Found 401 article(s) in category 'Q3: Financial Crisis?'

Can analysts assess fundamental risk and valuation uncertainty? An empirical analysis of scenario-based value estimates

Can analysts assess fundamental risk and valuation uncertainty? An empirical analysis of scenario-based value estimates. Suraj Srinivasan, September 2016, Paper, “We use a data set of sell-side analysts’ scenario-based equity valuation estimates to examine whether analysts can assess the state-contingent risk surrounding a firm’s fundamental value. We find that the spread in analysts’ scenario-based valuations captures the riskiness of operations and predicts the absolute magnitude of long-run valuation errors and future changes in firm fundamentals. We also show that analysts’ assessment of fundamental risk and its predictive ability systematically improved after the financial crisis, consistent with the macroeconomic shock raising analysts’ awareness of firms’ systematic risk exposures.Link

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Problems Unsolved and a Nation Divided

Problems Unsolved and a Nation Divided.  Michael Porter, Jan Rivkin, and Mihir Desai, September 2016, Paper, “America retains and enjoys many strengths. However, various economic indicators show that the U.S. economy has failed to deliver strong growth and shared prosperity for nearly two decades. These structural issues pre-date the Great Recession and are compounded by political paralysis. This report calls for a national economic strategy for America and proposes federal policy priorities that can form the core of such a strategy. Further, the report highlights corporate and personal tax reform as a promising first step in the strategy. Finally, the report warns that it is impossible to solve the issues besetting the U.S. economy and bring prosperity to millions of Americans if the United States remains mired in crippling political gridlock and vicious rhetoric.Link

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The Federal Reserve’s Balance Sheet as a Financial-Stability Tool

The Federal Reserve’s Balance Sheet as a Financial-Stability Tool. Robin Greenwood, Samuel Hanson, Jeremy Stein, September 2016, Paper, “In this paper, we argue that the Federal Reserve should use its balance sheet to help reduce a key threat to financial stability: the tendency for private-sector financial intermediaries to engage in excessive amounts of maturity transformation—i.e. to finance risky assets using dangerously large volumes of runnable short-term liabilities. Specifically, we make the case that the Fed can complement its regulatory efforts on the financial-stability front by maintaining a relatively large balance sheet, even when policy rates have moved well away from the zero lower bound (ZLB). In so doing, it can help ensure that there is an ample supply of government-provided safe shortterm claims—e.g. interest-bearing reserves and reverse repurchase agreements.Link

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What We Need to do to Get Out of this Economic Malaise

What We Need to do to Get Out of this Economic Malaise. Lawrence Summers, August 18, 2016, Opinion, “John Williams has written the most thoughtful piece on monetary policy that has come out of the Federal Reserve in a long time. He recognizes more explicitly than others that, the neutral interest rate, is now very low and quite probably will remain very low for a long time to come.  As he recognizes, this the essence of the secular stagnation concern that I and others have been expressing for the past three years.Link

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Does Aggregated Returns Disclosure Increase Portfolio Risk Taking?

Does Aggregated Returns Disclosure Increase Portfolio Risk Taking? David Laibson, Brigitte Madrian, August 11, 2016, Paper, “Many experiments have found that participants take more investment risk if they see returns less frequently, see portfolio-level returns (rather than each individual asset’s returns), or see long-horizon (rather than one-year) historical return distributions. In contrast, we find that such information aggregation treatments do not affect total equity investment when we make the investment environment more realistic than in prior experiments. Previously documented aggregation effects are not robust to changes in the risky asset’s return distribution or the introduction of a multi-day delay between portfolio choice and return realization.Link

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Harvard’s Martin Feldstein: Labor Market Remains Tight

Harvard’s Martin Feldstein: Labor Market Remains Tight. Martin Feldstein, August 4, 2016, Opinion, “Former Reagan Economic Advisor and current George F. Baker Professor of Economics at Harvard University Martin Feldstein weighed in on concerns about the deficit and the state of the U.S. economy and job market.” Link

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Varieties of Capitalism in Light of the Euro Crisis

Varieties of Capitalism in Light of the Euro Crisis. Peter Hall, August 2016, Paper, “The Euro crisis began, at least in symbolic terms, on November 5, 2009 when a new Prime Minister announced that the Greek budget deficit would be 12.7 percent of GDP, more than three times the amount projected for that year by the outgoing government. This sparked a crisis of confidence in sovereign debt and European banks that forced Greece, Ireland, Portugal, Spain and Cyprus into torturous negotiations with the European Union, followed by bail-out programs that imposed various combinations of fiscal austerity and structural reform on them. Almost seven years later, the effects of the crisis are still palpable. The Greek economy has lost a quarter of its value; levels of unemployment are close to 20 percent in parts of southern Europe; and the average level of economic activity in the Eurozone as a whole has only now regained its level before the global financial crisis of 2008-09.Link

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Weathering the Great Recession: Variation in Employment Responses by Establishments and Countries

Weathering the Great Recession: Variation in Employment Responses by Establishments and Countries. Richard Freeman, July 2016, Paper, “This paper finds that US employment changed differently relative to output in the Great Recession and recovery than in most other advanced countries or in the US in earlier recessions. Instead of hoarding labor, US firms reduced employment proportionately more than output in the Great Recession, with establishments that survived the downturn contracting jobs massively. Diverging from the aggregate pattern, US manufacturers reduced employment less than output while the elasticity of employment to gross output varied widely among establishments. In the recovery, growth of employment was dominated by job creation in new establishments. The variegated responses of employment to output challenges extant models of how enterprises adjust employment over the business cycle.” Link

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Where the Fed Will Be When the Next Downturn Comes

Where the Fed Will Be When the Next Downturn Comes. Martin Feldstein, July 5, 2016, Opinion, “Testifying before the Senate on June 21, Federal Reserve Chair Janet Yellen said the chances of the U.S. economy sliding into recession this year are “quite low.” I agree. But the Fed still faces the difficult problem of what to do when the next downturn occurs if interest rates are still extremely low.Link

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