Found 409 article(s) for author 'Financial Services'

Disclosure Is the Best Kind Of Credit Regulation

Disclosure Is the Best Kind Of Credit Regulation. Cass Sunstein, August 13, 2008, Opinion. “The Federal Reserve Board recently issued proposed amendments to Regulation Z, which governs Truth in Lending. According to the Fed, the amendments ‘are intended to improve the effectiveness of the disclosures consumers receive in connection with credit card accounts and other revolving credit plans by ensuring that information is provided in a timely manner and in a form that is readily understandable.’ The Fed’s interest in this problem should be applauded, especially in light of the consumer credit crisis…” Link

Tags: , ,

Can Exchange Rates Forecast Commodity Prices?

Can Exchange Rates Forecast Commodity Prices? Kenneth Rogoff, June 29, 2008, Paper. “We show that “commodity currency” exchange rates have remarkably robust power in predicting global commodity prices, both in-sample and out-of-sample, and against a variety of alternative benchmarks. This result is of particular interest to policymakers, given the lack of deep forward markets in many individual commodities, and broad aggregate commodity indices in particular. We also explore the reverse relationship (commodity prices forecasting exchange rates) but Önd it to be notably less robust…” Link

Tags: , ,

The Continuing Puzzle of Short Horizon Exchange Rate Forecasting

The Continuing Puzzle of Short Horizon Exchange Rate Forecasting. Kenneth Rogoff, Vania Stavrakeva, June 2008, Paper. “Are structural models getting closer to being able to forecast exchange rates at short horizons? Here we argue that misinterpretation of some new out-of-sample tests for nested models, over-reliance on asymptotic test statistics, and failure to sufficiently check robustness to alternative time windows have led many studies to overstate even the relatively thin positive results that have been found. We find that by allowing for common cross-country shocks in our panel forecasting…” (May require user account or purchase) Link

Tags: , ,

Bank Accounting Standards in Mexico: A Layman’s Guide to Changes 10 Years after the 1995 Bank Crisis

Bank Accounting Standards in Mexico: A Layman’s Guide to Changes 10 Years after the 1995 Bank Crisis Aldo Musacchio, April 2, 2008, Paper.  “After the 1995 crisis, the Mexican banking system experienced significant changes in bank accounting standards. Most of these changes took place between 1996 and 2001, and had a significant impact in the structure and interpretation of financial information of banks. This document explains the major changes on bank accounting, their purpose and structure, and discusses their impact on financial information reported by Mexican banks. It also provides the English equivalent of…” Link

Tags: , ,

Do Hedge Funds Profit From Mutual-Fund Distress?

Do Hedge Funds Profit From Mutual-Fund Distress? Jeremy Stein, Samuel Hanson, February 2008, Paper. “This paper explores the question of whether hedge funds engage in front-running strategies that exploit the predictable trades of others. One potential opportunity for front-running arises when distressed mutual funds — those suffering large outflows of assets under management — are forced to sell stocks they own. We document two pieces of evidence that are consistent with hedge funds taking advantage of this opportunity. First, in the time series, the average returns of long/short equity hedge funds are significantly higher in those…” Link

Tags: , ,

The Promise of Prediction Markets

The Promise of Prediction Markets. Cass Sunstein, January 1, 2008, Paper. “Prediction markets are markets for contracts that yield payments based on the outcome of an uncertain future event, such as a presidential election. Using these markets as forecasting tools could substantially improve decision making in the private and public sectors. We argue that U.S. regulators should lower barriers to the creation and design of prediction markets by creating a safe harbor for certain types of small stakes markets.We believe our proposed change has the potential to stimulate innovation in the design…” Link

Tags: , ,

Repayment Frequency and Default in Micro-Finance: Evidence from India

Repayment Frequency and Default in Micro-Finance: Evidence from India, Erica Field, Rohini Pande, January 2008, Paper. “In stark contrast to bank debt contracts, most micro-finance con- tracts require that repayments start nearly immediately after loan disbursement and occur weekly thereafter. Even though economic theory suggests that a more flexible repayment schedule would benefit clients and potentially improve their repayment capacity, micro- finance practitioners argue that the fiscal discipline imposed by frequent repayment is critical to preventing loan default. In this paper we use data from a field experiment which randomized client assignment to a weekly or monthly repayment schedule and find no significant effect of type of repayment schedule on client delinquency or default.” Link

Tags: , , , , ,

Where Does It Go? Spending by the Financially Constrained

Where Does It Go? Spending by the Financially Constrained. Shawn Cole, 2008, Book Chapter, “Despite widespread interest by academics, businesspeople, and policymakers, little is known about the financial behavior of low-income individuals, particularly the unbanked and underbanked. We examine the spending patterns of low- and moderate-income (LMI) households using a new database and focus on differences in spending as a function of consumers’ credit constraints. Our work leverages a unique and proprietary data set of spending information on more than 1.5 million individuals to shed light on important questions at the intersection of consumer credit and consumer spending: Do credit-constrained consumers spend money more quickly than less constrained consumers?Link

Tags: , , ,

Arbitrage in Housing Markets

Arbitrage in Housing Markets. Edward Glaeser, December 15, 2007, Paper. “Urban economists understand housing prices with a spatial equilibrium approach that assumes people must be indifferent across locations. Since the spatial no arbitrage condition is inherently imprecise, other economists have turned to different no arbitrage conditions, such as the prediction that individuals must be indifferent between owning and renting. This paper argues the predictions from these non-spatial, financial no arbitrage conditions are also quite imprecise. Owned homes are extremely different from rental units and owners are…” Link

Tags: , ,

The Only Game in Town: Stock-Price Consequences of Local Bias

The Only Game in Town: Stock-Price Consequences of Local Bias. Jeremy Stein, November 2007, Paper. “Theory suggests that, in the presence of local bias, the price of a stock should be decreasing in the ratio of the aggregate book value of firms in its region to the aggregate risk tolerance of investors in its region. Using data on U.S. states and Census regions, we find clear-cut support for this proposition. Most of the variation in the ratio of interest comes from differences across regions in aggregate book value per capita. Regions with low population density—e.g., the Deep South—are home to relatively few firms per capita…” Link

Tags: ,