Author: Wei-Xuan Li
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Author: Lubomir Petrasek
Publisher:
ISBN:
Category :
Languages : en
Pages : 128

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Author: Shuming Liu (doctor of finance.)
Publisher:
ISBN:
Category : Institutional investors
Languages : en
Pages : 254

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This dissertation consists of two empirical essays on investor behavior and liquidity variation. The results demonstrate the important role of investors in affecting liquidity. The first essay examines how the fluctuation in the aggregate stock market liquidity is related to investor sentiment. I find that the stock market is more liquid when investor sentiment is higher. This evidence is consistent with the theoretical prediction that higher investor sentiment increases stock market liquidity. The second essay investigates whether the cross-sectional differences in liquidity are affected by institutional ownership. I document that stocks with larger increases in the number of institutional investors are more liquid than other stocks. This result is consistent with the prediction that information competition among institutional investors increases stock liquidity.

Author: Chang Liu (Writer on finance)
Publisher:
ISBN:
Category : Corporations
Languages : en
Pages : 115

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My dissertation contains two essays regarding corporate liquidity management. In the first essay, we find that personal connections between borrowers and lenders have a significant impact on the choice of corporate liquidity. Connected firms tend to obtain larger credit lines and hold less cash. Closer personal ties result in easier access to credit lines during economic shocks, such as financial crisis and negative news of credit quality. In addition, connections help firms with tighter financial constraints or higher risk obtain larger amount of credit lines. Connections also increase the amount of credit lines of borrowers with less public debt. Overall, our findings suggest that reduced asymmetric information between borrowers and lenders can improve corporate liquidity management. In the second essay, we study the relationship between corporate liquidity choice and market value by using the market-to-book decomposition of Rhodes-Kropf, Robinson, and Viswanathan (2005). We find that sector overvaluation or long-run growth usually increase the portion of cash in the total corporate liquidity. The effect is stronger in firms with larger growth opportunities, better corporate governance, or longer investor horizons. Moreover, the choice between cash and credit lines for firms without credit ratings are more sensitive to the sector overvaluation or long-run growth. In addition, we find sector error and long-run growth have stronger effects on corporate liquidity in the long horizons.

Author: Guido Lorenzoni
Publisher:
ISBN:
Category :
Languages : en
Pages : 146

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This thesis includes four essays on the macroeconomic effects of financial market imperfections. The first essay studies the incentives for banks that participate in an interbank market to keep a sufficient level of reserves. It presents a model where, in presence of imperfect insurance against bank-specific shocks, banks keep an inefficiently low ratio of reserves to deposits. A consequence of this is that the interest rate on the money market will fluctuate too much from a second-best perspective. It discusses the potential benefits and risks associated to central bank intervention, and highlights the complementarity between regulatory reserve requirements and stabilization of the interest rate. The second essay (joint with C. Hellwig) studies the ability of banks to issue liquid liabilities while holding only a fraction of their activities in liquid assets. We study the possibility of self-sustaining equilibria in which banks are prevented from abusing their issuing privilege by the threat of losing it in case of default. The third essay is a contribution to the empirics of precautionary savings and shows evidence of a decreasing relationship between household wealth and the variability of consumption expenditure. The evidence is consistent with the presence of a precautionary motive for wealth accumulation. The fourth essay (joint with F. Broner) shows that the time series of the spreads on emerging market bonds appears consistent with the view that international investors supplying funds to these countries are liquidity constrained at times of large price drops.

Author: Mohamed Abdel-aziz Mekhaimer
Publisher:
ISBN:
Category :
Languages : en
Pages :

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This dissertation is composed of two essays. In the first essay, we use the introduction of the first transatlantic trading platform NYSE Arca Europe (NAE), as an exogenous shock to examine the impact of market design on commonality in liquidity. We find that commonality in liquidity increases significantly for stocks traded in the NAE, specifically, the introduction of the transatlantic NAE trading platform increases the comovement of NAE stocks with NAE aggregate liquidity while their comovement with the home market aggregate liquidity decreases. Further, we find that the commonality in liquidity remains unchanged for matched non-NAE control sample stocks. Our results are robust to different methods for computing commonality, different liquidity proxies and across size quintiles. We conclude that market design and trading infrastructure has a significant impact on commonality in liquidity. The second essay investigates the impact of internal governance on stock market liquidity. Acharya, Myers and Rajan (2011) develop a model of internal governance where subordinate managers can effectively monitor the CEO to maintain the future of the firm. Using a measure of internal governance based on the difference in horizons between a CEO and his subordinates, we show that firms with better internal governance have lower information asymmetry and higher liquidity. We also show that internal governance is more effective in enhancing liquidity for firms with CEOs close to retirement, firms that require higher firm-specific skills, and firms with experienced subordinate managers. Our results are robust to inclusion of conventional governance measures, alternative model specifications, and different measures of internal governance and liquidity.

Author: Andrei I. Nikiforov
Publisher:
ISBN:
Category : Electronic dissertations
Languages : en
Pages : 136

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In these essays, I identify the effects of earnings seasons (i.e., the clustering of earnings releases), on stock market liquidity and asset pricing. In the first essay, I document strong seasonal regularities associated with aggregate earnings announcements. Applying the large body of literature linking earnings announcements to liquidity effects, I argue that these earnings seasons create market-wide liquidity shocks and I show that both liquidity betas and liquidity risk change during earnings seasons In the second essay, I test the impact of earnings seasons on commonality in liquidity as measured by both spreads and depths. I find that commonality significantly decreases during the four weeks of each calendar quarter when most companies release their earnings. These findings contribute to the literature by identifying and examining the clustering effect of firm-specific information on commonality in liquidity. In the third essay, I extend the study of the liquidity effects of earnings seasons to a sample of 20 countries. I find that the international data corroborate both hypotheses. I also find that the aggregate quality of accounting information, and the duration and frequency of interim reporting periods are important determinants of the liquidity effects (both liquidity betas and commonality in liquidity) during earnings seasons.

Author: John Brendan McDermott
Publisher:
ISBN:
Category : Investments
Languages : en
Pages : 446

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Author: Nardos M. Beyene
Publisher:
ISBN:
Category : Capital assets pricing model
Languages : en
Pages : 72

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The main objective of my three essays is to incorporate liquidity shocks and the linkages between the liquidity condition of financial markets into asset pricing and valuation models. The first essay focuses on the liquidity adjusted capital asset pricing model, while the second and the third essays examine the popular asset valuation model called the Fed model. The first essay investigates the pricing of the commonality risk in the U.S. stock market by using a more comprehensive market illiquidity measure that can reflect the liquidity condition of different asset markets. This measure is given by the yield difference between commercial paper and treasury bill. In addition, consistent with the definition of commonality risk, I form portfolios based on the sensitivity of each stock's illiquidity to the market-wide illiquidity. Using monthly data from January 1997 to December 2016 and the conditional version of the Liquidity-adjusted Capital Asset Pricing Model (LCAPM) estimated by the Dynamic Conditional Correlation approach, I find a significant commonality risk premium of 0.022% and 0.014% per year for 12-month and 24-month holding periods, respectively. This premium estimate is significantly higher than those found using the market illiquidity measure and estimation procedures from previous studies. These findings provide evidence that a security's easiness in terms of tradability at times of liquidity dry up is extremely important. It is also higher than the excess return associated with other forms of liquidity risk. In addition, the paper finds a variation in the estimated commonality risk premium over time, with values being higher during periods of market turmoil. Moreover, estimating the LCAPM with the yield difference between commercial paper and treasury bill as a measure of market illiquidity performs better in predicting returns for the low commonality risk portfolios. The second essay examines the inflation illusion hypothesis in explaining the high correlation between government bond yield and stock yield as implied by the Fed model. According to the inflation illusion hypothesis, there is mis-pricing in the stock market due to the failure of investors to adjust their cash flow expectation to inflation. This led to a co-movement in stock yield and government bond yield. I use the Gordon Growth model to determine the mis-pricing component in the stock market. In the next step, the correlation between bond yield and stock yield is estimated using the Asymmetric Generalized Dynamic Conditional Correlation (AG-DCC) model. Finally, I regress this correlation on mis-pricing and two other control variables, GDP and inflation. I use monthly data from January 1983 to December 2016. Consistent with the Fed model, the paper finds a significant positive correlation between the yield on government bonds and stock yield, with an average correlation of 0.942 - 0.997. However, in contrast to the inflation illusion hypothesis, mis-pricing in the stock market has an insignificant impact on this correlation. The third essay provides liquidity shocks contagion between the stock market and the corporate bond market as the driving force behind the high correlation between the yield on stocks and the yield on government bonds as implied by the Fed model. The idea is that when liquidity drops in the stock market, firms' credit risk rises because the deterioration in the liquidity of equities traded in the stock market increases the firms' default probability. Consequently, investors' preferences shift away from corporate bonds to government bonds. Higher demand for government bonds keeps their yield low, leading to a co-movement of government bond yield and stock yield. In order to test this liquidity-based explanation, the paper first examines the interdependence between liquidity in the stock and corporate bond markets using the Markov switching model, and a time series non-parametric technique called the Convergent Cross Mapping (CCM). In order to see the response of government bond yield and stock yield to liquidity shocks in the stock market, the study implements an Auto Regressive Distributed Lag (ARDL) model. Using monthly data from January 1997 to December 2016, the paper presents strong evidence of liquidity shocks transmission form the stock market to the corporate bond market. Furthermore, liquidity shocks in the stock market are found to have a significant impact on the stock yield. These findings support the illiquidity contagion explanation provided in this paper.

Author: Jie-Haun Lee
Publisher:
ISBN:
Category : Liquidity (Economics)
Languages : en
Pages : 170

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