Abstract:
We examine how sentiment spillovers affect tail risk propagation within the network of financial stocks in the United States. Using high-frequency data, we construct and interact measures of sentiment connectedness and network-based conditional value at risk, distinguishing between direct, direct spillovers and indirect spillovers sentiment transmission channels. Results show that direct sentiment transmission mitigates extreme risks during market stress periods, whereas indirect, peer-driven effects foster herding and contagion, acting in the opposite direction. Overall, the findings reveal a significant and asymmetric role of sentiment in systemic risk dynamics.
Zoom:
https://ase.zoom.us/j/88975840175?pwd=Q0ZnbHl0TjhqcEtzVnhMUWRmdWdPQT09
Activitate de socializare: J’ai Bistrot
Abstract:
Using as data 116750 firm-year observations from 11675 companies from 46 countries, for the period 2013-2022, we have found democracy has a positive impact on dividend payments. The COVID-19 pandemic (analyzed globally, but also through proxies counting for 3 perspectives – epidemiological, governmental measures and level of panic) has determined a decrease in dividend payments. Democracy moderates the impact of pandemic crisis on dividend payments only for the case of emerging and developing countries. Conversely, in developed economies, democracy exacerbates the economic impact of pandemic crises. Our findings remain robust across a series of additional analyses. These results offer valuable insights for forecasting dividend payments and contribute to explaining cross-country variations in dividend policies. Furthermore, our study advances the literature on the interplay between democracy and dividend payments in the context of pandemic crises.
Zoom:
https://ase.zoom.us/j/88975840175?pwd=Q0ZnbHl0TjhqcEtzVnhMUWRmdWdPQT09
Activitate de socializare: J’ai Bistrot
Abstract:
We study how risk-averse market makers manage inventory by setting quotes in multiple assets. As the correlation between assets increases, an inventory shock in one asset causes the market maker to quote more in other assets but less in the affected asset. We predict that a more risk-averse market maker reaches zero inventory more often in each asset, engages less in hedging inventory across assets, and causes a lower asset return correlation at higher frequencies: the Epps effect. Ignoring inventory cross-hedging by restricting analysis to a single asset leads to the underestimation of market maker risk aversion.
Zoom:
https://ase.zoom.us/j/88975840175?pwd=Q0ZnbHl0TjhqcEtzVnhMUWRmdWdPQT09
Activitate de socializare: Taproom – Hop Hooligans
Abstract:
This paper explores the relationship between microfinance and economic development using a cross-country dataset of 60 developing countries from 2000-2018. We employ the Panel VAR model, estimated by the generalised method of moments (GMM). Microfinance institutions indicators are categorised into social and financial performance variables. Social performance variables include the number of clients served and the percentage of women borrowers, while financial performance indicators consist of the portfolio at risk, operational self-sufficiency, and operating expenses. Economic development is assessed using the Human Development Index, which integrates economic indicators like Gross National Income per capita with social indicators such as educational attainment and life expectancy at birth. We perform a Granger causality test confirming a Granger causal relationship between microfinance and economic development. Our findings indicate that shocks to social performance variables positively influence economic development, and shocks to financial performance variables significantly impact the human development index.
Zoom:
https://ase.zoom.us/j/88975840175?pwd=Q0ZnbHl0TjhqcEtzVnhMUWRmdWdPQT09
Activitate de socializare: J’ai Bistrot
Abstract:
Concerns about fiscal sustainability and worsening balance sheet conditions of major banks triggered a doom loop between banks and sovereigns during the 2010-2013 sovereign debt crisis. Despite closer financial integration and additional institutional safeguards, the home bias, i.e. domestic bank holdings of domestic sovereign debt, is still high in most EU countries. We examine the effects of home bias on fiscal sustainability. We extend two IMF database on sovereign debt holdings to all EU Member States. We then apply panel smooth transition regression models on a fiscal rule. We find that a high home bias does not reduce the reaction of governments to public debt, but only if the financial system is sufficiently developed. A developed banking system allows sovereigns to raise more public debt at acceptable conditions to support economic stabilisation. An increased presence of foreign banks has a benign effect on sustainability by reducing governments’ debt bias, but state-owned banks reduce it. Developing financial markets further through the completion of the Banking and Capital Markets Unions in the EU could help countries in the trade-off between economic stabilisation and debt sustainability, while bringing in more foreign banks might enforce stronger fiscal discipline.
Zoom:
https://ase.zoom.us/j/88975840175?pwd=Q0ZnbHl0TjhqcEtzVnhMUWRmdWdPQT09
Activitate de socializare: J’ai Bistrot
Abstract:
We examine the relationship between climate-related financial policies (CRFPs) and banks’ systemic risk. Using a sample of 458 banks in 47 countries over the period 2000-2020, we document that more stringent CRFPs are detrimental to overall financial stability and contribute to increased system-wide distress. These findings raise the possibility that overly stringent green finance policies could lead to a disorderly transition. In addition, measures that restrict banks’ exposure to carbon-intensive counterparties, both directly and indirectly, may lead to less lending to the real economy and higher lending rates. The latter increase, in turn, could lead to significant credit losses, reduced bank profitability and other spillover effects with the potential to undermine systemic resilience. However, the implementation and ratification of the Paris Agreement, more robust adaptation strategies to cope with climate shocks and a higher incidence of natural disasters and a larger number of people affected by extreme climate events may counteract the amplifying effects of CRFPs on systemic risk. Moreover, banks with stronger environmental, social, and governance (ESG) commitments experience less systemic distress when exposed to green financial policies. Our findings have critical policy implications for public authorities formulating green financial policies to achieve the goals of the Paris Agreement.
Zoom:
https://ase.zoom.us/j/88975840175?pwd=Q0ZnbHl0TjhqcEtzVnhMUWRmdWdPQT09
Activitate de socializare: La Radu
Abstract:
This paper develops a New Keynesian Environmental Dynamic Stochastic General Equilibrium (E-DSGE) model to analyze the role of government investment in facilitating the transition to a green economy. We extend the standard framework by incorporating two types of capital—polluting (brown) and non-polluting (green)—both of which are used in production. Firms choose their capital mix while being subject to carbon taxation, and the government directly invests in capital formation, with preferences over green and brown investments. The model includes adjustment costs for the production of green capital, capturing the frictions associated with its deployment and the slow adaptation of firms to green alternatives. Our analysis explores the macroeconomic and environmental effects of fiscal policy under different government investment preferences. We find that when the government invests only in brown capital, the crowding-out effect on private investment leads to lower output, reduced consumption, and increased emissions. In contrast, when the government prioritizes green capital, economic growth accelerates while emissions decline, despite the presence of a private investment crowd-out effect.
Zoom:
https://ase.zoom.us/j/88975840175?pwd=Q0ZnbHl0TjhqcEtzVnhMUWRmdWdPQT09
Activitate de socializare: Restaurant Thalia
Abstract:
TBA
Zoom:
https://ase.zoom.us/j/88975840175?pwd=Q0ZnbHl0TjhqcEtzVnhMUWRmdWdPQT09
Activitate de socializare: Beer o’Clock – Craft Beer Bar
Abstract:
TBA
Zoom:
https://ase.zoom.us/j/88975840175?pwd=Q0ZnbHl0TjhqcEtzVnhMUWRmdWdPQT09
Activitate de socializare: Beer o’Clock – Craft Beer Bar
Abstract:
Using as data 120,690 firm-year observations from 12,069 companies from 59 countries, we tested whether different indicators for democracy, pandemic crisis, and their interaction explain dividend policy. Our results are mixed. Propensity to pay dividends is positively influenced by democracy, but only for the entire sample and for the developing countries; for developed countries, democracy has a negative impact on this indicator. On the other hand, for dividend / assets, the impact of democracy is reversed. This result can be explained by the different informational content of these two indicators. Dividend policy was negatively affected by the COVID-19 pandemic. Finally, we have interacted democracy with epidemic crisis and analyzed its impact on dividend policy.
Zoom:
https://ase.zoom.us/j/88975840175?pwd=Q0ZnbHl0TjhqcEtzVnhMUWRmdWdPQT09
Activitate de socializare: Old Kitchen
Abstract:
This study compares traditional credit scoring methods, deep learning models, and large language models (LLMs), using synthetic data to protect privacy and ensure consistency. Credit scoring has traditionally used methods like logistic regression and new AI models which may improve prediction accuracy. In this paper it was tested and evaluated these models baseline methods (logistic regression), deep learning (Gradient Boosting Machine and Neural Networks), and LLM-based models for feature extraction and prediction looking at performance in areas like accuracy, precision, and recall. The results show that deep learning and LLM-based models perform better with complex data, while traditional models still work well with lower computational demands. This paper provides valuable insights into balancing accuracy, interpretability, and computational efficiency when developing credit scoring models.
Zoom:
https://ase.zoom.us/j/88975840175?pwd=Q0ZnbHl0TjhqcEtzVnhMUWRmdWdPQT09
Activitate de socializare: Zăganu
Abstract:
We propose a rotated dynamic Nelson-Siegel model for modeling the Romanian sovereign yield curve and a tailored Lasso VAR model with macroeconomic and financial predictors for forecasting it. As expected, inflation and the key interest rate emerge as primary drivers of the yield curve. Nonetheless, our results also show that other factors significantly impact the yield curve, including credit growth, the current account balance, the market operations balance, interbank interest rates, international financial stress (proxied by the VIX), and local banking sector risk (measured by a stock volatility index). Furthermore, our results suggest that domestic bank risk is partially responsive to the spread component of the yield curve but remains unaffected by other yield curve characteristics. This study offers a valuable tool for fiscal policymakers aiming to comprehend yield curve dynamics in an emerging economy and for institutional investors considering borderline investment-grade sovereign bonds in their portfolios.
Zoom:
https://ase.zoom.us/j/88975840175?pwd=Q0ZnbHl0TjhqcEtzVnhMUWRmdWdPQT09
Activitate de socializare: Coolinart
Abstract:
We investigate potential biases related to using AI/ML models for default predictions or credit scoring, choosing gender (female) as protective attribute. We propose a new methodology based on the principle of „equal risks, equal rights”, using Deep Learning Networks. Specifically, we investigate the probability of AI/ML models generating Type I errors (false positives) depending on the borrowers’ risk levels. We use a database containing all consumer and mortgage loans with value higher than EUR 4000 (nearly 900,000 debtors) granted by a European Union banking sector. The results show that proper use of ML model feeded with unbias dataset do not generate bias in outcome.
Zoom:
https://ase.zoom.us/j/88975840175?pwd=Q0ZnbHl0TjhqcEtzVnhMUWRmdWdPQT09
Activitate de socializare: La Radu
Abstract:
Artificial intelligence is the automation of statistical analysis – aiming to produce highly accurate outcome distributions. In order to be reliable, statistical predictions crucially depend on whether the future observations are similar to the past. For AI to be effective, identified patterns must be reoccurring but on efficient financial markets identified performance patterns are unlikely to persist. In this talk, drawing on an ongoing research project with Andreas Zimmermann, we will show the new opportunities AI brings to portfolio optimization. Specifically, we will discuss how AI enables to quantify complex dependencies of financial instruments performance and the integration of their diverse outcome distributions in different financial market states to enhance portfolio optimisation.
Zoom:
https://ase.zoom.us/j/88975840175?pwd=Q0ZnbHl0TjhqcEtzVnhMUWRmdWdPQT09
Activitate de socializare: N/A
Abstract:
Asset bubble crashes often result in severe negative consequences for financial markets, extending repercussions to the real economy. Understanding the dynamics of these crashes is critical for developing mechanisms to mitigate their impact. This study employs machine learning techniques alongside experimental tools and biometric data to forecast bubble crashes. It incorporates a three-legged task involving asset bubble formation, asset price forecasting, and risk elicitation to explore fluctuations in individual risk preferences at different bubble stages. Preliminary results indicate biometric activity can be used to forecast stock returns and bubble crashes. We add to the literature on neuroforecasting and bubble crash prediction by using innovative biometric data, while also providing insights into the dynamics of boom-and-bust cycles.
Zoom:
https://ase.zoom.us/j/88975840175?pwd=Q0ZnbHl0TjhqcEtzVnhMUWRmdWdPQT09
Activitate de socializare: Zăganu
Abstract:
The sustainability-linked discussion has gained international importance in the recent years, as the concept of ESG seems to be on everyone’s lips nowadays. Debates at the highest levels are, however, still ongoing as to whether sustainability matters should be treated as a priority or little to no added economic value is added by transitioning to a green economy. What is without doubt in this equation is the position of the public sector, as the north star that will guide and drive the global economies towards a sustainable future or not. This paper aims at shedding some light over this very topical subject by presenting the link between ESG-related government efforts and economic development. Based on an extensive set of econometric techniques, the results indicate mixed impacts of various ESG-related forms of public spending and revenue on economic growth. The results can provide public policy advice as to how authorities should make use of their available resources to promote sustainability while retaining wealth creation.
Zoom:
https://ase.zoom.us/j/88975840175?pwd=Q0ZnbHl0TjhqcEtzVnhMUWRmdWdPQT09
Activitate de socializare: La Radu
Abstract:
This study examines the determinants of dividend policy in the US commercial banking sector during the COVID-19 pandemic, using a comprehensive sample of 3,770 commercial banks. The analysis reveals a significant pandemic-induced decline in the dividend-to-equity ratio among these banks, indicating a significant shift in dividend policy. Interestingly, this reduction in dividend payouts was not accompanied by a deterioration in loan portfolio quality, as evidenced by a substantial 43% decrease in the non-performing loan rates in the second quarter of 2022 compared to the fourth quarter of 2019. Using a fixed-effect Tobit regression we show that under normal market conditions, dividend policy was influenced by various bank-specific factors, including size, profitability, equity to assets, loans-to-deposits, not performing loans, cash to central banks, and goodwill-to-assets. However, during the COVID-19 pandemic, only profitability, equity-to-assets, goodwill-to-assets, and size consistently and significantly affected dividend-to-equity ratio. Additionally, the study shows that the dividend payments were influenced by different COVID-19 support measures across US states. Furthermore, analyzing only dividend payers, during the COVID-19 pandemic, higher non-performing loan rate levels negatively and significantly influenced dividend payments. This relationship strengthened with increasing dividend-to-equity ratio levels, indicating a cautious approach by US commercial banks during the pandemic in terms of dividend policy. Despite receiving financial support, banks maintained conservative dividend payouts policies possible due to managerial accountability and regulatory oversight. This research provides valuable insights into how US commercial banks adjusted their dividend policies during the pandemic, emphasizing the roles of government support measures and bank fundamentals in these decisions.
Zoom:
https://ase.zoom.us/j/88975840175?pwd=Q0ZnbHl0TjhqcEtzVnhMUWRmdWdPQT09
Activitate de socializare: Old KItchen
Abstract:
This paper reports a new methodology and results on the forecast of the numerical value of the fat tail(s) in asset returns distributions using the irrational fractional Brownian motion model. Optimal model parameter values are obtained from fits to consecutive daily 2-year period returns of S&P500 index over [1950–2016], generating 33-time series estimations. Through an econometric model, the kurtosis of returns distributions is modelled as a function of these parameters. Subsequently an auto-regressive analysis on these parameters advances the modelling and forecasting of kurtosis and returns distributions, providing the accurate shape of returns distributions and measurement of Value at Risk.
Zoom:
https://ase.zoom.us/j/88975840175?pwd=Q0ZnbHl0TjhqcEtzVnhMUWRmdWdPQT09
Activitate de socializare: Coolinart
Abstract:
We analyze if and how daily tail risk transmission between Financial stocks is influenced by investor sentiment (spillovers). On the one hand, we find that systemic risk and investor sentiment levels are negatively correlated. On the other hand, we show that investor sentiment spillovers are directly responsible for tail risk spillovers, most prominently for the month of January. The latter result suggests a sentiment contagion explanation for the January effect.
Zoom:
https://ase.zoom.us/j/88975840175?pwd=Q0ZnbHl0TjhqcEtzVnhMUWRmdWdPQT09
Activitate de socializare: J’ai Bistrot
