Tools for Financial Innovation: Neoclassical versus Behavioral Finance

The behavioral finance revolution in academic finance in the last several decades is best described as a return to a more eclectic approach to financial modeling. The earlier neoclassical finance revolution that had swept the finance profession in the 1960s and 1970s represented the overly‐enthusiastic pursuit of only one model. Freed from the tyranny of just one model, financial research is now making faster progress, and that progress can be expected to show material benefits. An example of the application of both behavioral finance and neoclassical finance is discussed: the reform of Social Security and the introduction of personal accounts.     

Neoclassical finance,behavioral finance and noise traders: A review and assessment of the literature

While mainstream neoclassical finance ignores the role played by noise traders, a significant amount of empirical evidence is available to show that noise traders are active market participants and that their participation gives rise to market anomalies. Unlike neoclassical finance, behavioral finance allows for market inefficiency on the grounds that market participants are subject to common human errors that arise from heuristics and biases. In this paper we review the literature on the behavior of noise traders and analyze the consequences of their presence in the market, starting with a distinction between neoclassical finance and behavioral finance. We identify the market anomalies that provide evidence for the tendency of markets to trade at irrational levels, demonstrate how noise trading is related to some market fundamentals, and describe the models used to quantify noise trader risk.     

嵌入社会责任与扩展公司财务理论

主流的公司财务理论是社会责任外生型的,其理论渊源是新古典范式的主流经济学。超越新古典范式,从嵌入性立场重新审视企业,则现代企业在性质上是一系列经济契约与社会契约的集合体,并且现代企业是独立于股东的实体而不是合法虚构。从公司实体假说出发,经典的代理理论需要重新解释,并且公司的财务目标函数需要重新修正。与修正的财务目标函数相匹配,公司财务理论需要在决策标准、分配理论和决策机制等方面进行适当地扩展。     

Intersectoral Labor Immobility,Sectoral Comovement,and News Shocks

Sectoral comovement of output and hours worked is a prominent feature of business cycle data. However, most two‐sector neoclassical models fail to generate this sectoral comovement. We construct and estimate a two‐sector neoclassical Dynamic Stochastic General Equilibrium (DGSE) model generating sectoral comovement in response to both anticipated and unanticipated shocks. The key to our model's success is a significant degree of intersectoral labor immobility, which we estimate using data on sectoral hours worked. Furthermore, we demonstrate that imperfect intersectoral labor mobility provides a better explanation for the sectoral comovement than an alternative model emphasizing the role of labor‐supply wealth effects.     

Inflation Taxation and Welfare with Externalities and Leisure

This paper examines how inflation taxation affects resource allocation and welfare in a neoclassical growth model with leisure, a production externality and money in the utility function. Switching from consumption taxation to inflation taxation to finance government spending reduces real money balances relative to income, but increases consumption, labor, capital, and output. The net welfare effect of this switch depends crucially on the strength of the externality and on the elasticity of intertemporal substitution. While it is always negative without the externality, it is likely to be positive with a strong externality and elastic intertemporal substitution.     

金融发展推动产业供给侧结构性改革的路径选择

基于新古典经济增长理论,提出金融发展推动我国产业供给侧结构性改革的理论路径.利用我国2008-2015年省级面板数据,通过构建双向固定效应模型对相关路径进行探究和论证,结果表明:金融规模推动产业层次提升的资本驱动路径的有效性边际递减,金融结构引导产业科技水平提高的创新引领路径的有效性并不显著,金融效率促进产业高效化发展的管理优化路径的有效性逐渐提升.     

Corporate Debt Structure and the Financial Crisis

We present a DSGE model where firms optimally choose among alternative instruments of external finance. The model is used to explain the evolving composition of corporate debt during the financial crisis of 2008–09, namely, the observed shift from bank finance to bond finance, at a time when the cost of market debt rose above the cost of bank loans. We show that the flexibility offered by banks on the terms of their loans and firms' ability to substitute among alternative instruments of debt finance are important to shield the economy from adverse real effects of a financial crisis.     

How to measure capital investment efficiency: a literature synthesis

This article reviews and integrates the empirical literature on the measurement of investment efficiency in the areas of accounting and finance. We identify the theories behind the measures and provide a framework which organises the measures of investment efficiency into three groups: those based on neoclassical theories, agency theory and real options theory. Furthermore, the advantages and disadvantages of each type of measure are discussed, allowing researchers to compare and then ascertain the most appropriate measure for their research purpose and research context.     

绿色金融、绿色创新与经济高质量发展

在可持续增长理论的基础上,本文将减排技术内生化,建立带有环境约束并包含金融部门的经济增长模型,解释了绿色金融通过支持绿色创新提升经济增长质量的内在机制。这一理论得到了基于中国省级面板数据中介效应分析的支持。本文为绿色金融的经济学建模提供了新的思路,推进了绿色金融的“功能”理论,论证了绿色金融对经济增长质量影响的“绿色创新渠道”,这意味着绿色金融不限于对少数清洁行业的支持,针对高污染、高能耗行业内部环保技术升级的金融服务也至关重要,是未来绿色金融政策需要关注的问题。     

基于信号传递博弈的融资租赁市场均衡分析

融资租赁作为一种新的金融工具,已被诸多经济发达的国家普遍采用,并成为其金融市场的重要组成部分。在我国中小企业融资难的情况下,融资租赁也不失为中小企业融资的一种可供选择的方式。本文借鉴斯宾塞劳动力市场信号传递模型,构建一个符合我国中小企业融资市场实际状况的融资租赁市场调控模型。研究结果表明:融资租赁市场的均衡既取决于承租方的装裱成本,也取决于不同类型承租方的租金差异、低营运能力承租方的项目投入的成功率及低营运能力承租方的信用程度(即履约率)。     

Presidential Address: Pension Policy and the Financial System

In this paper, I examine the effect of pension policy on the structure of financial systems around the world. In particular, I explore the hypothesis that policies that promote pension savings also promote the development of capital markets. I present a model that endogenizes the extent to which savings are intermediated through banks or capital markets, and derive implications for corporate finance, household finance, banking, and the size of the financial sector. I then present a number of facts that are broadly consistent with the theory and examine a variety of alternative explanations of my findings.     

Social and solidarity finance: A conceptual approach

An analysis of the social- and solidarity-finance system of relationships, which has characteristics that differ from those of other financial intermediaries, underpins the conceptual approach of this article. Social and solidarity finance constitutes a set of interdependent financial and social relationships, and partnerships between individuals and organisations, that mesh into an organised whole.This article makes use of institutional economics to understand those mechanisms of interaction between individuals, organisations and institutions that are not strictly economic. First, we offer a new conceptual framework on social and solidarity finance from an institutional point of view. Then, based on this framework, we outline the sustainability of alternative finance and its ability to respond to specific entrepreneurship needs. Finally, we present the French situation regarding social and solidarity finance to highlight the main characteristics of alternative finance.     

How alternative finance informs central themes in corporate finance

This paper investigates three areas of corporate finance, and the role of alternative finance in contributing to our understanding of these areas. First, we look at disclosure, information asymmetry, and adverse selection, and how different alternative finance solutions are used to mitigate these issues. Second, we examine moral hazard and risk taking and how these behaviours are shaped by new types of alternative finance. Third, we consider the role of control rights, and show how their importance varies by context including types of alternative finance and the country-level institutional setting.     

The genesis of the 2008 global financial crisis and challenges to the neoclassical paradigm of finance

In the first step, this paper briefly discusses the macroeconomic background of the 2008 financial crisis. Next, we take a wider approach and we look at systemic changes that global economics, and financial markets in particular, had undergone. We wonder if these transformations, and their effects so dramatically demonstrated in 2008, give grounds to modify the theoretical background of finance. The neoclassical paradigm might be seen as an idealized normative benchmark. On the other hand, behavioral approach helps explain deviations from this benchmark, however itself it lacks the normative character. We conclude that in contemporary circumstances an interdisciplinary approach is needed in the search for an adequate theory, as the financial world is getting more and more complex and dynamic.     

The Three‐Factor Model: A Practitioner's Guide

The three‐factor model (3FM) has slowly but steadily become a popular alternative to the CAPM for measuring risk from the perspective of both corporate finance and portfolio management. The evidence clearly shows a negative relationship between market capitalization and returns, and a positive relationship between the book‐to‐market ratio and returns. Under the assumption that size and value are risk factors, the 3FM incorporates a market risk premium, a size premium, and a value premium into a model that aims to assess risk in a more comprehensive way, and ultimately to provide a more reliable estimation of required return. The required return produced by the 3FM has corporate finance applications (such as cost of capital estimation, project evaluation, and firm valuation) as well as portfolio management applications (such as performance evaluation). This article discusses the foundations and intuition behind the 3FM, as well as its application to the estimation of the cost of equity and excess returns.     

Safe Assets as Commodity Money

This paper presents a model in which safe assets are systemic because they are the medium of exchange in risky assets. It connects the literature from banking and finance on safe assets to the monetary literature on alternative monetary systems involving commodity money, interest bearing money, and private money creation. Because safe assets have intrinsic value, changes in their supply lead to changes in market efficiency. Additionally, because safe assets are costly to produce, there is overproduction of safe assets relative to the social optimum. When the model is calibrated to plausible liquidity premiums the resulting inefficiencies are not large.     

Extreme Value Theory as a Risk Management Tool

The financial industry, including banking and insurance, is undergoing major changes. The (re)insurance industry is increasingly exposed to catastrophic losses for which the requested cover is only just available. An increasing complexity of financial instruments calls for sophisticated risk management tools. The securitization of risk and alternative risk transfer highlight the convergence of finance and insurance at the product level. Extreme value theory plays an important methodological role within risk management for insurance, reinsurance, and finance.     

Corporate Finance and Corporate Governance

A combined treatment of corporate finance and corporate governance is herein proposed. Debt and equity are treated not mainly as alternative financial instruments, but rather as alternative governance structures. Debt governance works mainly out of rules, while equity governance allows much greater discretion. A project-financing approach is adopted. I argue that whether a project should be financed by debt or by equity depends principally on the characteristics of the assets. Transaction-cost reasoning supports the use of debt (rules) to finance redeployable assets, while non-redeployable assets are financed by equity (discretion). Experiences with leasing and leveraged buyouts are used to illustrate the argument. The article also compares and contrasts the transaction-cost approach with the agency approach to the study of economic organization.     

Performance of Thinly Traded Assets: A Case in Real Estate

Thinly traded private assets do not fit into the traditional finance paradigm of a liquid and well‐functioning market where trading is continuous and instantaneous. Since private assets cannot be bought and sold easily, they bear liquidity risk. Classical finance theories cannot properly gauge the performance of illiquid private assets because they implicitly assume such illiquidity is trivial. This paper proposes an alternative performance metric for the illiquid private asset, which explicitly captures liquidity risk in a formal analysis. Applying the new performance metric, we are able to explain the decades‐old “real estate risk premium puzzle.”