We examine the pricing of financial crash insurance during the 2007-2009 financial crisis in US option markets, and we show that a large amount of aggregate tail risk is missing from the cost of ...financial sector crash insurance during the crisis. The difference in costs between out-of-the-money put options for individual banks and puts on the financial sector index increases four-fold from its precrisis 2003-2007 level. We provide evidence that a collective government guarantee for the financial sector lowers index put prices far more than those of individual banks and explains the increase in the basket-index put spread.
Our paper examines whether audit quality is higher for industry audit specialists at the national and cityoffice levels using the framework developed in Ferguson et al. 2003 and Francis et al. 2005. ...We find that auditors who are both national and city-specific industry specialists have clients with the lowest abnormal accruals, suggesting that joint national and city-specific industry specialists have the highest audit quality. In addition, we find some evidence that abnormal accruals of firms audited by city-industry specialists alone (without also being national specific industry specialists) are lower than those audited by nonindustry specialists. Using alternative measures of audit quality, we find that when the auditor is both a national and a city-specific industry specialist, its clients are less likely to meet or beat analysts' earnings forecasts by one penny per share and more likely to be issued a going-concern audit opinion. Together these results provide consistent evidence that audit quality is higher when the auditor is both a national and city-specific industry specialist, suggesting that auditors' national positive network synergies and the individual auditors' deep industry knowledge at the office level are jointly important factors in delivering higher audit quality.
We reevaluate the role of human capital in determining the wealth of nations. We use standard human capital theory to estimate stocks of human capital and allow the quality of human capital to vary ...across countries. Our model can explain differences in schooling and earnings profiles and, consequently, estimates of Mincerian rates of return across countries. We find that effective human capital per worker varies substantially across countries. Cross-country differences in Total Factor Productivity (TFP) are significantly smaller than found in previous studies. Our model implies that output per worker is highly responsive to changes in TFP and demographic variables.
Retail Short Selling and Stock Prices Kelley, Eric K.; Tetlock, Paul C.
The Review of financial studies,
03/2017, Volume:
30, Issue:
3
Journal Article
Peer reviewed
Open access
Using proprietary data on millions of trades by retail investors, we provide the first large-scale evidence that retail short selling predicts negative stock returns. A portfolio that mimics weekly ...retail shorting earns an annualized risk-adjusted return of 9%. The predictive ability of retail short selling lasts for one year and is not subsumed by institutional short selling. In contrast to institutional shorting, retail shorting best predicts returns in small stocks and those that are heavily bought by other retail investors. Our findings are consistent with retail short sellers having unique insights into the retail investor community and small firms' fundamentals.
This study considers the relationship between people's access to resources and their likelihood to start a new business, and particularly how this relationship might be moderated by formal and ...informal institutions. Individual–level resources might be more potent for new business creation in countries with financial and educational systems that are more oriented toward entrepreneurship, higher levels of trust, and cultures that are less hierarchical and conservative. The hypotheses are tested by undertaking random–effects multilevel analyses of a multi–source data set that spans a 5–year time period (2003–2007). The study's findings offer important implications for research and practice.
Abstract
We test for pricing disparities in mortgage contracts using a novel data set that allows us to observe the race and ethnicity of both parties to the loan. We find that minorities pay between ...3% and 5% more in fees than similarly qualified whites when obtaining a loan through the same white broker. Critically, we find that the premium paid by minorities depends on the race of the broker. We also examine recent policy changes around broker compensation rules that may not only reduce these price disparities but may also limit access to credit for minorities.
In China, urban land is allocated by leasehold sales by local officials. Attempting to end widespread corruption, the government now requires sales to be conducted publicly, by either English or ..."two-stage" auctions. However, corruption persists through the choice of auction format and preauction side deals between favored bidders and local officials. Two-stage auctions have a first stage where favored developers signal that auctions are "taken," deterring entry of other bidders. Empirics show that both sales prices and competition are significantly less for two-stage than English auctions. Selection on unobserved property characteristics is positive: officials divert hotter properties to two-stage auctions.
The Rise in Mortgage Defaults Mayer, Christopher; Pence, Karen; Sherlund, Shane M.
The Journal of economic perspectives,
2009, Volume:
23, Issue:
1
Journal Article
Peer reviewed
Open access
The first hints of trouble in the mortgage market surfaced in mid-2005, and conditions subsequently began to deteriorate rapidly. Mortgage defaults and delinquencies are particularly concentrated ...among borrowers whose mortgages are classified as “subprime” or “near-prime.” The main factors underlying the rise in mortgage defaults appear to be declines in house prices and deteriorated underwriting standards, in particular an increase in loan-to-value ratios and in the share of mortgages with little or no documentation of income. Contrary to popular perception, the growth in unconventional mortgages products, such as those with prepayment penalties, interest-only periods, and teaser interest rates, does not appear to be a significant factor in defaults through mid-2008 because borrowers who had problems with these products could refinance into different mortgages. However, as markets realized the extent of the poor underwriting, underwriting standards tightened and borrowers began to face difficulties refinancing; this dynamic suggests that these unconventional products could pose problems going forward.
Although the branding literature commenced during the 1940s, the first publications related to destination branding did not emerge until half a century later. A review of 74 destination branding ...publications by 102 authors from the first 10 years of destination branding literature (1998–2007) found at least nine potential research gaps warranting attention by researchers. In particular, there has been a lack of research examining the extent to which brand positioning campaigns have been successful in enhancing brand equity in the manner intended in the brand identity. The purpose of this paper is to report the results of an investigation of brand equity tracking for a competitive set of destinations in Queensland, Australia between 2003 and 2007. A hierarchy of consumer-based brand equity (CBBE) provided an effective means to monitor destination brand positions over time. A key implication of the results was the finding that there was no change in brand positions for any of the five destinations over the four year period. This leads to the proposition that destination position change within a competitive set will only occur slowly over a long period of time. The tabulation of 74 destination branding case studies, research papers, conceptual papers and web content analyses provides students and researchers with a useful resource on the current state of the field.
We use Spain’s Equality Law to test for the existence of agency problems between party leaders and their constituents. The law mandates a 40 percent female quota on electoral lists in towns with ...populations above 5,000. Using pre- and postquota data by party and municipality, we implement a triple-difference design. We find that female quotas resulted in slightly better electoral results for the parties that were most affected by the quota. Our evidence shows that party leaders were not maximizing electoral results prior to the quota, suggesting the existence of agency problems that hinder female representation in political institutions.
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