/desautels/taxonomy/term/2964/all en /desautels/channels/news/sickness-and-debt-covid-19-impact-sovereign-credit-risk-328393 <p><strong>Authors: <a href="/desautels/patrick-augustin">Patrick Augustin</a></strong>, V. Sokolovski, M.G. Subrahmanyam, and D. Tomio</p> <p><strong>Publication: </strong><em>Journal of Financial Economics</em>, Forthcoming<br /> <br /> <strong>Abstract:</strong></p> Tue, 09 Feb 2021 20:01:22 +0000 julie.lapalme@affiliate.mcgill.ca 79217 at /desautels /desautels/channels/news/sovereign-credit-risk-and-exchange-rates-evidence-cds-quanto-spreads-300597 <p><strong>Authors:</strong> <a href="/desautels/patrick-augustin"><strong>Patrick Augustin</strong></a>, Mikhail Chernov and Dongho Song</p> <p><strong>Publication:</strong> <em>Journal of Financial Economics</em>, Forthcoming</p> <p><strong>Abstract:</strong></p> <p>Sovereign CDS quanto spreads tell us how financial markets view the interaction between a country’s likelihood of default and associated currency devaluations (the Twin Ds). A no-arbitrage model applied to the term structure of Eurozone quanto spreads can isolate the Twin Ds and gauge the associated risk premiums. Conditional on the occurrence of default, the true and risk-adjusted 1-week probabilities of devaluation are 42% (2%) and 90% (55%) for the core (periphery) countries. The weekly risk premium for Euro devaluation in case of default for the core (periphery) exceeds the regular currency premium by up to 18 (13) basis points.</p> <p> Thu, 12 Sep 2019 18:58:50 +0000 angela.l.williams@mcgill.ca 74809 at /desautels /desautels/channels/news/large-scale-approach-evaluating-asset-pricing-models-286959 <p><strong>Author:</strong> <strong><a href="/desautels/laurent-barras">Laurent Barras</a></strong></p> <p><strong>Publication: </strong><em>Journal of Financial Economics</em>, Forthcoming</p> <p><strong>Abstract: </strong></p> <p>Recent studies show that the standard test portfolios do not contain sufficient information to discriminate between asset pricing models. To address this issue, we develop a large-scale approach that expands the cross-section to several thousand portfolios. Our novel approach is simple, widely applicable, and allows for formal evaluation/comparison tests. Its benefits are confirmed in empirical tests of CAPM- and characteristic-based models. While these models are all misspecified, we uncover striking performance differences between them. In particular, the human capital and conditional CAPMs largely outperform the CAPM which suggests that labor income and time-varying recession risks are primary concerns for investors.</p> <p> Tue, 01 May 2018 14:49:57 +0000 julie.lapalme@mcgill.ca 68667 at /desautels /desautels/research/desautels-top-tier-publications/journal-financial-economics <p><big>The <em><a href="https://www.journals.elsevier.com/journal-of-financial-economics" target="_blank">Journal of Financial Economics</a> </em>began a new section containing applied papers and case studies in 1989. This section provides a high-quality professional outlet for scholarly studies of actual cases, events or practice. Such phenomena provide a rich source of data that illustrate or challenge accepted theory and lead to new insights about the world.</big></p> Fri, 21 Jul 2017 16:23:40 +0000 julie.lapalme@mcgill.ca 67664 at /desautels