• Credit Freezes, Equilibrium Multiplicity, and Optimal Bailouts in Financial Networks

• Bond Price Fragility and the Structure of the Mutual Fund Industry

• Unsmoothing Returns of Illiquid Funds 

• Size Discount and Size Penalty: Trading Costs in Bond Markets

• Systemic Risk and Monetary Policy: The Haircut Gap Channel of the Lender of Last Resort

• Using Social Media to Identify the Effects of Congressional Viewpoints on Asset Prices

• The Psychological Externalities of Investing: Evidence from Stock Returns and Crime

Review of Financial Studies 2024年7月

Matthew Jackson (Stanford University)

Agathe Pernoud (University of Chicago)

We analyze how interdependencies in financial networks can lead to self-fulfilling insolvencies and multiple possible equilibrium outcomes. Multiplicity arises if a certain type of dependency cycle exists in the network. We show that finding the cheapest bailout policy that prevents self-fulfilling insolvencies is computationally hard, but that the optimal policy has intuitive features in some typical network structures. Leveraging indirect benefits ensures systemic solvency at a cost that never exceeds half of the overall shortfall. In core-periphery networks, it is optimal to bail out peripheral banks first as opposed to core banks.

原刊和作者：

Review of Financial Studies 2024年7月

Mariassunta Giannetti (Stockholm School of Economics, CEPR, and ECGI)

Chotibhak Jotikasthira (Southern Methodist University)

We conjecture that mutual funds with large shares of outstanding bond issues are more inclined to internalize the negative price spillovers of fire sales and thus sell their holdings in those issues, to a lower extent, when they experience redemptions. We provide evidence consistent with this conjecture and further show that ownership concentration limits bonds’ exposures to flow-induced fire sales. We exploit variation in negative spillovers arising from the Fed’s SMCCF to confirm the economic mechanism and explore our findings’ implications for fund performance and fire-sale spillovers to other funds.

原刊和作者：

Review of Financial Studies 2024年7月

Spencer Couts (University of Southern California)

Andrei Gonçalves (The Ohio State University)

Andrea Rossi (University of Arizona)

Funds investing in illiquid assets report returns with spurious autocorrelation. Consequently, investors need to unsmooth these funds’ returns when evaluating their risk exposures. We show that funds with similar investments share a common source of spurious autocorrelation not fully resolved by traditional unsmoothing methods and thereby leading to underestimation of systematic risk. Thus, we propose a generalized unsmoothing technique and apply it to hedge funds and private commercial real estate funds. Our method significantly improves the measurement of funds’ risk exposures and risk-adjusted performance, especially for highly illiquid funds. Overall, the average illiquid fund alpha is lower than previously thought.

原刊和作者：

Review of Financial Studies 2024年7月

Gabor Pinter (Bank for International Settlements)

Chaojun Wang (University of Pennsylvania)

Junyuan Zou (INSEAD)

We show that larger trades incur lower trading costs in government bond markets (“size discount”), but costs increase in trade size after controlling for client identity (“size penalty”). The size discount is driven by the cross-client variation of larger traders obtaining better prices, consistent with theories of trading with imperfect competition. The size penalty, driven by the within-client variation, is larger for corporate bonds, during major macroeconomic surprises and during COVID-19. These differences are larger among more sophisticated clients, consistent with information-based theories.

原刊和作者：

Review of Financial Studies 2024年7月

Martina Jasova (Columbia University)

Luc Laeven (European Central Bank, Tilburg University, and CEPR)

Caterina Mendicino (European Central Bank)

José-Luis Peydró (Imperial College London, Universitat Pompeu Fabra, and CEPR)

Dominik Supera (Columbia Business School)

We show that lender of last resort (LOLR) policy exacerbates bank interconnectedness. Using novel micro-level data, we analyze LOLR’s haircut gaps: the differences between the private market and central bank haircuts. LOLR policy incentivizes banks to increase pledging and holdings of higher haircut-gap bonds, especially those issued by domestic and systemically important banks. Effects only apply to banks, not to nonbanks without LOLR access. LOLR funding revives bank bond issuance associated with higher haircut gaps and increases the subsequent correlation between pledging and issuing banks’ bond prices, in particular during periods of low-market returns and for domestic, systemically important banks.

原刊和作者：

Review of Financial Studies 2024年7月

Francesco Bianchi (Johns Hopkins University, NBER, and CEPR)

Roberto Gómez-Cram (NYU and London Business School)

Howard Kung (London Business School and CEPR)

We use a high-frequency identification approach to document that individual politicians affect asset prices. We exploit the regular flow of viewpoints contained in Congress members’ tweets. Supportive (critical) tweets increase (decrease) the stock prices of the targeted firm and the corresponding industry in minutes around the tweet. The bulk of the stock price effects is concentrated in the tweets revealing news about future legislative action. The effects are amplified around committee meeting days, especially when the tweet originates from committee members and influential politicians. Overall, we show that Congress members’ social media accounts are an important source of political news.

原刊和作者：

Review of Financial Studies 2024年7月

John Huck (University of Wisconsin-Milwaukee)

This paper investigates the psychological effects from stock market returns. Using an FBI database of over 55 million daily reported crime incidents across the United States, crime is proposed as a measure of psychological well-being. The evidence suggests that stock returns affect the well-being of not only investors but also noninvestors. Specifically, a contemporaneous negative (positive) relationship between daily stock market returns and violent crime rates is found for investors (noninvestors). A similar relationship is also found between local earnings surprises and violent crime. The contrasting relationships for investors and noninvestors suggests that relative wealth may influence well-being.

原文：

https://academic.oup.com/rfs/issue/37/7

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