The evolution of aggregate stock ownership : [Version December 2010]

Since World War II, direct stock ownership by households has largely been replaced by indirect stock ownership by financial institutions. We argue that tax policy is the driving force. Using long time-series from eight countries, we show that the fraction of household ownership decreases with measures of the tax benefits of holding stocks inside a pension plan. This finding is important for policy considerations on effective taxation and for financial economics research on the long-term effects of taxation on corporate finance and asset prices. JEL Classification: G10, G20, H22, H30 Keywords: Capital Gains Tax, Income Tax, Stock Ownership, Bond Ownership, Inflation, Bracket Creep, Pension Fund

Multiple Unit Auctions and Short Squeezes

This paper develops a theory of multiple unit auctions with short squeezes in the post- auction market. This is especially relevant for financial and commodity markets where players may enter the auction with established forward positions. We study how a potential short squeeze impacts on bidders' strategies and auction performance. Conversely, we also study how the design of the auction affects the incidence of short squeezes. In particular, we model both uniform price and discriminatory price auctions in a true multiple unit setting, where bidders can submit multiple bids for multiple units. Our model is cast in what appears to be a common value framework. However, we show that the possibility of a short squeeze introduces different valuations of the to-be-auctioned asset between short and long bidders.Multiple unit auction, uniform auction, discriminatory auction, treasury auction, repo auction, short squeeze, market manipulation, market power

Government Policy and Ownership of Financial Assets

Since World War II, direct stock ownership by households across the globe has largely been replaced by indirect stock ownership by financial institutions. We argue that tax policy is the driving force. Using long time-series from eight countries, we show that the fraction of household ownership decreases with measures of the tax benefits of holding stocks inside tax-deferred plans. This finding is important for policy considerations on effective taxation and for financial economics research on the long-term effects of taxation on corporate finance and asset prices.

The Evolution of Aggregate Stock Ownership - A Unified Explanation

Since World War II, direct stock ownership by households has largely been replaced by indirect stock ownership by financial institutions. We argue that tax policy is the driving force. Using long time-series from eight countries, we show that the fraction of household ownership decreases with measures of the tax benefits of holding stocks inside a pension plan. This finding is important for policy considerations on effctive taxation and for financial economics research on the long-term effects of taxation on corporate finance and asset prices.Capital gains tax; income tax; stock ownership; inflation; bracket creep; pension funds

Bidding and Performance in Repo Auctions: Evidence from ECB Open Market Operations

Repo auctions are used to inject central bank funds against collateral into the banking sector. The ECB uses standard discriminatory auctions and hundreds of banks participate. The amount auctioned over the monthly reserve maintenance period is in principle exactly what banks collectively need to fulfil reserve requirements. We study bidder-level data and find: (i) Bidder behavior is different from what is documented for treasury auctions. Private information and the winner’s curse seem to be relatively unimportant. (ii) Underpricing is positively related to the difference between the interbank rate and the auction minimum bid rate, with the latter appearing to be a binding constraint. (iii) Bidders are more aggressive when the imbalance of awards in the previous auction is larger. (iv) Large bidders do better than small bidders. Some of our findings suggests that bidders are concerned with the loser’s nightmare and have limited amounts of the cheapest eligible collateral.Repo auctions, Multiunit auctions, Reserve requirements, Loser’s nightmare, Money markets, Central bank, Collateral, Open market operations

Macroeconomic Effects of Corporate Default Crises: A Long-Term Perspective

Using an extensive new data set on corporate bond defaults in the U.S. from 1866 to 2010, we study the macroeconomic effects of bond market crises and contrast them with those resulting from banking crises. During the past 150 years, the U.S. has experienced many severe corporate default crises in which 20 to 50 percent of all corporate bonds defaulted. Although the total par amount of corporate bonds has often rivaled the amount of bank loans outstanding, we find that corporate default crises have far fewer real effects than do banking crises. These results provide empirical support for current theories that emphasize the unique role that banks and the credit and collateral channels play in amplifying macroeconomic shocks.

The evolution of aggregate stock ownership

Since World War II, direct stock ownership by households has largely been replaced by indirect stock ownership by financial institutions. We argue that tax policy is the driving force. Using long time-series from eight countries, we show that the fraction of household ownership decreases with measures of the tax benefits of holding stocks inside a pension plan. This finding is important for policy considerations on effective taxation and for financial economics research on the long-term effects of taxation on corporate finance and asset prices

Bidding and performance in repo auctions: evidence from ECB open market operations

We study bidder bahavior and performance in 53 main refinancing operations (repo auctions) of the European Central Bank (ECB). The data set starts with the first auctions after the ECB changed from fixed rate tenders to variable rate tenders. We find that private information and the winnner's curse are not important in these auctions. The minimum bid rate and the level of secondary market rates play a crucial role in bidder behavior and auction performance. We also document that large bidders do better than small bidders, apparently because they use 'smarter' strategies which involve using more bids and having more kurtosis in their individual bid distribution. The penultimate auction in every reserve maintenance period has less underpricing that the other auctions within the maintenance period. Finally, from the two cases of underbidding covered by the sample period, it appears this was driven by particularly large cutrback by large, rather than small, bidders JEL Classification: G21, G12, D44, E43, E50Efficiency, liquidity, loser's nightmare, Open market operations, repo auctions

Bidding and performance in repo auctions : evidence from ECB open market operations

Repo auctions are used to inject central bank funds against collateral into the banking sector. The ECB uses standard discriminatory auctions and hundreds of banks participate. The amount auctioned over the monthly reserve maintenance period is in principle exactly what banks collectively need to fulfill reserve requirements. We study bidder-level data and find: (i) Bidder behavior is different from what is documented for treasury auctions. Private information and the winner’s curse seem to be relatively unimportant. (ii) Underpricing is positively related to the difference between the interbank rate and the auction minimum bid rate, with the latter appearing to be a binding constraint. (iii) Bidders are more aggressive when the imbalance of awards in the previous auction is larger. (iv) Large bidders do better than small bidders. Some of our findings suggests that bidders are concerned with the loser’s nightmare and have limited amounts of the cheapest eligible collateral

Bidding and performance in repo auctions: evidence from ECB open market operations

We study bidder bahavior and performance in 53 main refinancing operations (repo auctions) of the European Central Bank (ECB). The data set starts with the first auctions after the ECB changed from fixed rate tenders to variable rate tenders. We find that private information and the winnner's curse are not important in these auctions. The minimum bid rate and the level of secondary market rates play a crucial role in bidder behavior and auction performance. We also document that large bidders do better than small bidders, apparently because they use 'smarter' strategies which involve using more bids and having more kurtosis in their individual bid distribution. The penultimate auction in every reserve maintenance period has less underpricing that the other auctions within the maintenance period. Finally, from the two cases of underbidding covered by the sample period, it appears this was driven by particularly large cutrback by large, rather than small, bidder