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Credit Risk and Disaster Risk
Gourio, Francois - 2011
depression, this paper embeds a trade-off theory of capital structure into a real business cycle model with a small, time …
Persistent link: https://www.econbiz.de/10012461632
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The Network Origins of Large Economic Downturns
Acemoglu, Daron - 2013
This paper shows that large economic downturns may result from the propagation of microeconomic shocks over the input-output linkages across different firms or sectors within the economy. Building on the framework of Acemoglu et al. (2012), we argue that the economy's input-output structure can...
Persistent link: https://www.econbiz.de/10012459432
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Global Business Cycles and Credit Risk
Pesaran, M. Hashem - 2005
The potential for portfolio diversification is driven broadly by two characteristics: the degree to which systematic risk factors are correlated with each other and the degree of dependence individual firms have to the different types of risk factors. Using a global vector autoregressive...
Persistent link: https://www.econbiz.de/10012467187
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International Asset Allocation with Time-Varying Correlations
Ang, Andrew - 1999
It is widely believed that correlations between international equity markets tend to increase in highly volatile bear markets. This has led some to doubt the benefits of international diversification. This article solves the dynamic portfolio choice problem of a US investor faced with a...
Persistent link: https://www.econbiz.de/10012471745
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On Portfolio Optimization : Forecasting Covariances and Choosing the Risk Model
Chan, Louis K.C. - 1999
We evaluate the performance of different models for the covariance structure of stock returns, focusing on their use for optimal portfolio selection. Comparisons are based on forecasts of future covariances as well as the out-of-sample volatility of optimized portfolios from each model. A few...
Persistent link: https://www.econbiz.de/10012471761
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On the Correlation Structure of Microstructure Noise : A Financial Economic Approach
Diebold, Francis X. - 2010
volatility estimation. In particular, we use market microstructure theory to derive the cross-correlation function between latent … returns and market microstructure noise, which feature prominently in the recent volatility literature. The cross-correlation … geometrically. If market makers are sufficiently risk averse, however, the cross-correlation pattern is inverted. Our results are …
Persistent link: https://www.econbiz.de/10012462188
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Risk Reduction in Large Portfolios : Why Imposing the Wrong Constraints Helps
Jagannathan, Ravi - 2002
Mean-variance efficient portfolios constructed using sample moments often involve taking extreme long and short positions. Hence practitioners often impose portfolio weight constraints when constructing efficient portfolios. Green and Hollifield (1992) argue that the presence of a single...
Persistent link: https://www.econbiz.de/10012469792
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The Cross-Section of Risk and Return
Daniel, Kent - 2017
In the finance literature, a common practice is to create factor-portfolios by sorting on characteristics (such as book-to-market, profitability or investment) associated with average returns. The goal of this exercise is to create a parsimonious set of factor-portfolios that explain the...
Persistent link: https://www.econbiz.de/10012453549
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Cyclical Lending Standards : A Structural Analysis
Chen, Kaiji - 2020
Lending standards are a direct measure of credit conditions. We use the micro data merged from three separate sources to construct this measure and document that an uncertain macroeconomic outlook, rather than banks' balance sheet positions, was an important reason that a majority of banks...
Persistent link: https://www.econbiz.de/10012481797
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Macroeconomic Conditions and the Puzzles of Credit Spreads and Capital Structure
Chen, Hui - 2010
I build a dynamic capital structure model that demonstrates how business-cycle variations in expected growth rates, economic uncertainty, and risk premia influence firms' financing and default policies. Countercyclical fluctuations in risk prices, default probabilities, and default losses arise...
Persistent link: https://www.econbiz.de/10012462506