Hedge funds significantly reduced their equity holdings during the recent financial crisis. In 2008Q3-Q4, hedge funds sold about 29% of their aggregate portfolio. Redemptions and margin calls were the primary drivers of selloffs. Consistent with forced deleveraging, the selloffs took place in...

Large institutional investors own an increasing share of equity markets in the U.S. The implications of this development for financial markets are still unclear. The paper presents novel empirical evidence that ownership by large institutions predicts higher volatility and greater noise in stock...

Using a novel and comprehensive dataset, we provide the first systematic study of liquidity in the foreign exchange (FX) market. Contrary to common perceptions, we find significant variation in liquidity across exchange rates, substantial costs due to FX illiquidity, and strong commonality in...

Since the global financial crisis, the Swiss National Bank has been accumulating reserve assets amounting to the size of the Swiss GDP. Yet, the Swiss franc is still considered to be significantly over-valued. This paper analyzes the drivers behind the new situation and discusses challenges and...

Exchange rates are crucial variables for each economy as they affect the price at which a country can exchange goods and services with other currency areas. A strong domestic currency makes it relatively cheap to import goods and services, but at the same time renders domestic goods and services...

Recent regulation mandating the clearing of credit default swaps (CDS) by a Central Clearing Counterparties (CCP), has rendered the latter a systemically important institution, whose failure poses a serious threat to global financial stability. This work investigates the potential failure of a...

Recently, for standard asset classes, the first mutual clearing agreements between Central Coun- terparties (CCPs) have come into existence. There are already global concerns over the unique threats and benefits which arise from these situations, and further concern for an extension of agree-...

Following the 2008 financial crisis, regulation mandates the clearing of the CDS market through Central Clearing Counter-parties (CCPs). Large CCPs are now designated as 'Global Systemically Important Institutions' (GSIIs), whose unlikely-but-plausible failure threatens global financial market...

We develop a general equilibrium model with intermediaries at the heart of international financial markets. Global intermediaries bargain with households and extract rents for providing access to foreign claims. The behavior of intermediaries, by tilting state prices, breaks monetary neutrality...

Andrikogiannopoulou and Papakonstantinou (AP; 2019) conduct an inquiry into the bias of the False Discovery Rate (FDR) estimators of Barras, Scaillet, and Wermers (BSW; 2010). In this Reply, we replicate their results, then further explore the bias issue by (i) using different parameter values,...