This paper explains the emergence of liquidity traps in the aftermath of large-scale financial crises, as happened in the US 1930s, Japan 1990s and recently in the US and Europe. The paper introduces a new balance sheet channel that links equity capital to the risk-free interest rate. When...

This paper explains the emergence of liquidity traps in the aftermath of large-scale financial crises, as happened in the US 1930s, Japan 1990s and recently in the US and Europe. The paper introduces a new balance sheet channel that links equity capital to the risk-free interest rate. When...

We revisit the literature on using accounting earnings to estimate firm-level systematic risk, using macroeconomic indicators rather than listed-firm indexes to measure aggregate risk. Conventional listed-firm indexes reflect an unrepresentative subset of aggregate assets and thus are expected...

Despite the use of VaR as a means to control risk, using VaR can have the opposite effect. VaR is used by bank and insurance regulators more than any other risk measure. A value-at-risk (VaR) constraint on the probability that future firm equity value will be less than a floor, when the floor is...

Despite the use of VaR as a means to control risk, using VaR can have the opposite effect. VaR is used by bank and insurance regulators more than any other risk measure. A value-at-risk (VaR) constraint on the probability that future firm equity value will be less than a floor, when the floor is...

We develop and estimate a dynamic model of risk-shifting over the business cycle. First, equity holders with Epstein-Zin preferences increase their taking of idiosyncratic risk substantially more than the standard model in repeated games, because they perceive the arrival probability of bad...

The primary objective of the study is to examine the impact of political news (good and bad news) on the returns and volatility of Borsa Istanbul 100 Index (BIST-100). Sample data cover the period from January 2008 to December 2017. The main sample was divided into two subperiods to insulate the...

Post-issue stock underperformance is driven, at least in part, by the contemporary decline in idiosyncratic risk (proxied by idiosyncratic volatility) exposure for seasoned equity offerings (SEO) firms. As young firms dominate the SEO market, they generally face higher uncertainty of mean...

Recent crises have emphasized the tail risks present in corporate credit markets. Using credit default swap (CDS) data across maturities, we document two patterns. First, while the CDS term structure is generally upward sloping, financially constrained firms exhibit a negative slope. Second,...

Thinly traded securities exist in both emerging and well developed markets. However, plausible estimations of market risk measures for portfolios with infrequently traded securities have not been explored in the literature. We propose a methodology to calculate market risk measures based on the...