Despite the benefits of international diversification investors continue to display a preference for home based investments. Given this preference we investigate whether it is possible to mimic the benefits of international diversification via domestically traded products. We test this from the...

This paper studies common factor structure of bond returns from the US, UK and Germany. We estimate factors using both principal components analysis and common principal components analysis (CPCA), and construct factor mimicking portfolios to provide interpretations for some of these factors. A...

This study addresses the impact of equity market liquidity on Canadian economic growth and investigates how consumer attitudes/sentiments affect the dynamic macro-liquidity relationship. Using various market liquidity proxies (e.g., illiquidity ratio and open interest of equity futures) while...

Based on a panel data analysis of 164 countries from 1996 to 2006, we examine the impact of institutional quality on foreign direct investment (FDI) levels and volatility. We find that good institutional quality matters to FDI. We provide evidence that institutional quality has a positive and...

Corporate leverage among emerging market firms went up considerably after the 2007–09 Global Financial Crisis (GFC). We investigate how the increased emerging market corporate leverage in the post-GFC period (2010–15)impacted the underlying credit risk, compared to the pre-GFC (2002–2006)...

To estimate foreign exchange (FX) cash flow exposure, one may choose between direct and indirect regression approaches, where the direct approach uses accounting-based cash flow data and the indirect approach uses equity returns as a cash flow proxy. The indirect approach typically includes one...

In this paper, we investigate the relationship between balance sheet size and leverage (i.e., leverage pro-cyclicality) and the pro-cyclicality of systemic risk using three systemic risk measures such as DCoVaR (Adrian & Brunnermeier, 2016), MES (Acharya et al., 2017), SRISK (Brownlees & Engle,...

This paper examines the interaction between the equity index option market and sovereign credit ratings. S&P and Moody's signals exhibit strong impact on option-implied volatility while Fitch's influence is less significant. Moody's downgrades reduce the market uncertainty over the rated...

I consider extreme returns for the stock and bond markets of 14 EU countries using two classification schemes: One, the univariate classification scheme from the previous literature that classifies extreme returns for each market separately, and two, a novel multivariate classification scheme...

We develop a framework that allows a multivariate system of long memory processes to be conditional on specific regimes to investigate the effects of credit rating agencies' (CRAs) sovereign credit re-ratings on European stock and currency return distributions over the period from 1996 to 2012....