Thu 25 Jan 12:30: How to discipline financial markets: reputation is not enough
Historically, shocks originating in the financial sector often spilled over into the real sector with dramatic consequences. We study in the lab how interventions targeting disclosure and capital requirements of financial intermediaries can reduce insolvencies or prevent their negative effects from propagating to the broader economy. In our two-sector economy, con*sumers and producers can fund financial intermediaries, who in turn provide them with liquidity to settle trades. However, intermediaries may undertake risky investments and become insolvent, which depresses real economic activity. In the experiment, insolvencies were frequent. As a consequence, consumers and producers often refused to fund intermediaries, which lowered the trade volume. Imposing the disclosure of risky investments did not reduce risk-taking and insolvencies. Instead, imposing capital requirements prevented insolvencies from disrupting real economic activity, thus boosting financial intermediation and trade.
- Speaker: Maria Bigoni (University of Bologna)
- Thursday 25 January 2024, 12:30-13:30
- Venue: W4.03.
- Series: Cambridge Finance Workshop Series; organiser: Cerf Admin.
Thu 25 Jan 12:30: How to discipline financial markets: reputation is not enough
Historically, shocks originating in the financial sector often spilled over into the real sector with dramatic consequences. We study in the lab how interventions targeting disclosure and capital requirements of financial intermediaries can reduce insolvencies or prevent their negative effects from propagating to the broader economy. In our two-sector economy, con*sumers and producers can fund financial intermediaries, who in turn provide them with liquidity to settle trades. However, intermediaries may undertake risky investments and become insolvent, which depresses real economic activity. In the experiment, insolvencies were frequent. As a consequence, consumers and producers often refused to fund intermediaries, which lowered the trade volume. Imposing the disclosure of risky investments did not reduce risk-taking and insolvencies. Instead, imposing capital requirements prevented insolvencies from disrupting real economic activity, thus boosting financial intermediation and trade.
- Speaker: Maria Bigoni (University of Bologna)
- Thursday 25 January 2024, 12:30-13:30
- Venue: W4.03.
- Series: Cambridge Finance Workshop Series; organiser: Cerf Admin.
Thu 22 Feb 13:00: Nonparametric conditional factors for unbalanced panels
We introduce a nonparametric estimator for conditional covariance matrices of unbalanced panels. Our approach naturally accommodates a low-dimensional nonlinear factor structure that ensures all structural relations between moments. In high-dimensional large-data applications, we investigate various conditional return expectation and covariance models that depend on asset characteristics. The empirically successful models imply substantial conditional Sharpe ratios, along with respectable ordinal and point predictions. Our approach can easily be extended to accommodate higher-order moments and comes with asymptotic theory that can be used with large unbalanced panels.
- Speaker: Paul Schneider (Swiss Finance Institute)
- Thursday 22 February 2024, 13:00-14:00
- Venue: W4.03.
- Series: Cambridge Finance Workshop Series; organiser: Cerf Admin.
Thu 22 Feb 13:00: Nonparametric conditional factors for unbalanced panels
We introduce a nonparametric estimator for conditional covariance matrices of unbalanced panels. Our approach naturally accommodates a low-dimensional nonlinear factor structure that ensures all structural relations between moments. In high-dimensional large-data applications, we investigate various conditional return expectation and covariance models that depend on asset characteristics. The empirically successful models imply substantial conditional Sharpe ratios, along with respectable ordinal and point predictions. Our approach can easily be extended to accommodate higher-order moments and comes with asymptotic theory that can be used with large unbalanced panels.
- Speaker: Paul Schneider (Swiss Finance Institute)
- Thursday 22 February 2024, 13:00-14:00
- Venue: W4.03.
- Series: Cambridge Finance Workshop Series; organiser: Cerf Admin.