Integration in the mortgage market

The deregulatory trend and advances in technology during the 1980s removed many restrictions on the ability of U.S. depository financial institutions to obtain and redistribute funds across diverse geographical markets. This pervasive deregulation and innovation should have increased the degree of integration between different geographical financial markets. Yet there is little empirical evidence available on the validity of this expectation. It is important to provide such evidence since much of the U.S. depository institution regulatory policy is predicated on the assumption of highly localized, segmented financial markets. Considering alternative breakpoints at 1980 (DIDMCA) and at 1982 (Garn-St Germain), the current study tests the hypothesis that the degree of geographical financial integration after this period exceeded that prior to this period. Mortgage markets are focused on due to their historical importance in the regulation of funds flows. The study finds a significant increase in the mean contemporaneous correlation among FHLB districts' mortagage rate residuals in a vector-autoregressive system between two test periods. Further analysis shows that the distance between FHLB districts' headquarters and their respective pairwise interdistrict correlation coefficients are negatively related in the prior period but not significantly related in the later period. Economic booms and busts alternated among the districts over the two sample periods in a manner consistent with the reallocation of capital among more integrated financial markets. Individual districts' mortgage rates have been more sensitive to variations in national credit market conditions since deregulation was legally recognized by DIDMCA in 1980. Thus, the collective empirical evidence found in this study indicates that mortgage markets have responded to deregulation and marked technological advances by moving toward a national, highly integrated market. Regulators' preoccupation with highly localized, segmented markets must consequently be reexamined.     

Systematic mistakes in the mortgage market and lack of financial sophistication

Institutions often offer a menu of contracts to consumers in an attempt to create a separating equilibrium that reveals borrower types and provides better pricing. We test the effectiveness of a specific set of contracts in the mortgage market: mortgage points. Points allow borrowers to exchange an upfront amount for a decrease in the mortgage rate. We document that, on average, points takers lose about $700. Also, points takers are less financially savvy (less educated, older), and they make mistakes on other dimensions (e.g., inefficiently refinancing their mortgages). Overall, our results show that borrowers overestimate how long they will stay with the mortgage.     

Stock market regulations and international financial integration: the case of Spain

International financial integration effects on the Spanish stock market are studied, both for the conditional mean and conditional variance. New institutional regulations in Spain are taken into account and their efficiency consequences are addressed. Results suggest an increasing international integration but nontrivial opportunities for financial diversification may still be relevant.     

Government investment and the stock market

High rates of government investment in public sector capital forecast high risk premiums both at the aggregate and firm-level. This result is in sharp contrast with the well-documented negative relationship between the private sector investment rate and risk premiums. To explain the empirical findings, we extend the neoclassical q-theory model of investment and specify public sector capital as an additional input in the firm's technology. We show that the model can quantitatively replicate the empirical facts with reasonable parameter values if public sector capital increases the marginal productivity of private inputs.     

政府干预巨灾保险市场的研究述评

本文总结了国外学术界对政府干预巨灾保险市场这一领域的研究成果,集中探讨了政府干预巨灾保险市场的背景、政府是否应当干预巨灾保险市场、政府应该怎样干预巨灾保险市场这三个问题,并对未来的研究方向略做了展望。     

Stock recommendations and investment portfolio formation: A study in the Brazilian market

The stock analysts have a relevant role in the capital market, since, directly or indirectly, they contribute to the paper pricing and to the composition of the investment portfolio. The purpose of this study is to verify if it is possible to obtain extraordinary returns, above those offered by a market portfolio, with the monitoring of the stock recommendations issued by Brazilian capital market analysts, one of the most important in Latin America. Based on a wide range of consensual recommendations concerning the period from 2000 to 2010, and with the monitoring of the historical series of paper returns covered by the analyses, the performance of two portfolios were compared, one formed by stocks that received favorable and the other one formed by stocks that received unfavorable analyst recommendations. The results showed bias in recommendations, since there is, systematically, a greater number of favorable against unfavorable recommendations. The results mainly showed that the analysts were unable to identify the stocks that actually offered greater returns within the period considered.     

Liquidity and market efficiency: A large sample study

Chordia et al. (2008, hereafter CRS) examine short horizon return predictability from past order flows of large, actively traded NYSE firms across three tick size regimes and conclude that higher liquidity facilitates arbitrage trading which enhances market efficiency. We extend CRS to a comprehensive sample of all NYSE firms and examine the dynamics between liquidity and market efficiency during informational periods. Our results indicate that although all NYSE firms experience an overall improvement in market efficiency across periods of different tick size regimes, this improvement varies significantly across the portfolios of sample companies formed on the basis of trading frequency, market capitalization, and trading volume. After controlling for these factors, we further document a positive association between a continuous measure of liquidity and market efficiency, and show that this effect is amplified during periods that contain new information, as reflected in high adverse selection component of the bid-ask spread.     

Government intervention and investment efficiency: Evidence from China

The extant corporate investment literature has documented that information asymmetry and agency conflicts between managers and outside investors prevent firms from making optimal investment decisions. In this study, we investigate whether government intervention, as another form of friction, distorts firms' investment behavior and leads to investment inefficiency. Using Chinese data, we test this by measuring government intervention at two different levels. First, we compare investment efficiency between SOEs and non-SOEs. We find that the sensitivity of investment expenditure to investment opportunities is significantly weaker for SOEs. Second, we measure government intervention by whether a firm is politically connected through the employment of top executives with a government background. We find that political connections significantly reduce investment efficiency in SOEs. However, we do not find such evidence in non-SOEs. Taken together, our findings suggest that government intervention in SOEs through majority state ownership or the appointment of connected managers distorts investment behavior and harms investment efficiency.     

Foreign-exchange intervention strategies and market expectations: insights from Japan

This study extends the traditional set of central bank's interventions to include official announcements in order to provide empirical evidence on two pivotal questions: (i) are FX authorities able to influence market expectations with different instruments? (ii) how should interventions be designed to have the greatest impact? Using Japanese data over 1992–2004 and an event-study approach, we estimate the effect of different strategies on the USD/JPY exchange-rate risk-neutral density. Overall, transparent policies (public and oral interventions) appear to be the most effective. Moreover, the effect is greater when policies involve a financial cost (risk) suggesting that simple announcements can only be deemed as an imperfect substitute for actual interventions.     

中美住房抵押贷款市场比较:基于同质性与差异性的分析

本文首先从个人住房抵押贷款发展形势入手进行分析,发现当前我国住房抵押贷款市场的宏微观形势与2004年美国次级抵押贷款市场几近相同。本文进而对当前我国住房抵押贷款市场形势与美国的同质性和差异性进行了分析,发现其共性大于异性。最后本文提出,次贷危机说明了美国运用加息政策调节房市并不成功,因此,为了有效预防住房抵押贷款危机,我们有必要探索和尝试新的货币政策工具,尤其是充分发挥信贷杠杆工具,直接治理投资型住房贷款需求的膨胀,减小资产价格波动风险向银行信贷体系的传递,运用行之有效的办法,应对当前货币政策面临的困难与挑战。     

我国房贷政策回顾

在1988年第一次住房体制改革会议召开后,1991年住房信贷业务开始了起步,各项住房信贷政策出台。1991年建设银行、工商银行都成立了房地产信贷部,办理个人住房信贷业务,并制定职工住房抵押贷款管理办法。     

The financial reporting of fair value based on managerial inputs versus market inputs: evidence from mortgage servicing rights

This research examines whether the fair value of mortgage servicing rights (MSRs) based on managerial inputs (Level 3) better reflects the cash flow and risk characteristics of the underlying assets than the fair value of MSRs based on market inputs (Level 2). Using mortgage servicing fees as a proxy for the underlying cash flows, we find that the valuation multiples for MSRs based on Level 3 inputs are more positively associated with the persistence of future servicing fees compared with the fair value of MSRs based on Level 2 inputs. We also document that only the valuation multiples based on Level 3 fair values are negatively associated with proxies for risk factors. Our results suggest that, although unobservable inputs are subject to managerial discretions, managers can generate higher quality fair value estimates than market inputs due to their information advantage, especially when the market for the underlying asset is inactive.     

Pricing mortgage insurance contracts under housing price cycles with jump risk: evidence from the U.K. housing market

Previous studies have investigated the determinants of housing price cycles in the housing market; however, we observed the phenomenon of housing price jumps in the 2007 subprime crisis. This paper presents a discussion on the housing price cycle and abnormal price jumps to describe the behavior of housing prices in the United Kingdom. The empirical results show that the impact factors of housing cycles are market risk and the switching factor. Furthermore, the impact factors of jump risks include the bursting of the housing bubble and financial crises. Therefore, in this paper, we employ the Markov switching model with jump risks to value the MI contracts and analyze the influences of housing price cycles, jump risks, risks of market interest rate, and the prepayment risks on MI premiums. The results of sensitivity analysis show that more volatile housing price index returns, as well as longer periods of higher volatility in housing prices, raise MI premiums. Moreover, the MI premium is positively related to the absolute value of the average jump amplitude and the shock frequency of abnormal events. There is the tradeoff between the market interest rate and the prepayment risk. The influences of market interest rate are different on MI premium with/without prepayment risks.     

Macroeconomic and bank-specific determinants of non-performing loans in Greece: A comparative study of mortgage,business and consumer loan portfolios

This paper uses dynamic panel data methods to examine the determinants of non-performing loans (NPLs) in the Greek banking sector, separately for each loan category (consumer loans, business loans and mortgages). The study is motivated by the hypothesis that both macroeconomic and bank-specific variables have an effect on loan quality and that these effects vary between different loan categories. The results show that, for all loan categories, NPLs in the Greek banking system can be explained mainly by macroeconomic variables (GDP, unemployment, interest rates, public debt) and management quality. Differences in the quantitative impact of macroeconomic factors among loan categories are evident, with non-performing mortgages being the least responsive to changes in the macroeconomic conditions.     

我国银行问债券市场进一步创新的路径探讨

近年来我国银行间债券市场发展成效显著,其中,在防范风险前提下对创新的鼓励为市场发展提供了重要动力。该文从宏观和微观两个层面归纳了我国银行间债券市场的创新原则,并从基础产品创新、金融衍生品创新、做市商及其配套制度创新、发行与结算方式创新等多个角度提出银行间债券市场进一步创新的潜在方向。     

Loss coverage and stress testing mortgage portfolios: A non-parametric approach

This paper outlines the development of a practical approach to simulating a credit loss distribution function and to implementing a stress test exercise focusing on the entire Spanish mortgage portfolio. Specifically, we determine, via regression model, the main factors that explain why households fail to meet their mortgage payment commitments. This allows us to assign individual borrowers’ PDs and to estimate a rating system for the mortgage portfolio. Then, we simulate the empirical distribution function of mortgage loss rates using a Monte-Carlo resampling method, and compare the loss rates from this function with those provided by the Basel II IRB formulas. Finally, we assess, by running a stress exercise, the ability of banks to withstand certain adverse situations. The main result from this exercise is that, in general terms, Basel II IRB regulatory loss coverage offers fairly adequate protection for banks.     

日元国际化中的政府行为与市场表现

在日元国际化进程中,政府发挥了关键作用,其国际化政策的制定和相关措施的推行是日元国际化能顺利实现的重要保证,但也存在一些缺陷和不足,这些对人民币国际化道路的构建有一定的借鉴意义。该文认为,一国货币的国际储备地位与该国是否完全自由兑换无绝对关系,货币的国际化必须与该国国内金融体系完善程度相适宜,政府应该通过加强区域经济金融合作推动人民币国际化。