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Working Paper
Special Repo Rates and the Cross-Section of Bond Prices: the Role of the Special Collateral Risk Premium
We estimate the joint term-structure of U.S. Treasury cash and repo rates using daily prices of all outstanding Treasury securities and corresponding special collateral (SC) repo rates. This allows us to derive a risk premium associated to the SC value of Treasuries and quantitatively link this premium to various price anomalies, such as the on-the-run premium. We show that a time-varying SC risk premium can explain between 74%?90% of the on-the-run premium, and is highly correlated with a number of other Treasury market anomalies. This suggests a commonality across these price anomalies, ...
Working Paper
Internal sources of finance and the Great Recession
The rising stockpile of cash as a share of total assets at U.S. firms has intrigued economists since at least the paper of Bates, Kahle, and Stulz (2006), yet there has been relatively little work on where this cash has come from and how it is related to investment performance. We exploit Statement of Cash Flows data from Compustat to decompose firms' cash stocks and show that the rise in cash holdings has coincided with an increased willingness to save internally generated cash. We show that although investment is normally sensitive to externally generated cash, the increased sensitivity of ...
Working Paper
The sensitivity of long-term interest rates to economic news: comment
Refet Grkaynak, Brian Sack, and Eric Swanson (2005) provide empirical evidence that long forward nominal rates are overly sensitive to monetary policy shocks, and that this is consistent with a model where long-term inflation expectations are not anchored because agents must infer the central bank's inflation target from noisy interest rate movements. Using the same data, methodology, and model, we show that their empirical results are neither persistent nor robust to small changes in sample period or methodology. In addition, their theoretical results rely mainly on an ad hoc law of motion ...