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Macroeconomic Conditions and the Puzzles of Credit Spreads and Capital Structure
Chen, Hui - 2009
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/10013155971
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Correlations, Value Factor Returns, and Growth Options
Schoenleber, Lorenzo - 2020
Ex ante (expected) average equity market correlation is linked to the differential correlation dynamics of growth and … existence of a homogeneous correlation among stocks with similar growth characteristics, depending on the prevailing … link to growth options and the value premium, implied correlation serves as a leading procyclical state variable. Value …
Persistent link: https://www.econbiz.de/10012846985
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What's Gone Wrong with Option Liquidity : Evidence from the Knight Capital's Trading Glitch
Kapadia, Nikunj - 2020
Since the early 2000s liquidity in option markets has become less resilient, and our evidence suggests that it is so because of an increased vulnerability to liquidity shocks in the underlying. To demonstrate the causal impact, we consider an incident in which a large broker dealer erroneously...
Persistent link: https://www.econbiz.de/10012844386
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Firm Growth Potential and Option Returns
Andreou, Panayiotis C.; Bali, Turan G.; Kagkadis, Anastasios - 2021
This paper shows that firm growth potential – representing a firm's yet-unexercised growth opportunities – is associated with option overpricing and low future delta-hedged option returns. We provide an explanation of this phenomenon based on the idea that retail investors exert buying...
Persistent link: https://www.econbiz.de/10013219539
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The Risk Premium Channel and Long-Term Growth
Schumacher, Malte - 2017
We study a quantitative DSGE model linking a state of the art asset pricing framework à la Kung and Schmid (2015) with a constraint on leverage as in Gertler and Kiyotaki (2010). We show that a mere increase in the probability of firms being financially constrained leads to an increase in risk...
Persistent link: https://www.econbiz.de/10012941845
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Macroprudential Policy, Differences in Beliefs and Growth
Wei, Daren - 2017
I propose a model of macroprudential policy interventions in financial markets. I solve a heterogeneous-agent asset pricing model and show that speculation caused by differences in beliefs about expected technology growth increases asset returns volatility and the equity risk premium, reduces...
Persistent link: https://www.econbiz.de/10012943346
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The risk premium channel and long-term growth
Schumacher, Malte Daniel; Żochowski, Dawid - 2017
We study a quantitative DSGE model linking a state of the art asset pricing framework à la Kung and Schmid (2015) with a constraint on leverage as in Gertler and Kiyotaki (2010). We show that a mere increase in the probability of firms being financially constrained leads to an increase in risk...
Persistent link: https://www.econbiz.de/10011756564
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The Risk Premium Channel and Long-Term Growth
Schumacher, Malte - 2017
We study a quantitative DSGE model linking a state of the art asset pricing framework a la Kung and Schmid (2015) with a constraint on leverage as in Gertler and Kiyotaki (2010). We show that a mere increase in the probability of firms being financially constraint leads to an increase in risk...
Persistent link: https://www.econbiz.de/10012947037
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Economic Growth, Inefficient Markets, and Economic Inequality
Muthusamy, Senthil Kumar - 2023
Economic growth is ardently emphasized as a requisite underpinning not only for improving individual income, the standard of living, and a society's infrastructure, but also to attain equitable distribution of necessities, critical resources, and public goods such as education, healthcare, and...
Persistent link: https://www.econbiz.de/10014344860
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Inflation risk and the finance-growth nexus
Corhay, Alexandre; Tong, Jincheng - 2021
This paper shows that the effect of inflation on asset prices and real aggregates depends on the financial intermediation sector. When firms finance using nominal long-term debt issued by financial intermediaries, unexpected changes in inflation lead to a wealth transfer across sectors. Higher...
Persistent link: https://www.econbiz.de/10012595351