Firm Financing over the Business Cycle Begenau, Juliane; Salomao, Juliana
The Review of financial studies,
04/2019, Letnik:
32, Številka:
4
Journal Article
Recenzirano
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Data from U.S. public firms show that in booms large firms finance with debt and payout equity, whereas small firms issue both equity and debt. Therefore, large firms generally substitute between ...debt and equity financing over the business cycle, whereas small firms adhere to a procyclical financing policy for debt and equity. We explain these cyclical financing patterns quantitatively using a heterogeneous firm model with endogenous firm dynamics. We find that cross-sectional differences in investment returns and, therefore, funding needs and exposures to financial frictions are essential to understanding how firms’ financing policies respond to macroeconomic shocks.
Active Fundamental Performance Jiang, Hao; Zheng, Lu
The Review of financial studies,
12/2018, Letnik:
31, Številka:
12
Journal Article
Recenzirano
We propose a new measure, active fundamental performance (AFP), to identify skilled mutual fund managers. AFP evaluates fund investment skills conditioned on the release of firms’ fundamental ...information. For each fund, we examine the covariance between deviations of its portfolio weights from a benchmark portfolio and the underlying stock performance on days when firms publicize fundamental information. Because asset prices on these information days better reflect firm fundamentals, AFP can more effectively identify investment skills. From 1984 to 2014, funds in the top decile of high AFP subsequently outperformed those in the bottom decile by 2% to 3% per year.
This study provides novel evidence on trends in job stability in the United Kingdom and Germany, two capitalist economies with distinct sets of institutions and labour market reform trajectories. ...While we find evidence of an increase in short‐term jobs for men in both countries, we also find important differences in the overall patterns of change in the distribution of job tenure duration. The United Kingdom follows a masked instability pattern with opposite job stability trends for men and women. On the other hand, we find evidence of a polarization of the job tenure distribution among men and women in Germany. These findings are partly consistent with expectations from the dualization literature, emphasizing a growing segmentation of the labour market between insiders and outsiders. More generally, this study highlights the existence of multiple paths towards increased job instability that appear to be rooted in institutional differences.
This paper examines the role of investor overconfidence and self-attribution bias in explaining the momentum effect. We develop a novel measure of overconfidence based on characteristics and trading ...patterns of US equity mutual fund managers. Stocks held by more overconfident managers experience greater momentum profits and stronger return reversals than stocks held by less overconfident managers. The difference in momentum profits is not compensation for risk nor is it attributable to stock characteristics that influence momentum. Our results are consistent with Daniel, Hirshleifer, and Subrahmanyam (1998) who argue that momentum results from delayed overreaction caused by overconfidence and biased self-attribution.
We examine the effect of the EITC on the poverty and income of single mothers with children using a quasi-experimental approach that leverages variation in generosity due to policy expansions across ...tax years and family sizes. We find that the income increasing effects of the EITC are concentrated between 75 and 150 percent of income-to-poverty with little effect at the lowest income levels and at levels of 250 percent of poverty and higher. We use these results to show that by failing to capture the indirect effects of the credit on earnings, static calculations of the antipoverty effects of the EITC may be underestimated by almost 50 percent.
It is useful to reflect on how the financial environment changed between the credit crunch episode of the early 1990s and the recent financial crisis. What did we learn from the earlier crisis, and ...how did the credit crunch literature help guide policy in the more recent crisis? Two important changes were the consolidation of the banking sector and the dramatic growth in nonbank financial intermediaries, which are much more susceptible than banks to liquidity risks because of a lack of deposit insurance. This article highlights that, although security broker-dealers, money market mutual funds, and issuers of asset-backed securities were not particularly important in the early 1990s, when the bank credit crunch occurred, they grew dramatically to become both major sources of financing and key elements in exacerbating the problems experienced during the recent financial crisis.
When the Federal Open Market Committee (FOMC) communicates the expected future path of monetary policy to the public, it often outlines how economic conditions affect the stance of policy. In this ...way, the FOMC implicitly communicates a policy rule that guides its decisions. Professional forecasters, in turn, attempt to identify this implicit monetary policy rule as they set their forecasts for the short-term interest rate.
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