates committee (ARRC) eventually ...identified the secured overnight financing rate (SOFR) to be a suitable replacement to LIBOR. In this study, we question the underlying process behind the choice of SOFR as a replacement for LIBOR. Both academic literature and regulatory bodies fail to identify a consistent definition and criteria of a good reference rate. We fill in this gap in the literature by providing an empirically testable ‘checklist’ to evaluate any potential money market rate to gauge its suitability as a reference rate. We also carry out an empirical evaluation of various money market rates against our criteria and identify the 1-month AA non-financial commercial paper rate as the best available replacement for LIBOR.
From the inception of money market funds (MMFs), all MMFs reported a fixed $1 NAV (Net Asset Value). In July 2014, the Securities and Exchange Commission (SEC) issued new regulations for MMFs that ...require Prime institutional MMFs to report floating NAVs. The SEC did not expect a significant impact on the MMF industry from requiring floating NAVs for Prime institutional funds. We find that over 70% of the assets under management in Prime MMFs left Prime funds with over half the Prime funds closing. We find that more than half of the Prime retail MMFs (which are not required to switch to floating NAV) closed with more than 50% of the assets under management exiting these funds. Finally, we find that for every dollar that exited Prime MMFs a dollar was added to Government MMFs. Based on the SEC's economic discussions, these results all represent unexpected consequences.
We examine whether impending government shutdowns affect money market fund (MMF) investors and managers. Research suggests that market participants place increased risk on US Treasury Bills around ...government shutdown periods. There are three sets of decision makers in our sample: retail MMF investors, institutional MMF investors, and MMF investment managers. We ask the question; as the country moves toward a federal government shutdown do investors exit MMFs and do MMF managers shorten their maturities? In general, we find that fund managers did little to respond to government shutdowns. Institutional investors withdrew funds from MMFs (both Government and Prime). Retail investors moved funds into MMFs and moved into both Prime and Government funds.
Using an analysis of the two leading digits based on Benford’s Law, we analyze rounding patterns in loan loss allowances (LLAs) for a bank sample based on good and bad times, net income, ...profitability, bank size, regulatory level, and whether the banks are private or public. We find clear evidence of upward rounding during good times. Banks that are smaller, private, and subject to more lenient regulatory and supervisory levels also tend to round LLAs upward more than their larger, public, and more heavily regulated counterparts. The results are consistent with previous studies supporting non-opportunistic incentives (including signaling, reducing pro-cyclicality, and pursuing prudence and efficiency) under which bank managers increase the LLA. In addition to shedding more light on the ongoing debate about the management of provisioning for loan losses, we present an argument for why the rounding mechanism in LLAs is a rational consequence of U.S. commercial banks being subjected to opposing regulatory forces coming from bank regulators and securities regulators.
•Benford’s Law is a method to determine if leading digits in financial statements have been manipulated.•We use Benford’s Law to examine bank loan loss allowances for management manipulation.•Banks that are smaller, private, and subject to more lenient regulation round LLAs upward more than their counterparts.•Our results are consistent with prudent management of loan loss allowances.
•A year-end preferred habitat for liquidity exists across private-issue money market securities during the 1980s.•We examine year-ends in repo rates to determine if the preferred habitat is still ...present.•Repos were at the center of the financial crisis, so the behavior of year-end rates during and following the crisis are in question.•During the crisis, we find no evidence of the year-end preferred habitat in short-term repo rates.•Following the crisis, short-term interest rates were historically low. We find the reappearance of the preferred habitat post crisis.
The money market rates in the United States have exhibited a year-end effect consistent with the preferred habitat for liquidity. We revisit the year-end preferred habitat for liquidity using data on government general collateral repurchase agreements (GC Repos). We find no evidence to suggest a year-end effect during the financial crisis. The result is consistent with liquidity hoarding by investors during a crisis characterized by liquidity and solvency issues. Additionally, our findings suggest that investors manage their year-end liquidity following the crisis even when interest rates are historically low.
We examine how community banks respond to liquidity shocks created by natural disasters. We address community banks’ responses to liquidity shocks due to their focused geographic and economic ...presence, which coincide with their communities’ exposure to the disasters and the ability of the local banks to meet their needs. We find that community banks respond to liquidity shocks by managing their balance sheet, rather than any single balance sheet account. In particular, we find that they respond to the liquidity needs of their communities by increasing loans as deposits are withdrawn.
Audits provide monitoring for investors. The collapse of markets across the financial crisis made assets more difficult to value, which increased risk for auditors. The money markets were at the ...center of the financial crisis increasing audit engagement risk on money market funds, which at the time of the crisis were highly opaque. Measuring the response to increased engagement risk with audit fees, this study finds that auditors increase their fees for the riskiest class of funds. However, no evidence was found that audit fees increased as funds increased their holdings in the riskiest class of securities.
Market makers located in geographic proximity (local) to companies possess a local information advantage that comes from access to soft information. We study whether a nonlocal trader can capture the ...local information advantage and profit without relocating. We develop a trading strategy for the nonlocal trader that generates “buy” and “sell” signals for stocks based on quotes of local market makers. Our findings suggest it is possible, albeit difficult, for nonlocal traders to extract local information from local market makers’ quotes. Using limit orders from buy signals, we generate up to 7.6 basis points of abnormal return per day.
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