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Is local bias a cross-border phenomenon? Evidence from individual investors' international asset allocation

Baltzer, Markus; Stolper, Oscar; Walter, Andreas - Deutsche Bundesbank - 2013

Extant literature consistently documents that investors tilt their domestic equity portfolios towards regionally close stocks (local bias). We hypothesize that individual investors' local bias is not limited to the domestic sphere but instead also determines their international investment...

Persistent link: https://www.econbiz.de/10010957145

Equity returns in the banking sector in the wake of the great recession and the European sovereign debt crisis

Chan-Lau, Jorge A.; Liu, Estelle X.; Schmittmann, Jochen M. - Deutsche Bundesbank - 2013

This study finds that equity returns in the banking sector in the wake of the Great Recession and the European sovereign debt crisis have been driven mainly by weak growth prospects and heightened sovereign risk and to a lesser extent, by deteriorating funding conditions and investor sentiment....

Persistent link: https://www.econbiz.de/10010957160

Home-field advantage or a matter of ambiguity aversion? Local bias among German individual investors

Baltzer, Markus; Stolper, Oscar; Walter, Andreas - Deutsche Bundesbank - 2011

We analyze the effect of geographic proximity on individual investors' portfolio choice. Using a unique data set which covers the common stockholdings of private households at regional banks in Germany, we document strong and consistent overinvestment in geographically close companies. Our...

Persistent link: https://www.econbiz.de/10009372151

International banking and liquidity risk transmission: Lessons from across countries

Buch, Claudia M.; Goldberg, Linda - Deutsche Bundesbank - 2014

financial crisis. Yet, we know little about the actual magnitudes and mechanisms for transmission of liquidity shocks through … studies conducted in 11 countries to explore liquidity risk transmission. Among the main results is, first, that explanatory … power of the empirical model is higher for domestic lending than for international lending. Second, how liquidity risk …

Persistent link: https://www.econbiz.de/10010957099

Early warning indicators for the German banking system: A macroprudential analysis

Jahn, Nadya; Kick, Thomas - Deutsche Bundesbank - 2012

Over the past two decades, Germany experienced several periods of banking system instability rather than full-blown banking system crises. In this paper we introduce a continuous and forward-looking stability indicator for the banking system based on information on all financial institutions in...

Persistent link: https://www.econbiz.de/10010957094

Measuring option implied degree of distress in the US financial sector using the entropy principle

Matros, Philipp; Vilsmeier, Johannes - Deutsche Bundesbank - 2012

We estimate time series of option implied Probabilities of Default (PoDs) for 19 major US financial institutions from 2002 to 2012. These PoDs are estimated as mass points of entropy based risk neutral densities and subsequently corrected for maturity dependence. The obtained time series are...

Persistent link: https://www.econbiz.de/10010957111

Restructuring counterparty credit risk

Albanese, Claudio; Brigo, Damiano; Oertel, Frank - Deutsche Bundesbank - 2013

We introduce an innovative theoretical framework for the valuation and replication of derivative transactions between defaultable entities based on the principle of arbitrage freedom. Our framework extends the traditional formulations based on credit and debit valuation adjustments (CVA and...

Persistent link: https://www.econbiz.de/10010957120

The multivariate option iPoD framework: assessing systemic financial risk

Matros, Philipp; Vilsmeier, Johannes - Deutsche Bundesbank - 2014

We derive multivariate risk-neutral asset distributions for major US financial institutions (FIs) using option implied marginal risk-neutral asset distributions (RNDs) and probabilities of default (PoDs). The multivariate densities are estimated by combining the entropy approach, dynamic copulas...

Persistent link: https://www.econbiz.de/10010957132

A single composite financial stress indicator and its real impact in the euro area

Islami, Mevlud; Kurz-Kim, Jeong-Ryeol - Deutsche Bundesbank - 2013

the real economy in the euro area. Our FSI was shown to perform better than the Euro STOXX 50 volatility index for the …

Persistent link: https://www.econbiz.de/10010957158

Financial frictions and global spillovers

Metiu, Norbert; Hilberg, Björn; Grill, Michael - Deutsche Bundesbank - 2015

We investigate whether frictions in US financial markets amplify the international propagation of US financial shocks. The dynamics of the US economy is modeled jointly with global macroeconomic and financial variables using a threshold vector autoregression that allows us to capture...

Persistent link: https://www.econbiz.de/10011212003