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 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
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
Rollover Risk and the Maturity Transformation Function of Banks Staff Working Paper 2014-8 Teodora Paligorova, João Santos This paper shows that banks that rely heavily on short-term funding engage less in maturity transformation in an attempt to decrease their exposure to rollover risk. These banks shorten both the maturity of their portfolio of loans as well as the maturity of newly issued loans. We find that the loan yield curve becomes steeper with banks’ increasing use of short-term funding. Content Type(s): Staff research, Staff working papers Topic(s): Financial stability JEL Code(s): G, G2, G21
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
Banks’ Financial Distress, Lending Supply and Consumption Expenditure Staff Working Paper 2014-7 H. Evren Damar, Reint Gropp, Adi Mordel The paper employs a unique identification strategy that links survey data on household consumption expenditure to bank-level data in order to estimate the effects of bank financial distress on consumer credit and consumption expenditures. Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Domestic demand and components, Financial institutions JEL Code(s): E, E2, E21, E4, E44, G, G0, G01, G2, G21
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
Search-for-Yield in Canadian Fixed-Income Mutual Funds and Monetary Policy Staff Working Paper 2014-3 Sermin Gungor, Jesus Sierra This paper investigates the effects of monetary policy on the risk-taking behavior of fixed-income mutual funds in Canada. We consider different measures of the stance of monetary policy and investigate active variation in mutual funds’ risk exposure in response to monetary policy. Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Monetary policy transmission JEL Code(s): E, E5, E52, G, G2, G23
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