Search Results
Journal Article
Do international reactions of stock and bond markets reflect macroeconomic fundamentals?
Using quarterly data for the United States, Japan, and the United Kingdom, this article investigates the relationship between changes in fundamental economic conditions and the international reactions of stock and bond markets. The author assesses the degree to which the transmission of information about fundamentals prompts the stock or bond markets in different countries to move together.
Journal Article
The recent growth of financial derivative markets
This article examines the reasons for the phenomenal growth of financial derivative markets in recent years. The author shows how specific demand forces have largely determined the direction and speed of the derivatives' spread.
Working Paper
Price discovery in a market under stress: the U.S. Treasury market in fall 1998
We analyze how price discovery in the inter- dealer market for U.S. Treasury securities differs between stressful times and normal periods. Using tick-by-tick data on inter-dealer transactions in the on-the- run two-year, five-year and 10-year Treasury notes, we find that the impact of trades on prices tends to become significantly stronger on stressful days. This effect remains after accounting for the faster trading, wider spreads, and shallower depth observed on stressful days
Journal Article
Corporate refinancing in the 1990s
U.S. corporations have floated stocks and bonds in unprecedented amounts in the last year. How much have corporate treasurers reduced their firms' interest payments through such refinancing? After assessing the motives for refinancing, the authors estimate the aggregate interest savings achieved through equity issuance, bond calls, and bond sales and compare the effectiveness of refinancing and lower short-term interest rates in easing the interest burden on U.S. corporations' cash flows.
Report
The term structure of announcement effects
We analyze high-frequency responses of U.S. Treasury yields across the maturity spectrum to macroeconomic announcements. We find that surprises in the announcements evoke the sharpest reactions from the intermediate maturities, thus forming striking hump-shaped curves of announcement effects. We then fit an affine-yield model to the yield changes using the announcement surprises as GMM instruments. The model estimates imply that the announcements elicit larger shocks to an expected future target interest rate than to the current short-term interest rate and that different types of ...
Report
Price formation and liquidity in the U.S. treasuries market: evidence from intraday patterns around announcements
We find striking intraday adjustment patterns for price volatility, trading volume, and bid-ask spreads in the U.S. Treasuries market around the time of macroeconomic announcements. The patterns suggest certain hypotheses about price formation and liquidity provision in multiple-dealer markets. These hypotheses assign new importance to public information, heterogeneous views, sluggish price discovery, traditional inventory-control behavior by market makers, and liquidity traders who react with a lag to price changes.
Report
A three-factor econometric model of the U.S. term structure
We estimate and test a model of the U.S. term structure that fits both the time series of interest rates and the cross-sectional shapes of the yield and volatility curves. In the model, three unobserved factors drive a stochastic discount process that prices assets so as to rule out arbitrage opportunities. The resulting bond yields are conveniently affine in the factors. We use monthly zero-coupon yield data from January 1986 to March 1996 and estimate the model by applying a Kalman filter that takes into account the model's no-arbitrage restrictions and using only three maturities at a ...