5,584 research outputs found
Time-Varying Uncertainty and the Credit Channel
We extend the Carlstrom and Fuerst (1997) agency cost model of business cycles by including time varying uncertainty in the technology shocks that affect capital production. We first demonstrate that standard linearization methods can be used to solve the model yet second moment effects still influence equilibrium characteristics. The effects of the persistence of uncertainty are then analyzed. Our primary findings fall into four categories. First, it is demonstrated that uncertainty affects the level of the steady-state of the economy so that welfare analyses of uncertainty that focus entirely on the variability of output(or consumption) will understate the true costs of uncertainty. A second key result is that time varying uncertainty results in countercyclical bankruptcy rates - a finding which is consistent with the data and opposite the result in Carlstrom and Fuerst. Third, we show that persistence of uncertainty affects both quantitatively and qualitatively the behavior of the economy. Finally, we demonstrate that the magnitude of changes in uncertainty affecting the economy could be quite large; the implicationagency costs, credit channel, time-varying uncertainty
Legal Restrictions on Portfolio Holdings: Some Empirical Results
This article investigates the sensitivity analysis of mean-variance portfolio holdings to changes in the upper bounds. The optimization problem studied in this paper is, thus, constrained by a restriction that no more than certain portion of wealth can be invested in any one security. Our empirical results show that for both risk tolerant as well as for risk averse investors, the performance and expected returns of mean-variance efficient portfolios under the legal restrictions are lower and the variance are higher than the corresponding ones without the restriction.Upper bound constraint, Portfolio holdings, Parametric quadratic programming
Effects of Securities Transaction Taxes on Depth and Bid-Ask Spread
This paper investigates the effects of transaction taxes on depth and bid-ask spread under asymmetric information. The paper uses a static model where a monopolistic market maker faces liquidity and informed traders. Introducing transaction taxes could, surprisingly, lead to increase in depth. Under some distributional assumptions, when market conditions are favorable to the dealer, the spread responds less than proportionally to an increase in the transaction tax while the depth actually increases. In contrast, when market conditions are unfavorable to the dealer, the spread widens more than proportionally and the depth decreases, potentially to zero, in response to an increase in the transaction tax. Our model sheds light on the disagreement in the empirical literature on the relative magnitude of transaction costs on trading volume.Asymmetric information, Securities transaction taxes, Liquidity
Agency Costs and Investment Behaviour. ENEPRI Working Paper, No. 47, 3 February 2007
How do differences in the credit channel affect investment behavior in the U.S. and the Euro area? To analyze this question, we calibrate an agency cost model of business cycles. We focus on two key components of the lending channel, the default premium associated with bank loans and bankruptcy rates, to identify the differences in the U.S. and European financial sectors. Our results indicate that the differences in financial structures affect quantitatively the cyclical behavior in the two areas: the magnitude of the credit channel effects is amplified by the differences in the financial structures. We further demonstrate that the effects of minor differences in the credit market translate into large, persistent and asymmetric fluctuations in price of capital, bankruptcy rate and risk premium. The effects imply that the Euro Area's supply elasticities for capital are less elastic than the U.S
Empirical Performance of the Czech and Hungarian Index Options under Jump
This paper analyses Czech and Hungarian index options that are traded on the Austrian Futures and Options Exchange. We find that the Poisson jump-diffusion and not the GARCH (1,1) process lends statistical support for the data description. We estimate that approximately four-fifth of 4 percent underpricing (for the Czech Index) and 18 percent overpricing (for the Hungarian Index) biases reported for the short term out-of-the-money call options can be explained by the Jump option pricing model. However, we question whether the mispricings from the jump model are operational, especially, in these emerging financial markets.Leptokurtosis, Poisson jump-diffusion, GARCH, Equity index
Risk Shocks and Housing Markets
This paper analyzes the role of uncertainty in a multi-sector housing model with financial frictions. We include time varying uncertainty (i.e. risk shocks) in the technology shocks that affect housing production. The analysis demonstrates that risk shocks to the housing production sector are a quantitatively important impulse mechanism for the business cycle. Also, we demonstrate that bankruptcy costs act as an endogenous markup factor in housing prices; as a consequence, the volatility of housing prices is greater than that of output, as observed in the data. The model can also account for the observed countercyclical behavior of risk premia on loans to the housing sector.Agency costs, credit channel, time-varying uncertainty, residential investment, housing production, calibration
Agency Costs and Investment Behavior
How do differences in the credit channel affect investment behavior in the U.S. and the Euro area? To analyze this question, we calibrate an agency cost model of business cycles. We focus on two key components of the lending channel, the default premium associated with bank loans and bankruptcy rates, to identify the differences in the U.S. and European financial sectors. Our results indicate that the differences in financial structures affect quantitatively the cyclical behavior in the two areas: the magnitude of the credit channel effects is amplified by the differences in the financial structures. We further demonstrate that the effects of minor differences in the credit market translate into large, persistent and asymmetric fluctuations in price of capital, bankruptcy rate and risk premium. The effects imply that the Euro Area's supply elasticities for capital are less elastic than the U.S.Agency costs, Credit channel, Investment behavior, E.U. Area
Time-Varying Uncertainty and the Credit Channel
We extend the Carlstrom and Fuerst (1997) agency cost model of business cycles by including time varying uncertainty in the technology shocks that affect capital production. We first demonstrate that standard linearization methods can be used to solve the model yet second moment effects still influence equilibrium characteristics. The effects of the persistence of uncertainty are then analyzed. Our primary findings fall into three broad categories. First, it is demonstrated that uncertainty affects the level of the steady-state of the economy so that welfare analyses of uncertainty that focus entirely on the variability of output (consumption) will understate the true costs of uncertainty. A second key result is that time varying uncertainty results in countercyclical bankruptcy rates – a finding which is consistent with the data and opposite the result in Carlstrom and Fuerst. Third, we show that persistence of uncertainty affects both quantitatively and qualitatively the behavior of the economy.Agency costs, Credit channel, Time-varying uncertainty
Orbital selective Fermi surface shifts and mechanism of high T superconductivity in correlated AFeAs (A=Li,Na)
Based on the dynamical mean field theory (DMFT) and angle resolved
photoemission spectroscopy (ARPES), we have investigated the mechanism of high
superconductivity in stoichiometric LiFeAs. The calculated spectrum is in
excellent agreement with the observed ARPES measurement. The Fermi surface (FS)
nesting, which is predicted in the conventional density functional theory
method, is suppressed due to the orbital-dependent correlation effect with the
DMFT method. We have shown that such marginal breakdown of the FS nesting is an
essential condition to the spin-fluctuation mediated superconductivity, while
the good FS nesting in NaFeAs induces a spin density wave ground state. Our
results indicate that fully charge self-consistent description of the
correlation effect is crucial in the description of the FS nesting-driven
instabilities.Comment: 5 pages, 4 figures, supporting informatio
Lorentz invariance of entanglement classes in multipartite systems
We analyze multipartite entanglement in systems of spin-1/2 particles from a
relativistic perspective. General conditions which have to be met for any
classification of multipartite entanglement to be Lorentz invariant are
derived, which contributes to a physical understanding of entanglement
classification. We show that quantum information in a relativistic setting
requires the partition of the Hilbert space into particles to be taken
seriously. Furthermore, we study exemplary cases and show how the spin and
momentum entanglement transforms relativistically in a multipartite setting.Comment: v2: 5 pages, 4 figures, minor changes to main body, journal
references update
- …