Since the subprime crisis, securitization by financial institutions has been threatened, both in the U.S. and in Canada. In the U.S., private financial institutions have almost completely stopped their securitization activities. In Canada, the asset-backet commercial paper market is moribund and...

After reviewing some basic self-enforcing labour contracts models, we expose how self-enforcing labour market theory can help explain some important dynamic properties of key macroeconomic variables. Calmès (1999, 2003) detail how self-enforcing labour contracts improve the way macroeconomic...

Since financial institutions are subjected to increasingly tighter requirements regarding the way they conduct their loan business, we could assume that built-in regulatory pressures induce them to adopt collective business strategies, with the unintended consequence of persistently weakening...

Traditional leverage ratios assume that bank equity captures all changes in asset values. However, in the context of market-oriented banking, capital can be funded by additional debt or asset sales without directly influencing equity. Given the new sources of liquidity generated by...

Since the end of the nineties, Basle Committee has required that banks compute periodically their VaR and maintain sufficient capital to pay the eventual losses projected by VaR. Unfortunately, there is not only one measure of VaR because volatility, which is a fundamental component of VaR, is...

The Canadian banking system is considered one of the “best” in the world (Bordo et al., 2011). To examine this question we compare the risk-return trade-off of Canadian and U.S. banks in the context of market-based banking. We find that the sources of non-traditional income are actually more...

This paper investigates how banks, as a group, react to macroeconomic risk and uncertainty, and more specifically the way banks systemic risk evolves over the business cycle. Adopting the methodology of Beaudry et al. (2001), our results clearly suggest that the dispersion across banks...

According to the neoclassical theory of investment, if firms’ accruals are a form of short-term investment they should be greatly influenced by the shadow price of capital, namely Tobin’s q. In the presence of financial market imperfections, cash-flows should also impact accruals since they...

Data suggest a change in banks’ performance attributable to a greater involvement in non-traditional activities. Indeed, market-oriented banking increases banks’ accounting returns at the cost of a higher volatility in financial results. The motivation of this paper is to study how bank...

The popularity of Kalman filter is increasing in financial studies, notably to estimate diffusion processes. In this article, we show how we can use it to forecast the volatility of returns and the price-earnings ratio of the S&P500. The Kalman filter is consequently very versatile when...