Improving Overnight Loan Identification in Payments Systems Staff Working Paper 2014-25 Mark Rempel Information on the allocation and pricing of over-the-counter (OTC) markets is scarce. Furfine (1999) pioneered an algorithm that provides transaction-level data on the OTC interbank lending market. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial markets, Interest rates, Payment clearing and settlement systems JEL Code(s): C, C3, C38, C5, C53, E, E4, E42, E44, G, G1, G10
June 12, 2014 Reforming Financial Benchmarks: An International Perspective Financial System Review - June 2014 Thomas Thorn, Harri Vikstedt Thomas Thorn and Harri Vikstedt examine the efforts being taken internationally and in Canada to enhance the governance and integrity of financial benchmarks. The report provides an overview of how interbank interest rate benchmarks are set and describes the weaknesses in the process that were exposed by the financial crisis. It also explains recent policy developments designed to make global and Canadian interbank benchmarks more robust. Content Type(s): Publications, Financial System Review articles Topic(s): Financial markets, Financial system regulation and policies, Recent economic and financial developments JEL Code(s): G, G1, G11
Monetary Policy Transmission during Financial Crises: An Empirical Analysis Staff Working Paper 2014-21 Tatjana Dahlhaus This paper studies the effects of a monetary policy expansion in the United States during times of high financial stress. The analysis is carried out by introducing a smooth transition factor model where the transition between states (“normal” and high financial stress) depends on a financial conditions index. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial markets, Monetary policy transmission JEL Code(s): C, C1, C11, C3, C32, E, E3, E32, E4, E44, G, G0, G01
High-Frequency Trading Competition Staff Working Paper 2014-19 Jonathan Brogaard, Corey Garriott, Anna Pomeranets We analyze trading dynamics as successive high-frequency trading (HFT) firms begin to trade stocks in an equity market. Entrants compete with incumbents for volume, and there is crowding out. Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Market structure and pricing JEL Code(s): G, G1, G14, G2, G20, L, L1
Interest on Cash, Fundamental Value Process and Bubble Formation on Experimental Asset Markets Staff Working Paper 2014-18 Giovanni Giusti, Janet Hua Jiang, Yiping Xu We study the formation of price bubbles on experimental asset markets where cash earns interest. There are two main conclusions. Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets, Financial stability JEL Code(s): C, C9, C90, G, G1, G10
Do Sunspots Matter? Evidence from an Experimental Study of Bank Runs Staff Working Paper 2014-12 Jasmina Arifovic, Janet Hua Jiang A "sunspot" is a variable that has no direct impact on the economy’s fundamental condition, such as preferences, endowments or technologies, but may nonetheless affect economic outcomes through the expectations channel as a coordination device. This paper investigates how people react to sunspots in the context of a bank-run game in a controlled laboratory environment. Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Financial stability JEL Code(s): C, C9, C91, C92, D, D8, D80, E, E5, E58, G, G2, G20
Corporate Governance, Product Market Competition and Debt Financing Staff Working Paper 2014-5 Teodora Paligorova, Jun Yang This paper examines the impact of product market competition and corporate governance on the cost of debt financing and the use of bond covenants. We find that more anti-takeover provisions are associated with a lower cost of debt only in competitive industries. Content Type(s): Staff research, Staff working papers Topic(s): Financial markets JEL Code(s): G, G1, G12, G3, G34
It Hurts (Stock Prices) When Your Team Is About to Lose a Soccer Match Staff Working Paper 2014-2 Michael Ehrmann, David-Jan Jansen The end result of major sporting events has been shown to affect next-day stock returns through shifts in investor mood. By studying the soccer matches that led to the elimination of France and Italy from the 2010 FIFA World Cup, we show that mood-related pricing effects can materialize as sporting events unfold. Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets JEL Code(s): G, G0, G02, G1, G12, G14, G15
Regime Switches in the Risk-Return Trade-Off Staff Working Paper 2013-51 Eric Ghysels, Pierre Guérin, Massimiliano Marcellino This paper deals with the estimation of the risk-return trade-off. We use a MIDAS model for the conditional variance and allow for possible switches in the risk-return relation through a Markov-switching specification. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial markets JEL Code(s): G, G1, G10, G12
A Distributional Approach to Realized Volatility Staff Working Paper 2013-49 Selma Chaker, Nour Meddahi This paper proposes new measures of the integrated variance, measures which use high-frequency bid-ask spreads and quoted depths. The traditional approach assumes that the mid-quote is a good measure of frictionless price. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial markets JEL Code(s): C, C1, C14, C5, C51, C58