Found 30 article(s) for author 'Samuel Hanson'

Monetary Policy and Long-Term Real Rates

Monetary Policy and Long-Term Real Rates. Samuel G. Hanson, Jeremy Stein, April 2014, Paper. “Changes in monetary policy have surprisingly strong effects on forward real rates in the distant future. A 100 basis point increase in the two-year nominal yield on an FOMC announcement day is associated with a 42 basis point increase in the ten-year forward real rate. This finding is at odds with standard macro models based on sticky nominal prices, which imply that monetary policy cannot move real rates over a horizon longer than that over which all prices in the economy can readjust…” Link

Tags: , , , , , ,

Mortgage Convexity

Mortgage Convexity. Samuel G. Hanson, January 2014, Paper. “Most home mortgages in the U.S. are fixed-rate loans with an embedded prepayment option. When long-term rates decline, the effective duration of mortgage-backed securities (MBS) falls due to heightened refinancing expectations. I show that these changes in MBS duration function as large-scale shocks to the quantity of interest rate risk that must be borne by professional bond investors. I develop a simple model in which the risk tolerance of bond investors is limited in the short run, so these fluctuations in MBS duration generate…” Link Verified October 11, 2014

Tags: , ,

The Rise and Fall of Securitization

The Rise and Fall of Securitization. Samuel G. Hanson, Adi Sunderam, December 2013, Paper. “The rise and fall of nontraditional securitizations—collateralized debt obligations and mortgage-backed securities backed by nonprime loans—played a central role in the financial crisis. Little is known, however, about the factors that drove the pre-crisis surge in investor demand for these products. Examining insurance companies’ and mutual funds’ holdings of fixed income securities, we find evidence suggesting that both agency problems and neglected risks played an important role…” Link Verified October 11, 2014

Tags: , , , , ,

Are There Too Many Safe Securities? Securitization and the Incentives for Information Production

Are There Too Many Safe Securities? Securitization and the Incentives for Information Production. Samuel Hanson, Adi Sunderam, June 2013, Paper. “We present a model that helps explain several past collapses of securitization markets. Originators issue too many informationally insensitive securities in good times, blunting investor incentives to become informed. The resulting scarcity of informed investors exacerbates market collapses in bad times. Inefficiency arises because informed investors are a public good from the perspective of originators. All originators benefit from the presence of additional informed investors in bad times…” Link verified March 28, 2014

Tags: , , ,

An Evaluation of Money Market Fund Reform Proposals

An Evaluation of Money Market Fund Reform Proposals. Samuel Hanson, David S. Scharfstein, Adi Sunderam, April 2013, Paper. “We analyze the leading reform proposals to address the structural vulnerabilities of money market mutual funds (MMFs). We assume that the main goal of MMF reform is safeguarding financial stability. In light of this goal, reforms should reduce the ex ante incentives for MMFs to take excessive risk and increase the ex post resilience of MMFs to system-wide runs. Our analysis suggests that requiring MMFs to have subordinated capital buffers could generate significant financial stability benefits. Subordinated capital provides MMFs…” Link

Tags: , , , ,

Issuer Quality and Corporate Bond Returns

Issuer Quality and Corporate Bond Returns. Robin Greenwood, Samuel G. Hanson, February 2013, Paper. “We show that the credit quality of corporate debt issuers deteriorates during credit booms, and that this deterioration forecasts low excess returns to corporate bondholders. The key insight is that changes in the pricing of credit risk disproportionately affect the financing costs faced by low quality firms, so the debt issuance of low quality firms is particularly useful for forecasting bond returns. We show that a significant decline in issuer quality is a more reliable signal of credit market overheating than rapid…” Link verified August 21, 2014

Tags: , ,

The Minimum Balance at Risk: A Proposal to Mitigate the Systemic Risks Posed by Money Market Funds

The Minimum Balance at Risk: A Proposal to Mitigate the Systemic Risks Posed by Money Market Funds. Samuel Hanson, 2013, Opinion. “Many academics, policymakers, and market participants have recently been pushing for a significant overhaul of money market fund (MMF) regulations. Others oppose any significant changes in these regulations. Why has this historically sleepy corner of the mutual fund sector become a frontline battle in the postcrisis debate about financial regulation? And what can this debate tell us about the theory and practice of financial regulation and its future prospects for success?…” Link

Tags: ,

A Macroprudential Approach to Financial Regulation

A Macroprudential Approach to Financial Regulation. Jeremy Stein, Samuel Hanson, Winter 2011, Paper. “Many observers have argued that the regulatory framework in place prior to the global financial crisis was deficient because it was largely “microprudential” in nature. A microprudential approach is one in which regulation is partial equilibrium in its conception and aimed at preventing the costly failure of individual financial institutions. By contrast, a “macroprudential” approach recognizes the importance of general equilibrium effects, and seeks to safeguard the financial system as a whole. In the aftermath of the…” Link

Tags: , ,

A Gap-Filling Theory of Corporate Debt Maturity Choice

A Gap-Filling Theory of Corporate Debt Maturity Choice. Jeremy Stein, Robin Greenwood, Samuel Hanson, June 2008, Paper. “We argue that time-series variation in the maturity of aggregate corporate debt issues arises because firms behave as macro liquidity providers, absorbing the large supply shocks associated with changes in the maturity structure of government debt. We document that when the government funds itself with relatively more short-term debt, firms fill the resulting gap by issuing more long-term debt, and vice-versa. This type of liquidity provision is undertaken more aggressively: i) in periods when the ratio…” 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: , ,