Bond Risk Premia and Gaussian Term Structure Models Staff Working Paper 2014-13 Bruno Feunou, Jean-Sébastien Fontaine Cochrane and Piazzesi (2005) show that (i) lagged forward rates improve the predictability of annual bond returns, adding to current forward rates, and that (ii) a Markovian model for monthly forward rates cannot generate the pattern of predictability in annual returns. Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Interest rates JEL Code(s): E, E4, E43, E47, G, G1, G12
Do High-Frequency Financial Data Help Forecast Oil Prices? The MIDAS Touch at Work Staff Working Paper 2014-11 Christiane Baumeister, Pierre Guérin, Lutz Kilian The substantial variation in the real price of oil since 2003 has renewed interest in the question of how to forecast monthly and quarterly oil prices. There also has been increased interest in the link between financial markets and oil markets, including the question of whether financial market information helps forecast the real price of oil in physical markets. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C5, C53, G, G1, G14, Q, Q4, Q43
Macroeconomic Experiences and Risk Taking of Euro Area Households Staff Working Paper 2014-10 Miguel Ampudia, Michael Ehrmann This paper studies to what extent the experiences of households shape their willingness to take financial risks. It follows the methodology of Malmendier and Nagel (2011) and applies it to a novel data set on household finances covering euro area households. Content Type(s): Staff research, Staff working papers Topic(s): Sectoral balance sheet JEL Code(s): D, D0, D03, D1, D14, D8, D83, G, G1, G11
Database of Sovereign Defaults, 2017 Technical Report No. 101 David Beers, Jamshid Mavalwalla Until recently, there have been few efforts to systematically measure and aggregate the nominal value of the different types of sovereign government debt in default. To help fill this gap, the Bank of Canada’s Credit Rating Assessment Group (CRAG) has developed a comprehensive database of sovereign defaults posted on the Bank of Canada’s website. Content Type(s): Staff research, Technical reports Topic(s): Debt management, Development economics, Financial stability, International financial markets JEL Code(s): F, F3, F34, G, G1, G10, G14, G15
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
CoMargin Staff Working Paper 2013-47 Jorge Cruz Lopez, Jeffrey H. Harris, Christophe Hurlin, Christophe Pérignon We present CoMargin, a new methodology to estimate collateral requirements for central counterparties (CCPs) in derivatives markets. CoMargin depends on both the tail risk of a given market participant and its interdependence with other participants. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial institutions, Financial markets, Financial stability JEL Code(s): G, G1, G13
The Financialization of Food? Staff Working Paper 2013-39 Valentina G. Bruno, Bahattin Buyuksahin, Michel A. Robe Commodity-equity and cross-commodity return co-movements rose dramatically after the 2008 financial crisis. This development took place following what has been dubbed the “financialization” of commodity markets. Content Type(s): Staff research, Staff working papers Topic(s): International topics, Recent economic and financial developments JEL Code(s): G, G1, G12, G13, Q, Q1, Q11, Q13
The Safety of Government Debt Staff Working Paper 2013-34 Kartik Anand, Prasanna Gai We examine the safety of government bonds in the presence of Knightian uncertainty amongst financial market participants. In our model, the information insensitivity of government bonds is driven by strategic complementarities across counterparties and the structure of trading relationships. Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Financial stability, International financial markets JEL Code(s): D, D8, D81, E, E4, E44, F, F0, F02, F4, F41, G, G1, G15