BUSCADOR RECOLECTA

Macro-finance asset pricing models provide a rationale for connectedness dynamics between equity and Treasury risk-neutral volatilities. In this paper, we study the total and directional connectedness, in the sense of spillover effects, between risk-neutral volatilities from the equity and Treasury markets. In addition, we analyze the economic and monetary drivers of connectedness dynamics. Most of the time, but especially during bad economic times, we find significant net spillovers from Treasury to equity risk-neutral volatility. The spillover channel between risk-neutral volatilities arises mainly through the government fixed income market., This study was funded by the Ministerio de Ciencia, Innovación y Universidades (PGC2018-095072-B-I00), the Conselleria d'Educació, Investigació, Cultura I Esports (Prometeo/2017/158), the Secretaría de Estado de Investigación, Desarrollo e Innovación (PID2019-104304-GB-I00), and the Universidad Pública de Navarra (Grant for Young Researchers, 2018).

This paper analyzes the magnitude (accuracy) and length (time) of the lag in the incorporation of new information in different measures of credit risk. The results, for US firms, show a lag for Altman’s Z accounting measure and credit rating. In contrast, market-based credit-risk measures such as CDSs and the Black-Scholes-Merton model show no lag. This paper also analyzes the determinants of the lags found showing the importance of the informativeness of CDSs in reducing the lag for all types of default events, and a negative relationship between accounting manipulation and the lag of Altman’s Z for severe default events., We gratefully acknowledge financial support from the Spanish Ministry of Science and Innovation (PID2019-104304GB-I00/AEI/10.13039/50110 0 011033). In addition, Ana González-Urteaga acknowledges financial support from the Ministry of Science, Innovation, and Universities through grant PGC2018-095072-B-I00.

This research analyzes the causes of the quality premium, one of the most intriguing and successful investment strategies in equity markets. While previous research has argued that psychological biases explain the performance of the quality minus junk factor, our paper analyzes a leverage constraint explanation within a rational risk-based framework. The quality factor is multidimensional in nature, which suggests that a combination of risk, frictions, and behavioral biases is a reasonable explanation. Once we incorporate margin requirements and liquidity restrictions, we find that tighter conditions result in a higher intercept and a lower slope for the empirically implemented capital asset pricing model when using 10 quality-sorted portfolios. Our paper shows that, indeed, not only behavioral biases explain quality, but also market frictions account for its performance., The authors acknowledge financial support from the Ministry of Science, Innovation, and Universities through grant PGC2018-095072B-I00. In addition, Gonzalo Rubio acknowledges financial support from Generalitat Valencia grant Prometeo/2017/158, and Ana González Urteaga acknowledges financial support from the Ministry of Science and Innovation through grant PID2019-104304-GB-I00/AEI/10.13039/501100011033 and UPNA Research Grant for Young Researchers, Edition 2018.

This paper examines the predictive power of the main default-risk measures used by both academics and practitioners, including accounting measures, market-price-based measures and the credit rating. Given that some measures are unavailable for some firm types, pair wise comparisons are made between the various measures, using same-size samples in every case. The results show the superiority of market-based measures, although their accuracy depends on the prediction horizon and the type of default events considered. Furthermore, examination shows that the effect of within-sample firm characteristics varies across measures. The overall finding is of poorer goodness of fit for accurate default prediction in samples characterised by high book-to-market ratios and/or high asset intangibility, both of which suggest pricing difficulty. In the case of large-firm samples, goodness of fit is in general negatively related to size, possibly because of the 'too-big-to-fail' effect., This paper has been possible thanks to the SANFI Research Grant for Young Researchers Edition 2015, the financial support from the Spanish Ministry of Economy, Industry and Competitiveness (ECO2016-77631-R (AEI/FEDER, UE)) and the Spanish Ministry of Science and Innovation (PID2019-104304GB-I00/AEI/10.13039/501100011033). Ana González Urteaga particularly acknowledges financial support from the Spanish Ministry of Science, Innovation and Universities through grant PGC2018-095072-B-I00.

This paper extends the studies published to date by performing an analysis of the causal relationships between sovereign CDS spreads and the estimated conditional volatility of stock indices. This estimation is performed using a vector autoregressive model (VAR) and dynamically applying the Granger causality test. The conditional volatility of the stock market has been obtained through various univariate GARCH models. This methodology allows us to study the information transmissions, both unidirectional and bidirectional, that occur between CDS spreads and stock volatility between 2004 and 2020. We conclude that CDS spread returns cause (in the Granger sense) conditional stock volatility, mainly in Europe and during the sovereign debt crisis. This transmission dynamic breaks down during the COVID-19 period, where there are high bidirectional relationships between the two markets., The authors acknowledge the financial support from the Fundación Ramón Areces and PGC2018-095072-B-I00. In addition, Laura Ballester acknowledges the financial support from the Spanish Ministry of Science, Innovation, and Universities and the FEDER project, PGC2018-093645-B-I00, and Ana González-Urteaga acknowledges the financial support from the Ministry of Economics and Competitiveness through grant ECO2016-77631-R (AEI/FEDER.UE), from the Ministry of Science and Innovation through grant PID2019-104304GB-I00/AEI/10.13039/501100011033, and a UPNA Research Grant for Young Researchers, Edition 2018.

This analysis addressed the potential systemic effects of guarantee requirements by central counterparties. Using data from the Spanish BME and German Eurex central clearing counterparties and controlling for tail risk and monetary and real activity variables, we found a significant, positive, and robust relationship between the guarantees required and the spillover or total connectedness effects among nine financial assets in the Spanish, United States, and German capital markets. Bad economic times also had a significant incremental effect on the relationship between guarantees and connectedness. These findings are robust across central clearing corporations and futures contracts in the IBEX 35, DAX 30, and EURO STOXX 50. In addition, an event study indicated that global spillover effects tend to increase before central counterparty institutions raise their guarantees. The implication of the findings is that European clearing institutions react to rather than cause bad economic times., The authors acknowledge financial support from the Ministry of Science, Innovation, and Universities through grant PGC2018-095072-B-I00. In addition, Gonzalo Rubio acknowledges financial support from Generalitat Valencia grant Prometeo/2017/158 and Ana González-Urteaga acknowledges financial support through grant PID2019-104304GBI00 funded by MCIN/AEI/10.13039/501100011033, and UPNA Research Grant for Young Researchers, Edition 2018.

This paper shows how risk aversion and economic uncertainty affect the expected market risk premium. Under a habit preference macro-finance model with time-varying risk aversion, we show a significant amplifying effect of risk aversion on the expected market risk premium over and above economic uncertainty shocks. Although our full sample period is from January 1961 to March 2020, the results are robust to different sample periods and alternative estimation procedures, including the lower bound expected market risk premium based on option prices., The authors acknowledge financial support from the Ministry of Science, Innovation and Universities through grant PGC2018-095072-B-I00 and from Generalitat Valencia grant Prometeo/2017/158.

Institutional investors often have to decide which strategy to use across international business cycles. This is especially important during economic and financial crises. The exogenous nature of the outbreak of the dramatic COVID-19 crisis represents a unique opportunity to understand the performance of risk factors during severe economic times across international stock markets. Even more important is to analyze how these factors behave across very different economic crises, such as the COVID-19 pandemic and the Great Recession. Although, the overall results show that the momentum and quality factors are the winners, with the value factor as the loser, this research also reports different responses of factors across crises and countries. The size, value, and defensive factors tend to perform worse during the health crisis relative to the Great Recession, while the momentum factor shows a poor performance during the financial crisis, but a positive one during the outbreak of COVID-19. The quality factor is an extraordinary defensive factor in both crises. Similarly, this paper reports heterogeneous responses of option-implied expected market risk premia across alternative stock market indices, and between the Great Recession and the COVID-19 crisis., The authors acknowledge financial support from the Ministry of Science, Innovation, and Universities through grant PGC2018-095072-B-I00. In addition, they acknowledge financial support from Generalitat Valencia grant Prometeo/2017/158.

Macro-finance asset pricing models provide a rationale for connectedness dynamics between equity and Treasury risk-neutral volatilities. In this paper, we study the total and directional connectedness, in the sense of spillover effects, between risk-neutral volatilities from the equity and Treasury markets. In addition, we analyze the economic and monetary drivers of connectedness dynamics. Most of the time, but especially during bad economic times, we find significant net spillovers from Treasury to equity risk-neutral volatility. The spillover channel between risk-neutral volatilities arises mainly through the government fixed income market., This study was funded by the Ministerio de Ciencia, Innovación y Universidades (PGC2018-095072-B-I00), the Conselleria d’Educació, Investigació, Cultura I Esports (Prometeo/2017/158), the Secretaría de Estado de Investigación, Desarrollo e Innovación (PID2019-104304-GB-I00), and the Universidad Pública de Navarra (Grant for Young Researchers, 2018).

Employing out-of-sample non-parametric estimation techniques, we show that market-wide liquidity risk matters for asset pricing independently of the specific functional form of the stochastic discount factor (SDF) and, therefore, of the asset pricing model specification. Market-wide illiquidity significantly affects the distribution of the SDF. Specifically, it boosts up the volatility of the SDF, causing minor effects on higher moments of its distribution. This finding is robust to the use of different sets of test assets in the estimation of the SDF, including equity and corporate bond portfolios, and the use of a high-dimensional data estimation procedure., Authors acknowledge the research grant PRPPID2021-125317NB-I00, funded by MCIN/AEI /10.13039/501100011033/ and “ERDF A way of making Europe “. They also acknowledge the financial support from Generalitat Valencia Grant Prometeo/2017/158. Moreover, they recognize the support from projects ECO2017-86903-P (Abad and Pascual), ECO2017-87069-P (Abad), and PGC2018-095072-B-I00 (Nieto and Rubio) from the Ministerio de Ciencia, Innovación y Universidades.