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287
result(s)
Risk, Entropy, and the Transformation of Distributions
Staff Working Paper 2002-11
Mark Reesor,
Don McLeish
The exponential family, relative entropy, and distortion are methods of transforming probability distributions. We establish a link between those methods, focusing on the relation between relative entropy and distortion.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Econometric and statistical methods,
Financial markets,
Market structure and pricing
JEL Code(s):
C,
C0,
C1,
D,
D8,
G,
G0
The Microstructure of Multiple-Dealer Equity and Government Securities Markets: How They Differ
Staff Working Paper 2002-9
Toni Gravelle
Although dealership government and equity securities have, on the surface, similar market structures, the author demonstrates that some subtle differences exist between them that are likely to significantly affect the way market-makers trade, and as such have an impact on the liquidity that they provide.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Debt management,
Financial markets,
Market structure and pricing
JEL Code(s):
G,
G1,
G10,
G15,
G18
Restructuring in the Canadian Economy: A Survey of Firms
Staff Working Paper 2002-8
Carolyn Kwan
The regional offices of the Bank conducted a survey of 140 Canadian companies (representing all non-government sectors of the economy) to study the effects of restructuring (defined as a major change in the way firms do business).
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Labour markets,
Productivity,
Regional economic developments
JEL Code(s):
O,
O5,
O51
Employment Effects of Restructuring in the Public Sector in North America
Staff Working Paper 2001-19
Paul Fenton,
Irene Ip,
Geoff Wright
This paper examines whether restructuring in the public sector contributed to the slower cyclical recovery in Canada than in the United States during the 1990s. Changes in public sector employment are used to investigate this question.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Labour markets
JEL Code(s):
J,
J4,
J45
How Rigid Are Nominal-Wage Rates?
Staff Working Paper 2001-8
Allan Crawford
This study examines the effect of nominal-wage rigidities on wage growth in Canada using a hazard model and micro data for union contracts. The hazard model is specified in a way that allows considerable flexibility in the shape of the estimated notional wage-change distribution.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Inflation targets,
Labour markets
JEL Code(s):
E,
E2,
E24,
E5,
E52,
E6,
E61
Downward Nominal-Wage Rigidity: Micro Evidence from Tobit Models
Staff Working Paper 2001-7
Allan Crawford,
Geoff Wright
This paper uses Tobit models and data for union contracts to examine the extent of downward nominal-wage rigidity in Canada. To be consistent with important stylized facts, the models allow the variance of the notional wage-change distribution to be time-varying and test for menu-cost effects.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Inflation targets,
Labour markets
JEL Code(s):
E,
E2,
E24,
E5,
E52,
E6,
E61
November 16, 2000
Credit Derivatives
Credit derivatives are a useful tool for lenders who want to reduce their exposure to a particular borrower but are unwilling to sell their claims on that borrower. Without actually transferring ownership of the underlying assets, these contracts transfer risk from one counterparty to another. Commercial banks are the major participants in this growing market, using these transactions to diversify their portfolios of loans and other risky assets. The authors examine the size and workings of this relatively new market and discuss the potential of these transactions for distorting existing incentives for risk management and risk monitoring.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Credit and credit aggregates,
Financial markets,
Market structure and pricing
August 15, 2000
Restructuring in the Canadian Economy: A Survey of Firms
Towards the end of the 1980s and into the early 1990s, the Canadian economy experienced a number of structural changes. These included free trade agreements (both the FTA and NAFTA), significant technological advances, deregulation in many sectors of the economy, the arrival of large, U.S.-based retailers, and the introduction of the GST.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Labour markets,
Productivity,
Regional economic developments
August 14, 2000
Approaches to Current Stock Market Valuations
The increase in North American stock prices in 1999 and early 2000 has generated interest in the valuation assumptions that would make these price levels sustainable. Here, commonly used valuation techniques are applied to stock markets in Canada and the United States. For the comparative yield approach, real interest rates (rather than nominal rates) are preferred as the comparator of choice to yields on stock market indexes. The spreads between real interest rates and stock market yields have generally increased over the last two years. The dividend-discount model (DDM) approach provides an analytic linkage between the equity-risk premium and the expected growth of dividends. It suggests that market values (measured at the end of February 2000) could be sustained only by rapid growth of dividends in the future or by the continued assumption of an uncharacteristically low risk premium on equity. The spectacular rise in the value of technology stocks in 1999 is noted (Chart 4), and then the valuation measures for the Canadian stock market excluding the technology sector are examined. When this is done with the comparative yield approach, yield spreads are slightly lower, and for the DDM approach, one does not need to assume as high a growth of dividends or as low a risk premium to validate market valuations. Two effects of the "new economy" on the stock market are noted. One is the lowering of dividend yields, as new-economy technology companies tend to have a high reinvestment rate and a low dividend payout rate. Another relates to the potential for a higher track for the economy's productivity growth, which would mean that higher-than-historical assumptions about future earnings growth would be more plausible. Several explanations for the decline in risk premiums on equity are considered. While short-term volatility in the stock market has, if anything, increased in recent years, low inflation and improved economic performance, along with demographics and investor preferences, may have contributed to a decline in the risk premium demanded by investors. A scenario of rapid growth of dividends in the near term slowing to historical norms in the longer term is examined. While this approach can go partway towards explaining high stock market valuations, it requires assumptions that are outside historical experience.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Financial markets,
Market structure and pricing