Miracle-dz/UniFAR-FTUs huggingface dataset:
Pricing Risk Factors in Corporate Bond Returns and Yield Spreads

We model how a cash flow risk exposure is associated with higher bond yield spreads even if the factor is not priced in bond returns. Our model predicts that the absolute values of cash flow exposures are priced in yields. Additionally, we show how yields can provide a test for whether a factor is priced in returns. We use exposure to foreign exchange as a laboratory to test how a cash flow risk factor could affect the returns and yields using publicly traded bonds. Bond returns and yields are significantly related to a trade weighted index of major currencies and an index of other important trading partners. Fama-MacBeth regressions show no evidence that foreign exchange exposure is priced in returns, but strong evidence that these exposures are priced in yields. Moreover, as predicted, larger positive or negative exposures imply higher spreads. The absolute value of major trading partners’ exposure explains 24.4% of yield risk premiums.
Risk and Returns Around Bond Rating Changes: New Evidence from the Spanish Stock Market

This study analyzes the effect of corporate bond rating changes over stock prices. We explore the effects over excess of returns and systematic risk. Rating changes by Moody's, Standard and Poor's or FitchIBCA are analyzed. On an efficient market, these changes will only have some effect if they contain some new information or if they are associated to a redistribution of wealth between shareholders and bondholders. We use an extension of the event study dummy approach. Our results indicate that rating downgrades do not cause abnormal returns around the date of the announcement while upgrades cause significantly negative effect. This behavior reflect a redistribution of wealh behavior. Changes of both directions cause a rebalancing effect in the total risk of the firm, with significant reductions on their systematic componet.
Effects of Economic Policy Uncertainty on Decisions to Raise Capital

This paper investigates how economic policy uncertainty and ownership structure affect the decisions of US firms to raise capital. We use a three-step sequential framework involving the decisions to raise capital and, depending on the decision to raise capital, the choice of financing instrument, and the volume of capital. The simultaneous equation framework not only treats the three decisions sequentially but also removes endogenous selection bias. By using a sample of 45,635 firm-year records of publicly listed non-financial firms for the period starting from 2000 to the end of 2018, we find that during periods of higher economic policy uncertainty, firms engage in external financing more frequently with a preference toward debt-based instruments. In addition, ownership by institutional investors is associated with a tendency to raise capital through debt financing and in lower volumes, supporting ownership control hypothesis. Our results from economic policy uncertainty provide evidence of pecking order theory and market timing theory in raising capital.
Median Momentum

The median is a better measure of a sample's central tendency in the presence of extreme observations. We propose an alternative momentum strategy formed by buying (shorting) stocks with high (low) average median returns over a formation period of 3&#8211;12 months. The median momentum strategy outperforms the traditional price momentum strategy for all holding periods from 1 month to 5 years, with no long&#8208;term reversal. This same return pattern is observed for all G7 countries. Further analysis indicates that median momentum profitability is an underreaction&#8208;only phenomenon and shows behavioral patterns related to short&#8208;sale restrictions and investor sentiment.
The Effect of HR Policies on CSR: The Complementary Role of HRM Effectiveness.

HRM plays a significant role in how CSR is understood, developed, and enacted. This study aimed to investigate the relationship between human resource management (HRM) policies, Corporate Social Responsibilities (CSR), and the complementary role of HRM Effectiveness in the Financial industry of Pakistan. For this, we proposed a theoretical framework, hypothesizing a positive effect on HR policies on CSR in the presence of effective HRM implementation as HRM practices do not necessarily lead to effective HRM implementation. HRM policies included Recruitment &amp; Selection, Performance Appraisal, and Compensation &amp; Reward. Empirical validity was established by conducting a survey using a close-ended questionnaire. Data was collected from 400 employees working in the financial sector of Pakistan and analyzed using confirmatory factor analysis and structured equation modeling. The result shows that there is a significant effect of Recruitment &amp; Selection and Performance Appraisal &amp; Management on CSR, but showing the insignificant effect of Reward &amp; Pay Systems on CSR. Finding has also suggested that there is the insignificant moderate effect of HR policies (Recruitment &amp; Selection, Performance Appraisal &amp; Management and Reward &amp; Pay Systems) on CSR, but result indicates that there is a positive effect of HRM Effectiveness on CSR. We found a limited knowledge among organizations and employees regarding HRM Effectiveness in Pakistan, which can be easily overcome by the learning process.
A Review of Economic Analyses on the Potential Impact of Brexit

This paper summarises the economic analyses of the potential impact of Brexit on the United Kingdom, European Union (EU) and euro area performed by members of and contributors to the Brexit Task Force, a group reporting to the International Relations Committee of the European System of Central Banks. The studies were carried out between 2017 and the initial months of 2019 and have been independently published by the authors. The aim of this Occasional Paper is to present the studies in an organic manner, highlighting common features and results.
Attractiveness to Optimists and Stocks as Lotteries in the Cross-section of Expected Stock Returns

Theoretical studies find that optimistic investors, who overweight the probabilities of better outcomes, can survive and influence asset prices even in a competitive market. To study the impact of optimistic investors on the cross-section of expected stock returns, I define the measure of attractiveness to optimists of a stock based on rank-dependent probability weighting. In both portfolio-level and firm-level analyses, I find an economically and statistically significant negative relation between the measure of attractiveness to optimists and the expected stock return even after controlling for a set of control variables in the cross-section of U.S. stock returns. Furthermore, this framework both conceptually and empirically subsumes the MAX effect, one of the most common characteristics for lottery-type stocks.
Score-Driven Asset Pricing: Predicting Time-Varying Risk Premia based on Cross-Sectional Model Performance

This paper proposes a new parametric approach for estimating linear factor pricing models with time-varying risk premia. In contrast to most established methods, the framework presented abstains from specifying a time series model with external predictor variables. Instead, time-varying risk prices and exposures follow an observation-driven updating scheme that reduces the one-step-ahead prediction error from a cross-sectional factor model at the current observation. This agnostic approach is particularly useful in situations where predictors are unknown or of uncertain quality. Updating schemes for elliptically distributed returns are derived and propose cross-sectional regression errors as driving sequence for the parameter dynamics. Estimation and inference are performed by likelihood maximization. A simulation study confirms that the novel method is capable of filtering and predicting substantial risk price movements. The empirical performance is illustrated by an application to a macrofinance model of currency carry trades.
Optimal characteristic portfolios

Characteristic-sorted portfolios are the workhorses of modern empirical finance, deployed widely to evaluate anomalies and construct asset pricing models. We propose a new method for their estimation that is simple to compute, makes no ex-ante assumption on the nature of the relationship between the characteristic and returns, and does not require ad hoc selections of percentile breakpoints or portfolio weighting schemes. Characteristic portfolio weights are implied directly from data, through maximizing a Mean–Variance objective function with mean and variance estimated non-parametrically from the cross-section of assets. To illustrate the method, we evaluate the size, value and momentum anomalies and find overwhelming empirical evidence of the outperformance of our methodology compared to standard methods for constructing characteristic-sorted portfolios.
Credit Refinancing and Corporate Tax Avoidance

This paper examines the disciplining effects of credit markets on corporate tax avoidance strategies. We show that, during adverse credit market conditions, firms with refinancing needs prefer to forgo the after-tax cash flow benefits of tax avoidance to regain the access to the traditionally risk-averse credit markets. Our results show that firms increase their effective tax rate by 2 percentage points when facing refinancing constraints. This effect is more pronounced for firms with lower asset tangibility and higher default probability. Adverse credit market conditions together with refinancing needs prompt firms to become more conservative in their future tax avoidance strategy for up to three years. Moreover, we show that firms engage in less tax deferral strategies, while leaving their leverage and debt shield unchanged. Overall, these findings are consistent with credit markets putting pressure on tax avoiding firms.
Bond Pricing and Business Cycles with Central Bank Asset Purchases

I study central bank asset purchase effects in an estimated general equilibrium macroeconomic model with required borrowing for particular expenditures and a constrained credit market. Counterfactual simulations show Federal Reserve asset purchase programs from 2009 through 2014 reduce the yield curve's slope by 2.9\% at peak with a limited output effect. The yield curve does not invert in late 2019 absent these asset purchases, highlighting the policy dependence of any recession indicator properties of the yield curve. The estimation exercise provides new term premium estimates. Furthermore, I address modeling debt in macroeconomic models, comparing loan-in-advance and relatively impatient borrower specifications.
Financial Hedging Decisions on Procurement Risk with Value-at-Risk Consideration

We study how to manage commodity risks (price and volume) via procurement and financial hedging for a value-at-risk (VaR) risk-averse newsvendor. Facing stochastic procurement cost from the commodity market, the firm decides on its financial hedging strategy contingent on the procurement cost with continuous strike prices. After the realization of the procurement cost, the firm determines the order quantity under demand uncertainty. We derive closed-form solution of the joint optimal order quantity and financial hedging policy, which is proved to be time-consistent and risk-coherent. Furthermore, we show how financial hedging turns risks into rewards by rebalancing the payoffs under different spot price realizations, thus characterizing the value of financial hedging. We investigate the effects of these two parameters of VaR, i.e., the tolerance level divides the decision region into two that tends toward over-spending or short-spending, respectively. The profit reservation level lowers the risk-neutral order quantity in the over-spending region but raises it in the short-spending region. Numerical studies show that procurement cost uncertainty may improve the expected profit due to our comprehensive hedging policy and postponed order decision. The interaction between the operational and financial decision presents more value in the scenarios where there are a volatile demand and a negative correlation between demand and procurement cost.
An affordable green energy source—Evolving through current developments of organic, dye sensitized, and perovskite solar cells

ABSTRACT Intensive R&D efforts made in solar photovoltaic area has enabled Si, GaAs, CdTe, and CIGS devices exhibiting nearly ideal efficiencies. However, cost incurred per unit energy does not allow them to qualify for alternate energy source besides environmental issues at production floors. Consequently, search is still continuing not only to reduce cost by improved efficiency, reduced materials cost, and simplified processing resulting in a cleaner and greener technology. Current successes in organic, dye-sensitized, and perovskite solar cells with efficiencies in 10–15% range raise concrete hope for evolving a low cost and green technology involving solution processable organic/inorganic compounds extendable to roll-to-roll production. The current status and future prospects of these three promising routes are reviewed here highlighting the possibility of an emerging alternate green energy source to supplement the conventional ones at commercial level.
Discretion over Regulation: The Effectiveness of a Post-trade Transparency Regime

This paper explores the benefits post-trade transparency delays provide block trade facilitators who are afforded discretion in the timing of publishing the size and price of their trades on the London Stock Exchange. Operationalized under the auspices of MIFID II, we model the delay using Cox's proportional hazard framework and show dealers elect a particular post-trade transparency delay that assists in inventory management and market-making/facilitation profits. More generally for the market, we show publication creates volatility impacts, albeit less that of execution. We find the longer the delay, the lower the price volatility impact of publication.
The Information Content of Single Country Closed-End Fund Discounts

Using monthly data from 1996 to 2018 for the universe of single country closed-end funds, we study the information content of fund discounts/premiums. Unlike previous studies, we find that discounts/premiums forecast both share price (SP) and net asset value (NAV) returns. Additional tests show that the fund discounts/premiums contain information about future macroeconomic factors of their corresponding countries. We also find a strong association between expectations of future macroeconomic conditions and the difference in NAV and SP returns. Our results provide direct evidence for the presence of fundamental information in closed-end country fund discounts/premiums, consistent with international capital market segmentation.
The Investment Usefulness of Value Relevance Model: International Evidence

While valuation models such as the discounted cash flow model have been proposed and sophisticated, valuation practice often faces difficulties in estimating firm value because various assumptions on their factors are possible. Therefore, this study aims to provide a valuation procedure with the value relevance model which does not force analysts to set their personal assumptions. To show the usefulness of this procedure for investment around the world, we engage in empirical analyses with the annual data of the listed firms in 126 countries. After confirming that the value relevance model can explain the present market value of equity, we indicate that the ratio of the estimated intrinsic values to present market values is significantly related with future annual returns. We also demonstrate that significantly positive long-short returns can be obtained based on the ratio.
Identifying Deposits' Outflows in Real-Time

We propose a method based on control charts to identify in real-time sudden deposits' outflows through payment systems. The performance of the methodology is assessed with both Monte Carlo simulations and real transaction-level TARGET2 data for a large sample of Italian banks. We identify a set of idiosyncratic bank stress episodes and show that deposits are generally shifted to other banks, mainly large and domestic, generating a size premium; only a limited amount migrates to foreign banks. Under the fixed-rate, full allotment regime, the liquidity drain is mostly offset through open market operations.
Due Diligence

We propose a model of due diligence and analyze its effect on prices, payoffs, and deal completion. In our model, if the seller accepts an offer, the winning bidder (or “acquirer”) can gather information and chooses when to complete the transaction. In equilibrium, the acquirer engages in “too much” due diligence. Our quantitative results suggest that the magnitude of the distortion is economically significant. Nevertheless, allowing for due diligence can improve both total surplus and the seller's payoff compared to a setting without due diligence. We use our framework to explore the timing of due diligence, bidder heterogeneity, and breakup fees.
The Role of Social Presence in Auditor-Client Interactions

Auditors frequently interact with clients to perform inquiries and must maintain an appropriate level of professional skepticism during these interactions. Inquiries can be performed using various communication mediums. While prior research has shown partners prefer traditional face-to-face (FTF) interactions, many younger auditors prefer computer-mediated communication (CMC) (Bennett and Hatfield 2018). The present study utilizes Social Presence Theory to predict that skeptical behavior depends on the communication medium of the auditor-client interaction, such that auditors who perceive high social presence are less skeptical than auditors who perceive low social presence. The present study fully explores the relationship between communication medium, social presence, and skepticism by manipulating communication medium and measuring perceived social presence. Results support the prediction that auditors are less skeptical when they perceive high social presence. However, auditors do not always perceive social presence as previously assumed (i.e., high social presence for FTF and low social presence for CMC).
Media coverage and stock market returns: Evidence from China Pakistan economic corridor (CPEC)

The primary source of investor interest that disrupts the financial markets is news that reflects the macroeconomy. This study intends to track changes in investors’ positive and negative market attention and their effects on stock market returns by examining the print media portrayal of the China–Pakistan economic corridor (CPEC). We access the daily and weekly coverage of the CPEC by national and international newspapers from the Bloomberg database over the period from January 2015 to December 2019. Using the Harvard psychological dictionary, we categorize the news headlines into positive and negative news sentiments. We then relate the news sentiment to the stock market returns, using quintile analysis, ordinary least squares (OLS), and vector autoregressive (VAR) models. The results show that investors react quickly and significantly to positive news. They pay more for the same stock if the positive news stream increases; hence, the stock market return also increases. In contrast, investors do not react with the same passion to an increase in negative news. These findings are in line with the theoretical rationale of the disposition effect. These outcomes may be useful for active investors and practitioners to devise investment strategies in the presence of the hype surrounding the CPEC in the print media.
Mutual Funds and Qualitative Disclosure

In this paper, we use the content of U.S. mutual funds' prospectuses to examine the informational value of funds' qualitative disclosures. We document significant heterogeneity in the cross-section of funds' qualitative disclosures, primarily attributed to characteristics at the investment company level. Using textual analysis, we decompose funds' qualitative disclosures into informative and standard content. Our results show that funds' risk-taking behavior and risk-adjusted-performance increase with the informativeness of their disclosures. Content-based updates of disclosures are informative about funds' future risk-taking and their future performance. Finally, we document evidence that investors react to some extent to the informativeness of fund disclosures.
Why Have Actively Managed Bond Funds Remained Popular?

In sharp contrast to equity funds, actively managed bond funds have remained popular. This paper explores why by examining how active share affects the performance, risk management, and flows of bond funds. We find that bond funds tend to be highly active and often invest outside of their primary asset classes. Bond funds with higher active share persistently earn higher alphas, demonstrate lower downside risk, and exhibit less flow sensitivity to poor performance (consistent with alleviating investor run risk). In conclusion, our results show that investors tend to benefit from active management in bond funds.
Dimensions of Execution Quality: Recent Evidence for U.S. Equity Markets

I analyze market order execution quality using order-based data reported in accordance with SEC Rule 11Ac1-5. These data facilitate a comprehensive investigation of multiple dimensions of execution quality, including measures of costs and speed, for large samples of common stocks on Nasdaq and the NYSE. The evidence is consistent with competitive equity markets. Overall execution costs on Nasdaq exceed those on the NYSE, but orders execute faster. This relationship reverses for larger orders exceeding 1,999 shares. The apparent trade-off between costs and speed suggests that inferring execution quality from costs alone may be problematical. It also illustrates the need for models of trader behavior that can accommodate multiple dimensions of execution quality.
The Sum of All Positive (Expectations) and Negative (Fears) Investor Sentiment and Stock Market Returns

This paper aims to measure the positive (Expectations) and negative (Fears) investor sentiment about the ongoing economic conditions and analyze both sentiments for changes in stock market returns. Following the method proposed by Da et al. (2014), this study estimates the investor’s economic sentiment by using the Google SVI of search terms about macroeconomic indicators. The study decomposes investor sentiment into positive economic sentiment “Expectations” and negative economic sentiment “Fears”. The study regresses both sentiments for changes in stock market returns using time-series regression models. The results of the study show that both Expectations and Fears explain the contemporaneous changes in stock market returns. Investor Expectations show a positive impact on a contemporaneous change in stock market returns, whereas Fears depict a negative impact on stock returns. The study contributes to the financial literature in two ways. First, the study provides an alternative measure for investors’ expectations and investors’ fears. Second, the study provides empirical evidence on the net effect of investors’ expectations and fears on stock returns.
Asset Pricing Based on S-Shaped Consumption Utility

This paper shows that consumption-based asset pricing puzzles arise from using globally concave-shaped consumption utility. We empirically find that asset returns correlate negatively with many individuals' low-quantile consumption growth. This finding challenges most mainstream models and supports an asset pricing model based on an S-shaped consumption utility. This new model explains both the low covariance between consumption growth and stock returns and a high equity premium. Moreover, this model shows that applying globally concave-shaped consumption utility mistakenly leads to a positive correlation between risky returns and stochastic discount factors of many individuals, a root for many pricing puzzles.