Review of Financial Studies

Review of Financial Studies /channels/taxonomy/term/16605/all en Institutional Trading around Corporate News: Evidence from Textual Analysis /channels/channels/news/institutional-trading-around-corporate-news-evidence-textual-analysis-331539 Authors: A.G. Huang, <a href="//www.mcgill.ca/desautels/hongping-tan">Hongping Tan</a>, and R. Wermers Publication: The Review of Financial Studies, Volume 33, Issue 10, October 2020, Pages 4627-4675. Abstract: Tue, 15 Jun 2021 13:47:54 +0000 webfull 171144 at /channels Cross-Listings and the Dynamics between Credit and Equity Returns /channels/channels/news/cross-listings-and-dynamics-between-credit-and-equity-returns-304156 Authors: <a href="//www.mcgill.ca/desautels/patrick-augustin">Patrick Augustin</a>, Feng Jiao, <a href="//www.mcgill.ca/desautels/sergei-sarkissian">Sergei Sarkissian</a>, Michael J Schill Publication: The Review of Financial Studies, Vol. 33, Issue 1, January 2020 Abstract: We study how listing in multiple markets affects the dynamics between firms’ credit default swap (CDS) and stock returns. We find that cross-listing increases (1) the sensitivity of CDS to stock returns, (2) the integration of CDS with world equity and bond markets, and (3) the statistical synchronicity of CDS and stock prices. Our results are stronger for firms with greater media attention, analyst and CDS coverage, and Google search intensity and for listings in familiar markets. We suggest that a firm’s presence in global equity markets comes with an improvement in the credit-equity integration through a reduction of informational frictions. Wed, 15 Jan 2020 21:09:07 +0000 webfull 157331 at /channels Measuring sovereign bond market integration /channels/channels/news/measuring-sovereign-bond-market-integration-300590 Authors: Ines Chaieb, <a href="//www.mcgill.ca/desautels/vihang-r-errunza" target="_blank">Vihang Errunza</a>, and Rajna Gibson Brandon Publication: The Review of Financial Studies, Forthcoming Abstract: There is significant heterogeneity in the degree and dynamics of sovereign bond market integration across 21 developed and 18 emerging countries. We show that better spanning can significantly enhance market integration through local risk premia dissipation. Integration of the sovereign bond markets increases on average by about 10%, when a country moves from the 25th percentile to the 75th percentile as a result of higher political stability and credit quality, lower inflation and inflation risk, and lower illiquidity. The 10% increase in integration leads to, on average, a decrease in the sovereign cost of funding of about 1% per annum. Thu, 12 Sep 2019 18:17:42 +0000 webfull 153069 at /channels Ruslan Goyenko paper "Illiquidity Premia in Equity Option Markets" selected Editor's Choice in Review of Financial Studies /channels/channels/news/ruslan-goyenko-paper-illiquidity-premia-equity-option-markets-selected-editors-choice-review-286310 Professor <a href="//www.mcgill.ca/desautels/ruslan-goyenko">Ruslan Goyenko</a>'s paper "Illiquidity Premia in Equity Option Markets" with Peter Christoffersen, Kris Jacobs and Mehdi Karoui was selected as Editor's Choice article in the March 2018 issue of Review of Financial Studies. Thu, 29 Mar 2018 18:22:35 +0000 webfull 137006 at /channels What Is the Consumption-CAPM Missing? An Information-Theoretic Framework for the Analysis of Asset Pricing Models /channels/channels/news/what-consumption-capm-missing-information-theoretic-framework-analysis-asset-pricing-models-286302 Authors: <a href="//www.mcgill.ca/desautels/anisha-ghosh">Anisha Ghosh</a>, Christian Julliard, Alex P. Taylor Publication: The Review of Financial Studies, Volume 30, No. 2, February 2017 Abstract: We consider asset pricing models in which the SDF can be factorized into an observable component and a potentially unobservable one. Using a relative entropy minimization approach, we nonparametrically estimate the SDF and its components. Empirically, we find the SDF has a business-cycle pattern and significant correlations with market crashes and the Fama-French factors. Moreover, we derive novel bounds for the SDF that are tighter and have higher information content than existing ones. We show that commonly used consumption-based SDFs correlate poorly with the estimated one, require high risk aversion to satisfy the bounds and understate market crash risk. Read article: <a href="https://academic.oup.com/rfs/article/30/2/442/2444496" target="_blank">The Review of Financial Studies</a> Thu, 29 Mar 2018 17:02:11 +0000 webfull 136999 at /channels Market and Regional Segmentation and Risk Premia in the First Era of Financial Globalization /channels/channels/news/market-and-regional-segmentation-and-risk-premia-first-era-financial-globalization-279306 Authors: David Chambers, <a href="//www.mcgill.ca/desautels/sergei-sarkissian">Sergei Sarkissian</a> and Michael J. Schill Publication: Review of Financial Studies, Forthcoming Abstract: We study market segmentation effects using data on U.S. railroads that list their bonds in New York and London between 1873 and 1913. This sample provides a unique setting for such analysis because of the precision offered by bond yields in cost of capital estimation, the geography-specific nature of railroad assets, and ongoing substantial technological change. We document a significant reduction in market segmentation over time. Whilst New York bond yields exceeded those in London in the 1870s, this premium disappeared by the early 1900s. However, the segmentation premium persisted in the more remote regions of the United States. Read full article: <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2179088" target="_blank">Review of Financial Studies</a> Wed, 18 Oct 2017 18:27:46 +0000 webfull 132037 at /channels Illiquidity Premia in the Equity Options Market /channels/channels/news/illiquidity-premia-equity-options-market-278703 Authors: Peter Christoffersen, <a href="//www.mcgill.ca/desautels/ruslan-goyenko">Ruslan Goyenko</a>, Kris Jacobs, Mehdi Karoui Publication: Review of Financial Studies, Vol. 31, No. 3, March 2018 Abstract: Standard option valuation models leave no room for option illiquidity premia. Yet we find the risk-adjusted return spread for illiquid over liquid equity options is 3:4% per day for at-the-money calls and 2:5% for at-the-money puts. These premia are computed using option illiquidity measures constructed from intraday effective spreads for a large panel of U.S. equities, and they are robust to different empirical implementations. Our findings are consistent with evidence that market makers in the equity options market hold large and risky net long positions, and positive illiquidity premia compensate them for the risks and costs of these positions. Read full article: <a href="https://academic.oup.com/rfs/article/doi/10.1093/rfs/hhx113/4371415/Illiquidity-Premia-in-the-Equity-Options-Market" target="_blank">Review of Financial Studies</a> Tue, 17 Oct 2017 16:32:09 +0000 webfull 131992 at /channels