The Myth of the Credit Spread Puzzle Feldhütter, Peter; Schaefer, Stephen M.
The Review of financial studies,
08/2018, Letnik:
31, Številka:
8
Journal Article
Recenzirano
Odprti dostop
Are standard structural models able to explain credit spreads on corporate bonds? In contrast to much of the literature, we find that the Black-Cox model matches the level of investment-grade spreads ...well. Model spreads for speculative-grade debt are too low, and we find that bond illiquidity contributes to this underpricing. Our analysis makes use of a new approach for calibrating the model to historical default rates that leads to more precise estimates of investment-grade default probabilities.
We nonparametrically estimate spillovers of properties financed by the Low Income Housing Tax Credit (LIHTC) onto neighborhood residents by developing a new difference-in-differences style estimator. ...LIHTC development revitalizes low-income neighborhoods, increasing house prices 6.5 percent, lowering crime rates, and attracting racially and income diverse populations. LIHTC development in higher-income areas causes house price declines of 2.5 percent and attracts lower-income households. Linking these price effects to a hedonic model of preferences, LIHTC developments in low-income areas cause aggregate welfare benefits of $116 million. Affordable housing development acts like a place-based policy and can revitalize low-income communities.
Employment and hours are more cyclical than dictated by productivity and consumption. This intratemporal labor wedge can arise from product or labor market distortions. Based on employee wages, the ...literature has attributed the intratemporal wedge almost entirely to labor market distortions. Because wages may be smoothed versions of labor’s true cyclical price, we instead examine the self-employed and intermediate inputs, respectively. For recent decades in the United States, we find price markup movements are at least as cyclical as wage markup movements. Thus, countercyclical price markups deserve a central place in business-cycle research, alongside sticky wages and matching frictions.
Priority Spreading of Corporate Debt Badoer, Dominique C.; Dudley, Evan; James, Christopher M.
The Review of financial studies,
01/2020, Letnik:
33, Številka:
1
Journal Article
Recenzirano
Priority spreading refers to the practice of firms increasing their reliance on secured and subordinated debt and reducing their reliance on senior debt as their credit quality deteriorates. We argue ...that priority spreading occurs because security provides creditors with greater protection from dilution from other creditors than do covenants that prioritize payments. Consistent with this argument, we find that secured bank creditors are rarely diluted by junior creditors in distressed restructurings, whereas senior unsecured creditors are frequently diluted, exogenous increases in asset volatility result in greater priority spreading and yields on senior and subordinated bonds converge as asset volatility increases.
We study the impact of school smoking bans on individual health behavior in Germany. Using a multiple difference-in-differences approach in combination with randomization inference, we find that for ...individuals affected by a smoking ban during their school time, the propensity toward smoking declines by 14–22 percent, while the number of smoked cigarettes per day decreases by 19–25 percent. After elaborating on treatment effect heterogeneity and intensity, we evaluate spillovers to smoking behavior of nontreated individuals living in the same household.
This article provides a detailed chronological account of the extent of overall change in women's representation in UK unions' structures of democracy and in unions' adoption of gender equality (GE) ...strategies over a 25‐year period (1987–2012). The findings reveal huge progress towards gender proportionality and towards getting women's concerns on the union agenda. The evidence strongly suggests that at least in part this progress can be attributed to the wide range of GE strategies increasingly adopted over the period. However, the article exposes persistent gaps and warns against regarding the union gender democracy project as finished business.
This paper studies the demand for and supply of residential housing in urban China since the late 1980s when the urban housing market became commercialized. Using aggregated annual data from 1987 to ...2012 in a simultaneous equations framework we show that the rapid increase in the urban residential housing price can be well explained by the forces of demand and supply, with income determining demand and cost of construction affecting supply. We find the income elasticity of demand for urban housing to be approximately 1, the price elasticity of demand to be approximately −1.1 and the price elasticity of supply of the total housing stock to be approximately 0.5. The resulting long‐run effect of income on urban housing prices in elasticity terms is approximately 0.7, because the increase in income has shifted the demand curve outward more rapidly than the supply curve.
Index Option Returns: Still Puzzling Chambers, Donald R.; Foy, Matthew; Liebner, Jeffrey ...
The Review of financial studies,
06/2014, Letnik:
27, Številka:
6
Journal Article
Recenzirano
Previous research indicates mixed conclusions on the potential mispricing of equity index put options. We examine the returns of put writing and other option strategies by comparing historical option ...returns with returns generated using option pricing models. We find it is generally possible to reject the hypothesis that put returns are consistent with option pricing models. An implication is that the average cost of buying out-of-the-money put options to provide tail-risk protection to a portfolio may include a significant premium. Our results are based on a sample period of 1987–2012 that includes periods of high volatility in equity returns.
This paper estimates the magnitude of participation costs and preference parameters exploiting information on households’ participation decisions in the equities market. A structural model for ...portfolio choices over the life cycle is solved numerically. The parameters of interest are estimated using an Indirect Inference approach which makes use of the computed participation gains/losses. Participation costs are found to be significant, education and lagged participation being the major sources of heterogeneity. Also, the least educated are the least risk averse, and the positive effect of risk aversion on wealth accumulation dominates its negative influence on the risky asset demand.
In this article, a survey is provided of the privatisation of government‐owned enterprises in Australia since the 1980s. In particular, the article evaluates the evidence that has been compiled on ...the success or failure of privatisation in enhancing efficiency in various industry sectors. In terms of efficiency improvements, some privatisations have been a clear success. In other cases, however, most of the improvements in efficiency took place after corporatisation, rather than following privatisation. In most cases, improvements in efficiency were also probably due in varying (and sometimes substantial) parts to regulatory reform, increases in competition and technological change.
PDF
