Digests

Loan Officer Incentives, Internal Rating Models, and Default Rates
Tobias Berg, Manju Puri, Jörg Rocholl
Review of Finance, Volume 24, Issue 3, May 2020, Pages 529–578, https://doi.org/10.1093/rof/rfz018

Manipulation of information has been at the center of a wave of recent investigations into fraudulent bank behavior.… Read more...

Higher Bank Capital Requirements and Mortgage Pricing: Evidence from the Counter-Cyclical Capital Buffer
Christoph Basten
Review of Finance, Volume 24, Issue 2, March 2020, Pages 453–495, https://doi.org/10.1093/rof/rfz009

Basel III introduced the macroprudential tool Counter-Cyclical Capital Buffer (CCyB) as capital requirements that policy-makers can temporarily increase when lending appears excessive.… Read more...

Financial Loss Aversion Illusion
Christoph Merkle
Review of Finance, Volume 24, Issue 2, March 2020, Pages 381–413, https://doi.org/10.1093/rof/rfz002

Loss aversion has been frequently documented in psychology and economics, with the conclusion that losses loom larger than gains by a magnitude of about two.… Read more...

Yield Spreads and the Corporate Bond Rollover Channel
Florian Nagler
Review of Finance, Volume 24, Issue 2, March 2020, Pages 345–379, https://doi.org/10.1093/rof/rfz005

When firms have exposure to rollover maturing bonds their rollover costs depend on the liquidity in the market.… Read more...

Managerial Short-Termism and Investment: Evidence from Accelerated Option Vesting
Tomislav Ladika, Zacharias Sautner
Review of Finance, Volume 24, Issue 2, March 2020, Pages 305–344, https://doi.org/10.1093/rof/rfz012

Do managers sometimes boost short-term performance at the expense of long-run value? Financial analysts and policymakers frequently express concern about managerial short-termism.… Read more...

One Central Bank to Rule them All (Editor’s Choice)
Francesca Brusa, Pavel Savor, Mungo Wilson
Review of Finance, Volume 24, Issue 2, March 2020, Pages 263–304, https://doi.org/10.1093/rof/rfz015

Stock markets across the globe universally enjoy high returns on days surrounding FOMC meetings, which account for the bulk of the global equity risk premia in recent decades.… Read more...

Mood, Memory, and the Evaluation of Asset Prices
Aaron L Bodoh-Creed
Review of Finance, Volume 24, Issue 1, February 2020, Pages 227–262, https://doi.org/10.1093/rof/rfz001

I model the effect of associative memory on asset prices. The model includes mood-congruent memory, which predicts that the subjective goodness (or badness) of the agent’s affective state (e.g.,… Read more...

Follow the Leader: Using the Stock Market to Uncover Information Flows between Firms
Anna Scherbina, Bernd Schlusche
Review of Finance, Volume 24, Issue 1, February 2020, Pages 189–225, https://doi.org/10.1093/rof/rfy038

News developments experienced by one firm, such as labor force scandals, intellectual property disputes, or geopolitical challenges encountered in other countries, can also impact other firms in similar circumstances.… Read more...

The Failure of a Clearinghouse: Empirical Evidence
Vincent Bignon, Guillaume Vuillemey
Review of Finance, Volume 24, Issue 1, February 2020, Pages 99–128, https://doi.org/10.1093/rof/rfy039

Central clearing counterparties (CCPs) are critical institutions in post-crisis financial markets. The role of CCPs is to guarantee derivatives transactions against the failure of counterparties : they are thus supposed to reduce systemic risk and the potential for contagious failures of financial institutions.… Read more...

Specification Analysis of Structural Credit Risk Models
Jing-Zhi Huang, Zhan Shi, Hao Zhou
Review of Finance, Volume 24, Issue 1, February 2020, Pages 45–98, https://doi.org/10.1093/rof/rfz006

Empirical studies of structural credit risk models are usually carried out using calibration, rolling window estimation, or regression analysis.… Read more...