Digests

A Sustainable Capital Asset Pricing Model (S-CAPM): Evidence from Environmental Integration and Sin Stock Exclusion
Olivier David Zerbib
Review of Finance, Volume 26, Issue 6, November 2022, Pages 1345–1388, https://doi.org/10.1093/rof/rfac045

This paper shows how sustainable investing—through the joint practice of exclusionary screening and environmental, social, and governance (ESG) integration—affects asset returns.… Read more...

Aggregate Confusion: The Divergence of ESG Ratings
Florian Berg, Julian F Kölbel, Roberto Rigobon
Review of Finance, Volume 26, Issue 6, November 2022, Pages 1315–1344, https://doi.org/10.1093/rof/rfac033

ESG (environmental, social, and governance) rating agencies have become influential institutions in today’s financial markets, affecting a wide range of important decisions.… Read more...

Anticipating Disagreement in Dynamic Contracting
John Y Zhu
Review of Finance, Volume 26, Issue 5, September 2022, Pages 1241–1265, https://doi.org/10.1093/rof/rfac007

The emergence of disagreement is a significant friction in long-term financing relationships. This paper studies a long-term optimal contracting problem between a financier and an entrepreneur, in which it is anticipated that, at some point in the future, disagreement might emerge about which action the entrepreneur should take.… Read more...

Passive-Aggressive Trading: The Supply and Demand of Liquidity by Mutual Funds
Susan K Christoffersen, Donald B Keim, David K Musto, Aleksandra Rzeznik
Review of Finance, Volume 26, Issue 5, September 2022, Pages 1145–1177, https://doi.org/10.1093/rof/rfac008

Active mutual fund managers search for profitable investment opportunities and pay for the liquidity required to execute the trades.… Read more...

Leverage and Cash Dynamics
Harry DeAngelo, Andrei S Gonçalves, René M Stulz
Review of Finance, Volume 26, Issue 5, September 2022, Pages 1101–1144, https://doi.org/10.1093/rof/rfac043

The empirical corporate finance literature contains two distinct (and enormous) research silos, one focused on capital structure and the other on cash balances, with interactions between leverage and cash largely ignored.… Read more...

Uniform Mortgage Regulation and Distortion in Capital Allocation
Tim Zhang
Review of Finance, Volume 26, Issue 4, July 2022, Pages 1011–1050, https://doi.org/10.1093/rof/rfab026

The economy in the United States is strongly influenced by local conditions, but some federal pricing policies are often nationally uniform and do not reflect the heterogeneity of local features across geography.… Read more...

Do Credit Rating Agencies Influence Elections
Igor Cunha, Miguel A Ferreira, Rui C Silva
Review of Finance, Volume 26, Issue 4, July 2022, Pages 937–969, https://doi.org/10.1093/rof/rfac039

The long-standing debate about the role of financial markets in society has recently received additional attention due to the 2007-2009 global financial crisis and the 2010-2012 European sovereign debt crisis.… Read more...

A Wake-Up Call Theory of Contagion
Toni Ahnert, Christoph Bertsch
Review of Finance, Volume 26, Issue 4, July 2022, Pages 829–854, https://doi.org/10.1093/rof/rfac025

Financial contagion is an important phenomenon contributing to the spread and severity of financial distress. Forbes (2012) distinguishes four different, but not mutually exclusive, channels of contagion: trade, banks and financial institutions, portfolio investors, and wake-up calls.… Read more...

Advertising Arbitrage
Sergey Kovbasyuk, Marco Pagano
Review of Finance, Volume 26, Issue 4, July 2022, Pages 799–827, https://doi.org/10.1093/rof/rfac019

Professional investors often “talk up their book.” That is, they not only disclose their positions and express opinions, but to back their assertions with data on the allegedly mispriced assets.… Read more...

Economic Policy Uncertainty and the Yield Curve
Markus Leippold, Felix Matthys
Review of Finance, Volume 26, Issue 4, July 2022, Pages 751–797, https://doi.org/10.1093/rof/rfac031

Financial markets respond both acutely and swiftly to unanticipated political events. In times of elevated political uncertainty, safe assets such as government bonds are in high demand by investors.… Read more...