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Working Paper
The Extent and Cyclicality of Career Changes: Evidence for the U.K
Visschers, Ludo; Hobijn, Bart; Carrillo-Tudela, Carlos; She, Powen (2014-08-27)
U.K. data from 1993-2012 suggest that in economic downturns a smaller fraction of unemployed workers change their career when starting a new job. The proportion of total hires involving a career change also drops. This implies that career changes decline during recessions. The results indicate that recessions are times of subdued reallocation rather than of accelerated and involuntary structural transformation.
Working Paper Series , Paper 2014-21

Working Paper
In the shadow of the United States: the international transmission effect of asset returns
Chang, Kuang-Liang; Leung, Charles Ka Yui; Chen, Nan-Kuang (2012)
We examine how the fluctuations in financial and housing markets in U.S. affect the asset returns and GDP in Hong Kong. In contrast to the results from linear specifications, which concludes that the U.S. and Hong Kong are virtually delinked in terms of the asset markets, our regime-switching models indicate that the unexpected shock of US stock returns, followed by the TED spread, has the most significant effect on HK asset returns and GDP, typically in the regime with high return and low volatility. For the in-sample one-step-ahead forecasting, US Term spread stands out to be the best ...
Globalization Institute Working Papers , Paper 121

Working Paper
Measuring Mortgage Credit Availability : A Frontier Estimation Approach
Hizmo, Aurel; Molloy, Raven S.; Kung, Edward; Anenberg, Elliot (2017-09-29)
We construct a new measure of mortgage credit availability that describes the maximum amount obtainable by a borrower of given characteristics. We estimate this "loan frontier" using mortgage originations data from 2001 to 2014 and show that it reflects a binding borrowing constraint. Our estimates reveal that the expansion of mortgage credit during the housing boom was substantial for all borrowers, not only for low-score or low-income borrowers. The contraction was most pronounced for low-score borrowers. Using variation in the frontier across metropolitan areas over time, we show that ...
Finance and Economics Discussion Series , Paper 2017-101

Working Paper
The Shift from Active to Passive Investing: Potential Risks to Financial Stability?
Shin, Chae Hee; Osambela, Emilio; Kruttli, Mathias S.; Anadu, Kenechukwu E.; McCabe, Patrick E. (2018-08-27)
The past couple of decades have seen a significant shift in assets from active to passive investment strategies. We examine the potential effects of this shift on financial stability through four different channels: (1) effects on investment funds? liquidity transformation and redemption risks; (2) passive strategies that amplify market volatility; (3) increases in asset-management industry concentration; and (4) the effects on valuations, volatility, and comovement of assets that are included in indexes. Overall, the shift from active to passive investment strategies appears to be increasing ...
Supervisory Research and Analysis Working Papers , Paper RPA 18-4

Working Paper
Learning from History : Volatility and Financial Crises
Valenzuela, Marcela; Danielsson, Jon; Zer, Ilknur (2016-10)
We study the effects of volatility on financial crises by constructing a cross-country database spanning over 200 years. Volatility is not a significant predictor of crises whereas unusually high and low volatilities are. Low volatility is followed by credit build-ups, indicating that agents take more risk in periods of low financial risk consistent with Minsky hypothesis, and increasing the likelihood of a banking crisis. The impact is stronger when financial markets are more prominent and less regulated. Finally, both high and low volatilities make stock market crises more likely, while ...
Finance and Economics Discussion Series , Paper 2016-093

Working Paper
Zeroing in on the Expected Returns of Anomalies
Chen, Andrew Y.; Velikov, Mihail (2020-05-22)
We zero in on the expected returns of long-short portfolios based on 120 stock market anomalies by accounting for (1) effective bid-ask spreads, (2) post-publication effects, and (3) the modern era of trading technology that began in the early 2000s. Net of these effects, the average anomaly's expected return is a measly 8 bps per month. The strongest anomalies return only 10-20 bps after accounting for data-mining with either out-of-sample tests or empirical Bayesian methods. Expected returns are negligible despite cost optimizations that produce impressive net returns in-sample and the ...
Finance and Economics Discussion Series , Paper 2020-039

Report
Betting against beta (and gamma) using government bonds
Durham, J. Benson (2015-01-01)
Purportedly consistent with ?risk parity? (RP) asset allocation, recent studies document compelling ?low risk? trading strategies that exploit a persistently negative relation between Sharpe ratios (SRs) and maturity along the U.S. Treasury (UST) term structure. This paper extends this evidence on betting against beta with government bonds (BABgov) in four respects. First, out-of-sample tests suggest that excess returns may have waned somewhat recently and that the pattern seems most pronounced for USTs given data on ten other previously unexamined government bond markets. Second, BABgov ...
Staff Reports , Paper 708

Working Paper
The Seniority Structure of Sovereign Debt
Trebesch, Christoph; Schlegl, Matthias; Wright, Mark L. J. (2019-05-30)
Sovereign governments owe debt to many foreign creditors and can choose which creditors to favor when making payments. This paper documents the de facto seniority structure of sovereign debt using new data on defaults (missed payments or arrears) and creditor losses in debt restructuring (haircuts). We overturn conventional wisdom by showing that official bilateral (government-to-government) debt is junior, or at least not senior, to private sovereign debt such as bank loans and bonds. Private creditors are typically paid first and lose less than bilateral official creditors. We confirm that ...
Working Papers , Paper 759

Working Paper
The Limits of p-Hacking : A Thought Experiment
Chen, Andrew Y. (2019-03-22)
Suppose that asset pricing factors are just p-hacked noise. How much p-hacking is required to produce the 300 factors documented by academics? I show that, if 10,000 academics generate 1 factor every minute, it takes 15 million years of p-hacking. This absurd conclusion comes from applying the p-hacking theory to published data. To fit the fat right tail of published t-stats, the p-hacking theory requires that the probability of publishing t-stats < 6.0 is infinitesimal. Thus it takes a ridiculous amount of p-hacking to publish a single t-stat. These results show that p-hacking alone cannot ...
Finance and Economics Discussion Series , Paper 2019-016

Working Paper
Intergenerational Linkages in Household Credit
Kudlyak, Marianna; Ghent, Andra C. (2016-12-21)
We document novel, economically important correlations between children?s future credit risk scores, default, and homeownership status and their parents? credit characteristics measured when the children are in their late teens. A one standard deviation higher parental credit risk score when the child is 19 is associated with a 24 percent reduction in the likelihood that the child goes bankrupt by age 29, a 36 percent lower likelihood of other serious default, a 35 point higher child credit score, and a 23 percent higher chance of the child becoming a homeowner. The linkages persist after ...
Working Paper Series , Paper 2016-31

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