Property and Inflation: The Hedging Characteristics of U.K. Commercial Property, 1967–1994

This paper examines the statistical similarities between U.K. commercial property capital and rental values and the price level. Our aim is to determine whether commercial property is an inflation hedge and, if so, what type of inflation it hedges against. To answer these questions, we use both a multivariate unobserved components model and structural vector autoregressions. We find that commercial property is an inflation hedge but only a weak one. More specifically, we find that property offers some form of partial hedge against changes in the underlying inflation rate but not to either temporary or permanent changes to the price level. We also find that capital values offer a stronger hedge than rental values and that industrial and retail property account for most of this hedging capacity. We find no evidence that property responds differently to high or low inflation but we do find capital and rental values respond more to unexpected inflation than anticipated price changes.     

资产证券化与商业银行逆向选择问题:基于美国数据的实证研究

选取2009—2016年美国银行控股公司的季度数据,采用面板向量自回归(PVAR)模型围绕着美国信贷资产证券化与银行逆向选择问题展开了研究。研究结果显示,信贷资产证券化的正交化新息对银行的资产质量、流动性水平以及资产收益波动性产生偏离理论预期的脉冲响应。尽管在理论上信贷资产证券化有助于增强银行资产流动性、改善银行资产质量等,但商业银行的动机扭曲反而导致逆向选择问题:即意味着银行在利润最大化的激励机制下抵消了资产证券化的积极作用。模型为研究结果提供了有力的支持,也为资产证券化与银行逆向选择问题提供了来自Panel VAR模型的独特解释。     

The U.S. Property and Liability Insurance Industry: Firm Growth,Size, and Age

The relationship between firm size, age, and growth is tested for the U.S. property and liability (P‐L) insurance industry, and the determinants of firm characteristics on firm growth are analyzed. Using Heckman's two‐stage methodology, this article examines the relationship between corporate growth and firm size. The relationship between firm growth and firm age is also investigated. Furthermore, to determine time‐varying effects, the analysis is conducted for the different subperiods. The results of this article strongly support Gibrat's Law in the U.S. P‐L insurance market for the testing periods. The results are consistent for longer time periods and for shorter subperiods. It also finds that young firms grow faster than old firms during the sample periods. Related to the determinants of firm characteristics on firm growth, insurers using less input cost tend to grow fast. Economies of scope are positively related to firm growth as well.     

Energy Factors,Leasing Structure and the Market Price of Office Buildings in the U.S.

The Journal of Real Estate Finance and Economics - This paper presents an empirical analysis of the relation between energy factor markets, leasing structures, and the transaction prices of office...     

Effectiveness of Capital Regulation at U.S. Commercial Banks, 1985 to 1994

Unless priced and administered appropriately, a governmental safety net enhances risk-shifting opportunities for banks. This paper quantifies regulatory efforts to use capital requirements to control risk-shifting by U.S. banks during 1985 to 1994 and investigates how much risk-based capital requirements and other deposit-insurance reforms improved this control. We find that capital discipline did not prevent large banks from shifting risk onto the safety net. Banks with low capital and debt-to-deposits ratios overcame outside discipline better than other banks. Mandates introduced by 1991 legislation have improved but did not establish full regulatory control over bank risk-shifting incentives.     

Step Interventions and Market Integration: Tests in the U.S., U.K., and Australian Property Markets

Market integration implies the existence of some long-run equilibrium relationship between markets such that movements in one market are transmitted to movements in another. It is an interesting observation of much of the literature regarding a possible relationship between real estate and stock markets that there is relatively scant attention given to the possible existence of structural breaks and the impact that such breaks may have on tests for market integration. Other research has shown that failure to take into account structural breaks in various macroeconomic data series may have yielded misleading results on cointegration (in particular, unit root tests on individual series). In this article we examine the issue of whether the stock market and real estate markets are stationary or nonstationary in the presence of structural breaks. We adopt the techniques of Perron (1989), Zivot and Andrews (1992), and Perron and Vogelsang (1992). Each of these tests is based on different assumptions and therefore may yield differing results. In general, the results do not support cointegration of domestic property and equity markets or cointegration of markets internationally.     

Inflation Dynamics in the U.S.: Global but Not Local Mean Reversion

A stylized fact of U.S. inflation dynamics is one of extreme persistence and possible unit root behavior. If so, the implications for macroeconomics and monetary policy are somewhat unpalatable. Our econometric analysis proposes a parsimonious univariate representation of the inflation process for the last 60 years, the nonlinear exponential smooth autoregressive. The empirical results confirm a number of the key features such as global stationarity, local unit root behavior, and lower persistence in the post-1983 period than in the pre-1983 period. We compare the forecasting ability of our model with that of competing univariate models and find that the nonlinear model outperforms the linear autoregressive model in the pre-1983 period and the random walk in the post-1983 period at short horizons.     

Organizational Structure,Board Composition,and Risk Taking in the U.S. Property Casualty Insurance Industry

This study examines the impact of organizational structure and board composition on risk taking in the U.S. property casualty insurance industry, addressing different risk‐taking behaviors from different perspectives. The risk‐taking measures include total risk, underwriting risk, investment risk, and leverage risk. The evidence shows that mutual insurers have lower total risk, underwriting risk, and investment risk than stock insurers. In terms of board composition variables, we find that some board composition variables not only have impact on risk‐taking behaviors but also affect different risk measures differently. Thus, using different risk measures is better than using one risk measure to assess risk‐taking behavior. Finally, we conclude that an insurer can control its total risk through management of underwriting, investment, and leverage risks that determine an insurer's risk profile.     

Implied Volatility in the U.K. Commercial Property Market: Empirical Evidence Based on Transaction Data

The primary aim of this research is to compute implied volatility based on a stochastic contingent claim valuation model proposed by Dixit and Pindyck (1994). Over the sample period of 1984 to 1997, and with approximately 20,000 commercial property transactions in the United Kingdom, we find that implied volatility of rental returns is in the region of 24.83 percent. Over the same sample period, the historical and conditional standard deviations of the log returns of transaction-based rental series is estimated to be 15.60 percent and 35.64 percent, respectively. The tests of information content of these risk measures show that there is strong orthogonality in the information impounded in implied volatility estimates compared to that contained in historical standard deviations.     

A Comparative Analysis of U.S. Property and Casualty Reinsurers and Insurers

In empirical research related to the property-casualty insurance industry, studies commonly focus on either insurers or reinsurers. However, in many cases, the definition used to make the distinction between the two groups is often not clearly defined and/or the definition varies across studies. This variation could result in a substantially different group of firms being included or excluded from the study, thereby affecting the empirical results obtained. This study builds upon Chen and Hamwi , who compare the performance of U.S. insurers and reinsurers. The objective of the study is fourfold: (1) to compare the definitions of insurer and reinsurer commonly used in prior research to identify differences, (2) to expand upon the traditional methods of classifying insurers and reinsurers, (3) to compare the individual firm-level characteristics of insurers and reinsurers to detect potential variation across categories and across definitions, and (4) to analyze the impact of different definitions on the results of multivariate analyses exploring common research questions. The univariate results indicate that there are some variations in the characteristics of the firms based on the categorization of insurers and reinsurers arising from different definitions. In addition, we find that there are significant differences in the regression results when comparing models based on various definitions of reinsurers utilized in prior research and when professional reinsurers and incidental reinsurers are grouped together. As such, it is possible that the definition used to include or exclude reinsurers from the sample can impact the results.     

An Examination of Comment Letters Filed in the U.S. Financial Accounting Standard-Setting Process by Institutional Interest Groups

With the advent of some form of IASC-type harmonized accounting standards likely, it has been suggested that they are likely to be based to a large extent on U.S. accounting standards promulgated by the FASB. This study of the content of comments filed on twenty controversial FASB accounting standards by four institutions in the United States is timely. Those comments are assumed to represent the views of financial-statement users, attestors and preparers: FEI, IMA, AIMR, and AICPA. The adopted standards' requirements are also examined in the context of these comments to provide insights about accounting characteristics on which the FASB has aligned with different interest groups. These characteristics include uniformity in accounting methods, disclosure, volatility in financial reporting, and conservatism. The results indicate that AIMR, in representing users, is the most constant in its positions. The two preparer organizations (FEI and IMA) took user-oriented positions on some issues, but showed a strong tendency to oppose costly disclosures and requirements associated with volatility. Comments from the AICPA were diverse but the study revealed an overall bias toward user views. Overall, the FASB aligned most closely with users and the AICPA. FASB tended to adopt standards that led to greater uniformity but compromised on costly disclosures and requirements associated with volatility and conservatism.     

商业银行管理层股票期权激励:特征及其影响因素——基于美国银行业的实证研究

本文以1996～2005年间美国43家代表性商业银行和98家制造业企业为样本,实证分析了商业银行管理层股票期权补偿激励的特征和影响因素。结果表明:商业银行管理层股票期权补偿占总报酬补偿比例的变化呈现出先升后降的倒U型趋势,商业银行管理层股票期权补偿占总报酬补偿的比例显著地低于制造业的这一比例;管理层股票期权补偿与商业银行成长机会、外部董事比例存在着显著的正相关关系,而与杠杆比率呈显著负相关;资产规模、管理层股票补偿对股票期权补偿水平的影响为负,但不显著;行业管制与管理层股票期权补偿费用的会计处理方法对银行业股票期权补偿有显著的影响。     

Operating Expenses and the Rent Premium of Energy Star and LEED Certified Buildings in the Central and Eastern U.S.

This paper investigates the relationship between operating expenses and rents of Energy Star and LEED certified buildings in the Central and Eastern United States. Several studies have shown that sustainable buildings command a rent premium compared to comparable conventional buildings. Lower operating expenses are expected to be a major source of the rent premium that sustainable buildings command. This is especially the case for buildings with triple-net leases, where tenants directly benefit from savings in operating costs. For a large dataset of U.S. office buildings this study finds significantly lower operating expenses in LEED certified buildings. However, savings in operating expenses only explain part of the rent premium. Additional factors must be at work. Surprisingly, we find significantly higher operating expenses in Energy Star rated buildings. Hence, intangible benefits appear to be the major source of rental premiums of Energy Star rated buildings.     

An Empirical Investigation of U.S. Firms in Reorganization

The purpose of this paper is to understand the institutional features of Chapter 11 from an empirical examination of thirty firms that have emerged from reorganization. We find the recontracting framework of Chapter 11 to be complex, lengthy, and costly. Violations of absolute priority in favor of stockholders are frequently encountered. These deviations may result from the bargaining process of Chapter 11 or from a recontracting process between creditors and stockholders which recognizes the ability of stockholder-oriented management to preserve firm value. An example of such recontracting addresses Myers' underinvestment problem. An investigation of the effects of Chapter 11 on the pricing of risky debt is also provided.     

The Dynamics of Liquidity in Commercial Property Markets: Revisiting Supply and Demand Indexes in Real Estate

The Journal of Real Estate Finance and Economics - A common definition of liquidity in real estate investment is the ability to sell property assets quickly at full value, as reflected by...     

The Impact of Derivatives Activity on Commercial Banks: Evidence from U.S. Bank Holding Companies

We have examined the impact of derivatives activity on commercial banks based on panel data from 18 large U.S. bank holding companies (BHC). This paper found that in general the larger the notional values of non-traded derivatives, the more derivative positions held by banks, meaning potentially better performance. The derivatives activity increased the BHCs’ overall risk level, the reason is that most US BHCs are able to take more speculative positions in derivatives contracts in the name of risk management, excluding the impact of held-for-trading positions. Additionally, we found that while participative banks took more speculative positions in derivatives contracts in the name of risk management, while dominant banks preferred to hold derivatives positions for the sake of hedging the underlying risks. Furthermore, we found that the BHCs take more speculative positions in derivatives contracts in the name of risk management before the sub-prime mortgage loan crisis than after the sub-prime mortgage loan crisis, so they assumed more risks before the sub-prime mortgage loan crisis. Overall, our findings suggest that the usage of derivatives for commercial banks is a double-edged sword. Using derivatives maybe a matter of managerial risk appetite to hedge underlying risks for commercial banks, however, it maybe also increase the commercial banks’ overall risks if the derivatives positions are used to speculate, though derivatives activity could increase the profitability of BHCs.