Illiquidity Premium in the MILA

This article analyzes the illiquidity premium in the MILA. Using seven proxies for illiquidity, we find a positive and significant illiquidity premium for our sample. A microstructure bias-free portfolio weighting based on past returns is critical in our finding of an illiquidity premium, which is robust to several methodological changes in our portfolio simulations. We also document that the premium is present only in small and high book-to-market stocks. Nonetheless, when we control for size and distress effects, the difference and significance in risk-adjusted returns between portfolios of high and low illiquidity stocks remains.     

Money demand and the role of monetary indicators in forecasting euro area inflation

This paper examines the stability of money demand and the forecasting performances of a broad monetary aggregate (M3), excess liquidity and excess inflation in predicting euro area inflation. The out-of sample forecasting performances are compared to a widely used alternative, the spread of interest rates. The results indicate that the evolution of M3 is still in line with money demand, even when observations from the economic and financial crisis are included. Both excess measures and the spread are useful for predicting inflation.     

Stock liquidity and stock prices crash-risk: Evidence from India

In this paper, we examine the role of stock liquidity as a governance mechanism to discipline managers for withholding bad news (stock price crash-risk). This topic is useful to emerging markets because the dominance of controlling owners limits the monitoring of internal governance. Stock liquidity can be altered by the financial market regulations, thereby improving firm-level governance. In empirical analysis, we show that stock liquidity decreases stock price crash-risk. We identify two possible mechanisms through which stock liquidity reduces stock price crash-risk: the threat of intervention and price informativeness.     

What Drives the Consequences of Intentional Misstatements? Evidence from Rating Analysts’ Reactions

This paper aims to identify the mechanisms through which intentional misstatements adversely affect firms by analyzing rating analysts’ reaction to misstatements. In order to identify the mechanisms through which the misstatement affects firms’ credit ratings, we analyze the content of rating reports. Rating analysts are concerned about seven different mechanisms. They are most concerned about misstatement‐related violations of debt covenants that increase a firm's liquidity risk. We find that, subsequent to an intentional misstatement becoming publicly known, credit ratings of misreporting firms are adversely affected for up to seven years. The adverse impact of an intentional misstatement on a firm's credit rating is most pronounced in cases in which rating analysts mention concerns about misstatement‐related violations of covenants. Our results suggest that these covenant violations are the most severe mechanism through which misstatements adversely affect firms’ creditworthiness.     

Liquidity commonality in order-driven trading: evidence from the Athens Stock Exchange

We examine the presence of liquidity commonality in the order-driven Athens Stock Exchange (ASE). Unlike the majority of liquidity commonality studies that focus on the bid–ask spread, our analysis extends deeper in the Limit Order Book, providing insight on the price impact of both small and large trades. We utilize a 6-month FTSE/ATHEX-20 intraday data set to estimate the liquidity factor model of Chordia et al. (2000). To this end, we conduct single-equation analysis as well as panel data analysis with the use of two-way clustered errors, correcting for simultaneous firm and time correlations. Moreover, we apply standard principal component analysis on stock liquidities to extract the marketwide liquidity component. We find that liquidity commonality is low at the bid–ask spread, whereas it increases deeper in the book; consequently, large traders face liquidity risks associated with both individual stock and marketwide illiquidity. Moreover, our empirical evidence hints that liquidity commonality is asynchronous, suggesting that the ASE trading process includes various levels of information speed. Our analysis contributes to the understanding of liquidity commonality in order-driven trading, especially in emerging markets like the ASE where trading activity is limited and information speed is low.     

Water as an investment: liquid yet illiquid!

The water industry is in great need of further large investments to address existing severe water shortages worldwide which requires the participation of private sector investors. This industry is heavily infrastructure based and is therefore saddled with fixed assets-in-place or illiquid assets. This exposes the industry to what is termed as ‘illiquidity risk’, and hence, investors in this industry should be compensated for bearing this risk with an appropriate return premium (i.e. extra return). In this study, we provide evidence as to whether illiquidity risk indeed significantly affects returns in this industry. We examine the case of all 76 firms that compose the five major global water indices. After controlling for other factors that impact on returns, our results suggest that asset illiquidity is positively associated with stock returns. Specifically, water firms with a larger proportion of illiquid assets-in-place are observed to have greater stock returns than those with a smaller proportion of illiquid assets. Our results have important implications for the financing of water-related projects particularly those which involve the participation of investors from the private sector.     

FIRE SALES FORENSICS: MEASURING ENDOGENOUS RISK

We propose a tractable framework for quantifying the impact of loss‐triggered fire sales on portfolio risk, in a multi‐asset setting. We derive analytical expressions for the impact of fire sales on the realized volatility and correlations of asset returns in a fire sales scenario and show that our results provide a quantitative explanation for the spikes in volatility and correlations observed during such deleveraging episodes. These results are then used to develop an econometric framework for the forensic analysis of fire sales episodes, using observations of market prices. We give conditions for the identifiability of model parameters from time series of asset prices, propose a statistical test for the presence of fire sales, and an estimator for the magnitude of fire sales in each asset class. Pathwise consistency and large sample properties of the estimator are studied in the high‐frequency asymptotic regime. We illustrate our methodology by applying it to the forensic analysis of two recent deleveraging episodes: the Quant Crash of August 2007 and the Great Deleveraging following the default of Lehman Brothers in Fall 2008.     

流动性过剩与股票价格重估

在固定汇率与资本管制框架下,剩余储蓄的持续增加必然导致流动性过剩,对股票市场而言,只有当实体经济持续的剩余储蓄增加引起流动性过剩时,才会推动股票市场估值中枢的剧烈抬升.对近期经济指标的分析表明,股票市场重估将会持续下去,而货币政策紧缩引起的投资下降会进一步扩大剩余储蓄,加快重估的进程.     

基于复合实物期权的公司流动性定价研究

公司流动性是指公司或企业持有的流动性资产,它除了账面价值外,还含有某种潜在价值。对公司流动性价值进行科学的评估,对于投资者、公司管理者等各方都非常重要。采用实物期权理论对公司流动性进行定价。是目前公司金融理论的前沿课题。这方面的研究不但可以打开对公司流动性认知的新视野,还可以促使我们通过了解公司持有的流动性所蕴含的价值,进而对整个公司价值进行真正正确的评估。本文首次揭示了公司流动性的复合实物期权性质,并用复合实物期权二叉树模型进行了公司流动性定价的尝试,为公司财务管理决策提供了一种量化的工具。通过使用复合实物期权模型,我们得到了公司流动性复合期权的价值,这个价值不但大于流动性持有的机会成本和其最初时刻的静态价值,同样也比常用的NPV法算出的项目价值大。多出来的价值就是考虑了流动性复合期权的结果。     

2010-2011年中国宏观经济报告——流动性回收与新规划效应下的中国宏观经济

2010年中国宏观经济步入了"高位回稳"、"经济常态化"、"价格偏高"、"结构良性化"的运行轨道。2011年中国宏观经济一方面延续了2010年经济运行的逻辑,另一方面将出现货币政策的全面转向、外部环境的变异以及"十二五"规划的全面启动等新因素,这决定了2011年中国宏观经济将呈现"复杂但却平稳"的态势。本文利用模型对于相关宏观经济指标进行了预测,并提出了相应的政策建议。