A core-selecting auction for portfolio's packages

We introduce the "local-global" approach for a divisible portfolio and perform an equilibrium analysis for two variants of core-selecting auctions. Our main novelty is extending the Nearest-VCG pricing rule in a dynamic two-round setup, mitigating bidders' free-riding incentives and further reducing the sellers' costs. The two-round setup admits an information-revelation mechanism that may offset the "winner's curse", and it is in accord with the existing iterative procedure of combinatorial auctions. With portfolio trading becoming an increasingly important part of investment strategies, our mechanism contributes to increasing interest in portfolio auction protocols

From Fragmentation to Function: Critical Concepts and Writings on Social Capital Markets' Structure, Operation, and Innovation

We hope to see a future in which more funds flow to investments seeking the generation of social and/or environmental value in conjunction with some level of financial performance. As the 'capital markets' moniker would suggest, we would like to see these capital flows be performance-based (so that funds advance the work of high-performance investees, while being less accessible to lower-performing and/or riskier ventures). Furthermore, we would like to see these investments adopt structures that more completely address the diverse needs and interests of investors and investees. Our ambition is that by better organizing the ideas and initiatives of the many individuals who have worked to frame this emerging market, these goals may be advanced. The paper's secondary goals are to help focus future research and praxis on efforts that build on the significant body of existing work without unduly re-treading well-worn analytical paths. This paper seeks to promote an elevated discussion of the social capital markets, a discourse focusing on  high-leverage issues. The paper also invites experts from related academic and practical fields to engage in a conversation that has to this point largely been conducted between social sector professionals turning their attention to capital flows and finance professionals placing their expertise in the service of social purposes

A Toolbox for Sustainable Crisis Response Measures for Central Banks and Supervisors

Central banks and financial supervisors are playing a crucial role in shaping the responses to the crisis brought about by the COVID-19 pandemic in both the immediate stabilisation phase and the subsequent recovery phase. Many of the same central banks are also taking action to incorporate climate risks and green finance across their operations. So far, however, there is limited evidence that central banks’ and supervisory authorities’ responses to COVID-19 have actively taken account of climate change or wider sustainability goals. To avoid lock-in to a high-carbon recovery and to fulfil their mandates for financial stability, central banks and supervisors need to align their COVID-19 response measures with the Paris Agreement on climate change. Numerous instruments that are already being applied by central banks and financial supervisors in the crisis can be calibrated in ways that account for climate- and other sustainability-related financial risks and/or contribute to the achievement of climate and sustainability goals. This initial toolbox sets out three broad categories of measures – monetary, prudential and other – covering nine types of tools. It provides central banks and financial supervisors with options to align their crisis response measures

"The Asian Disease: Plausible Diagnoses, Possible Remedies"

The Asian crisis is a textbook case of the "financial instability hypothesis" first expressed in 1966 by the late Hyman Minsky. Minsky's "hypothesis" was proposed to explain instability in a large, insulated, developed economy. Despite its intuitive appeal, it was not widely accepted among financial economists (Charles Kindleberger being a notable exception) because, they said, they could not find historical illustrations to fit the theory. The financial economist's machine runs smoothly in the best of all possible worlds. What makes trouble in the financial economist's world is the exogenous shock that affects everyone (war, oil prices) or government error (fiscal imbalance, monetary policy). "Financial distress," Barry Eichengreen and Richard Portes write in their study of sovereign debt rescheduling, "normally results from a real shock or bad policies." But Asia presents a cumulation of apparently rational decisions that are precisely those Minsky predicted.

Shadow Banking: The Blind Spot in Banking and Capital Markets Reform

Shadow banking is the concept used by the Financial Stability Board (FSB) and the European Commission to propose a new bout of regulatory reforms. The problem is less in the concept's negative bias than in its marginalization of the problem. Shadow banking is reflective of major players exploiting existing rules often in collusion with authorities. This should prompt a deeper discussion about the influence of legal institutions in market structures, and the perils of artificial distinctions between 'banking/money markets' and 'capital markets'. Drawing the appropriate lessons is particularly important now that momentous reforms, such as the Banking Union and Capital Markets Union, seem to go back to traditional (and unrealistic) dividing lines

Essays in Financial Economics: Announcement Effects in Fixed Income Markets

ABSTRACT ESSAYS IN FINANCIAL ECONOMICS: ANNOUNCEMENT EFFECTS IN FIXED INCOME MARKETS PHD IN FINANCE MAY 2018 JAMES J FOREST B.A., FRAMINGHAM STATE UNIVERSITY M.S., NORTHEASTERN UNIVERSITY Ph.D., UNIVERSITY OF MASSACHUSETTS – AMHERST Directed by: Professor Hossein B. Kazemi This dissertation demonstrates the use of empirical techniques for dealing with modeling issues that arise when analyzing announcement effects in fixed income markets. It describes empirical challenges in achieving unbiased and efficient parameter estimates and shows the importance of modelling a wide range of macroeconomic announcement effects to avoid omitted variable bias. Employing techniques common in Macroeconomics, financial market researchers are better able to provide meaningful results. In “The Effect of Macroeconomic Announcements on Credit Markets: An Autometric General-to-Specific Analysis of the Greenspan Era,” I show that a congruent, parsimonious, encompassing model discovered using David Hendry’s econometric modelling approach overcomes the many inadequacies of the typical static models of US Treasury returns. The typical specification tends to fail most specification tests. Results suggest a place for general-to-specific modelling in financial economics, a place where it has only recently been employed. In “A High-Frequency Analysis of Trading Activity in the Corporate Bond Market: Macro Announcements or Seasonality?” Here we explore whether factors that drive trading activity of US corporate bond market. Our main findings are that the thinly-traded market for corporate bonds is less affected by surprises in individual economic reports and that the market is dominated by day-of-week and time-of-day affects. We find that, unlike daily returns on the S&P 500, corporate bonds are sensitive to surprises in both labor market and inflation data. Trading activity is affected by absolute surprises in core CPI and nonfarm payrolls, but neither core PPI nor jobless claims affect order flow. Perhaps most interesting, however, is the presence of “behavioral seasonal” effects associated with the onset and incidence of seasonal affective disorder. This “winter blues” effect has been seen affecting activity in equity markets by Kamstra, M. J., L. A. Kramer and M. D. Levi (American Economic Review; 2000, 2003). In “The Effect of Treasury Auction Results on Interest Rates: The 1990s Experience,” I examine the response of U.S. Treasury returns to auction announcements. Rate changes differ significantly on auction days for one-year bills. Surprises in the release of bid-to-cover ratios and noncompetitive bidding affect Treasury 30-year returns significantly. Other maturities, however, are relatively unaffected. The results complement the study by Lou, Yan and Zhang (2013) and show the benefits of controlling macroeconomic announcements when analyzing market responses to auctions

"The Asian Disease: Plausible Diagnoses, Possible Remedies, Regulation of Cross-Border Interbank Lending and Derivatives Trade"

Asia presents a cumulation of apparently rational decisions that produced disastrous results- a textbook illustration of "financial instability" developing from the economics of euphoria. A combination of factors produced the crisis as enormous capital inflows were drawn to the "Asian miracle"-pegged exchange rates with fluctuating interest rates, integrated economies, moral hazard created by central banks, and short-term lending and derivatives trade without sufficient evaluation of risk and credit analysis of borrowers. The Asian tragedy demonstrates the need for improved regulation of cross-border interbank lending, improved accounting for both borrowers and lenders, and separation of the close