Journal of Economics and Finance

This paper extends the shift-contagion concept to housing price returns in order to examine co-movements between pairs of regional housing markets in the US. It associates nonlinearities of housing prices with the monetary policy criteria at disaggregate levels. The framework with Markov-switching volatility in Gravelle et al. (Journal of International Economics 68:409–423, 2006) is utilized to investigate housing contagion phenomena which are defined as the switches in the structural transmission of common shocks across regional housing markets. The empirical results suggest that interactions between regional and nationwide housing markets switch across low-volatility and high-volatility regimes of common shocks for the Northeast and the West whose housing price returns are nonlinear. In addition, there is the significantly time-varying interdependence between the West and each of the other three regional housing markets. The estimated indicator of the monetary policy effectiveness implies that monetary policies can be effective in the Northeast and the West because they are more closely linked with other regional housing markets in volatile phases which are subject to housing crises. Noticeably, the broken interrelationships between regional housing markets and real economies in the 2001 recession imply high vulnerability to housing bubbles for regional markets, while short-term monetary policies can be effective in stabilizing the housing market turmoil around 2007.

In 2016, India's Insolvency and Bankruptcy Board laid out the Insolvency and Bankruptcy Code for Indian companies struggling financially and seeking solvency or resolution. Since then, around three hundred firms have filed for bankruptcy resolution in India as per IBC 2016. This research studies the financial distress in Indian companies listed on the Bombay Stock Exchange (BSE) by taking a balanced sample of companies. The extant research has employed various methodologies. We apply state-of-the-art machine learning techniques for the task of prediction, such as logistic regression, lasso regression, decision tree, bagging, boosting, and support vector machine. We selected eighteen firm-level variables as explanatory variables, among which the ratio of Market capitalization/Debt came out to be the most critical variable in all the models. This variable is suggested as a measure of leverage in Altman's z-score model. The finding on the significance of the ratio of Market capitalization/Debt is in line with the existing literature. Debt is expected to be higher for financially distressed firms than the financially healthy ones. Further, as the investors might not be interested in investing in a distressed firm, it is likely to lead to a further decrease in market capitalization in financially distressed firms. The random forest bagging model achieved the highest accuracy, recall, and area under the curve (AUC) for the receiver operating characteristic (ROC) curve on the performance of the models. The boosting model achieved the highest precision.

The composed error stochastic frontier model is used to separate random variations in fire insurance losses from systematic unexpected losses due to adverse selection or moral hazard. Net premiums are an ex-ante predictor of losses, based on information available to insurers. Losses due to information unknown to the insurer are picked up by the half-normal part of the error term. Loss data for 275 stock fire companies operating in 51 states and territories in 1917 are analyzed in a random effects panel data model. The mean cost per insurer of adverse selection and moral hazard amounts to 15% of fire losses. This is an upper bound estimate because some portion of this cost may be due to failure to operate efficiently rather than incomplete information.

Sử dụng dữ liệu khảo sát từ các chủ thẻ bán lẻ và thẻ nhiên liệu, chúng tôi xem xét sự thay thế giữa thẻ ngân hàng đa năng và thẻ sở hữu cũng như cách mà các nhà phát hành có thể dự đoán được nhóm người tiêu dùng nào có khả năng thay thế nhiều nhất. Sự tiện lợi và chương trình hoàn tiền là những lý do chính dẫn đến việc sử dụng thẻ ngân hàng. Tuy nhiên, người tiêu dùng sử dụng thẻ nhiên liệu sở hữu của họ để theo dõi hồ sơ mua sắm và thẻ bán lẻ sở hữu để nhận được dịch vụ tốt hơn. Những kết quả này giúp giải thích sự gia tăng phổ biến của các loại thẻ “hợp tác thương hiệu”.

This paper examines the effects of inflation expectations on nominal interest rates, and incentives to save and invest under partial and complete tax indexation schemes. One would expect that a partially indexed structure would be better than a non-indexed system. However, this is not the case—it reduces the adverse effects of inflation on the incentives to save, but accentuates them on the incentives to invest. Moreover, a change from a non-indexed tax structure to a fully-indexed structure will, ceteris paribus, lead to lower equilibrium interest rates, whereas a switch to a partially indexed system will imply higher rates.

This paper presents a logit model for dating business-cycle turning points. The regressors are monthly series from the Business Cycle Indicators database of the Conference Board. Dividing the sample period into a subset for model initialization (1959∶9–1970∶12) and a subset for testing (1971∶1–2003∶12) yields a chronology that is nearly identical to that established by the National Bureau of Economic Research (NBER). However, the recognition lag is less than four months, in contrast to an average of more than eleven months for the official chronology. (JEL E320)

An agency-theory model of IPO management retention is presented and empirically explored. The model is based upon the differences between the investment public’s and underwriters’ fears of the consequences of management entrenchment and other agency problems. The model suggests that IPO underpricing should be a curvilinear hump-shaped function of retention. A large-sample empirical exploration verifies the curvilinear relation.

Finance literature highlights various reasons for stock performance subsequent to earnings announcements. However, other moving parts in these scenarios must also be simultaneously specified. While both revenue and earnings surprises are important for determining stock performance, forward-looking guidance and firm valuation prior to earnings should also be considered. Additionally, analyses that solely consider market-level data miss important subtleties evident in a sector-specific study, as “normal” growth and valuation metrics across sectors widely differ. We differentiate between firms that announce earnings during the evening hours (after the close) and firms that announce earnings during the morning hours (prior to the open).

This paper empirically investigates a complete theoretical model relating the operating characteristics of a firm to the total, systematic, and unsystematic risk of its equity. The degree of operating leverage, the ratio of net profits to firm value, and the variability of unit output are all found to be positively correlated with each of the three risk measures. The degree of financial leverage, while positively related to total and unsystematic risk, does not appear to be related to systematic risk. After controlling for the business risk of the firm, no evidence can be found of an interaction between the degree of operating leverage and the degree of financial leverage.