| 1. |
- Baghai, Ramin P., et al.
(författare)
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The Use of Credit Ratings in the Delegated Management of Fixed Income Assets
- 2024
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Ingår i: Management Science. - : Informs. - 1526-5501 .- 0025-1909. ; 70:5, s. 3059-3079
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Tidskriftsartikel (refereegranskat)abstract
- Investment mandates of fixed income funds constrain managers' portfolio decisions, often employing credit ratings to classify asset risk. We categorize U.S. and European fixed income funds' mandates using textual analysis and measure the use of ratings. Over the past two decades, despite the weaknesses of ratings revealed in the global financial crisis, ratings use has increased significantly. Since 2010, the fraction of funds not using ratings in any way has fallen by almost half in both the United States and Europe. By 2020, 94% of U.S. funds and 65% of European funds used ratings. These patterns fit agency based models of investment mandates and point to a lack of practically useful alternatives.
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| 2. |
- Baghai, Ramin, et al.
(författare)
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The Private Use of Credit Ratings: Evidence from Mutual Fund Investment Mandates
- 2019
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Ingår i: SSRN Electronic Journal. - : Elsevier BV. - 1556-5068.
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- Credit ratings have been shown to be imperfect and sometimes biased measures of risk. Has this affected their use in unregulated settings? Using textual analysis, we measure the use of credit ratings in investment mandates of fixed income mutual funds, where ratings serve to limit investment in risky assets. We find that this use has steadily increased from high initial levels over the past two decades. Fixed income markets' extensive and continued reliance on credit ratings either points to a lack of practically useful alternatives, a positive view of ratings by market participants, or inefficient contracting
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| 3. |
- Baghai, Ramin, et al.
(författare)
-
The Use of Credit Ratings in the Delegated Management of Fixed Income Assets
- 2022
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- Investment mandates of fixed income funds constrain managers’ portfolio decisions, often employing credit ratings to classify asset risk. We categorize U.S. and European fixed income funds’ mandates using textual analysis and measure the use of ratings. Over the past two decades, despite the weaknesses of ratings revealed in the global financial crisis, ratings use has increased significantly. Since 2010, the fraction of funds not using ratings in any way has fallen by almost half in both the U.S. and Europe. By 2020, 94% of U.S. funds and 65% of European funds use ratings. These patterns fit agency-based models of investment mandates and point to a lack of practically useful alternatives.
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| 4. |
- Chahrour, Ryan, et al.
(författare)
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Sectoral Media Focus and Aggregate Fluctuations
- 2021
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Ingår i: The American Economic Review. - : American Economic Association. - 0002-8282 .- 1944-7981. ; 111:12, s. 3872-3922
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Tidskriftsartikel (refereegranskat)abstract
- We formalize the editorial role of news media in a multisector economy and show that media can be an independent source of business cycle fluctuations, even when they report accurate information. Public reporting about a subset of sectoral developments that are newsworthy but unrepresentative causes firms across all sectors to hire too much or too little labor. We construct historical measures of US sectoral news coverage and use them to calibrate our model. Time-varying media focus generates demand-like fluctuations that are orthogonal to productivity, even in the absence of non-TFP shocks. Presented with historical sectoral productivity, the model reproduces the 2009 Great Recession.
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| 5. |
- Nimark, Kristoffer P., et al.
(författare)
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News media and delegated information choice
- 2019
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Ingår i: Journal of Economic Theory. - : ACADEMIC PRESS INC ELSEVIER SCIENCE. - 0022-0531 .- 1095-7235. ; 181, s. 160-196
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Tidskriftsartikel (refereegranskat)abstract
- No agent has the resources to monitor all events that are potentially relevant for his decisions. Therefore, many delegate their information choice to specialized news providers that monitor the world on their behalf and report only a curated selection of events. We document empirically that, while different outlets typically emphasize different topics, major events shift the general news focus and make coverage more homogeneous. We propose a theoretical framework that formalizes this type of state-dependent editorial behavior by introducing news selection functions. We prove that (i) agents can always reduce the entropy of their posterior beliefs by delegating their information choice, (ii) state-dependent reporting conveys information not only via the contents of a story, but also via the decision of what to report, and (iii) an event that is reported by all news providers is common knowledge among agents only if it is also considered maximally newsworthy by all providers. As an application, we embed delegated news selection into a simple beauty-contest model to demonstrate how it affects actions in a setting with strategic interactions.
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| 6. |
- Pitschner, Stefan
(författare)
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How do firms set prices? : Narrative evidence from corporate filings
- 2020
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Ingår i: European Economic Review. - : ELSEVIER. - 0014-2921 .- 1873-572X. ; 124
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Tidskriftsartikel (refereegranskat)abstract
- We quantify narrative evidence from archived corporate filings to construct a novel dataset on the price-setting behavior of public companies. Our approach is closely related to that of survey-based studies on price setting, but we collect data from twenty-five years instead of one specific point in time. This allows us to investigate variation over time and to establish that qualitative information provided directly by firms is informative about the aggregate variables macroeconomists are fundamentally interested in. Our findings suggest that (i) price setting is asymmetric and has a strong state-dependent component, (ii) real rigidities in the form of strategic pricing complementarities are very common, and (iii) an increase in the number of price changes does not necessarily reflect a decrease in price rigidity. We discuss to what extent our results can be explained by strategic reporting behavior and consider their implications in the context of widely-used price-setting models.
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| 7. |
- Vasi, Tamás, 1990-
(författare)
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Banks, Shocks and Monetary Policy
- 2020
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Doktorsavhandling (övrigt vetenskapligt/konstnärligt)abstract
- Essay 1: This paper studies the effect of monetary policy on the economy, distinguishing the effects of exogenous monetary policy shocks from information shocks that reveal the Federal Reserve's assessment of the economic outlook. To identify these two shocks, I exploit the difference in information content in public announcements by the Fed in its statements (released on decision days) and minutes of FOMC meetings (transcripts of the policy decision, released at a later date). Intuitively, the statements should give more information about monetary policy, while the minutes should contain more news about the economic outlook. I therefore maintain the assumption that the variances of monetary policy and information shocks should be different in statements and minutes. Following a similar approach to that of Rigobon and Sack (2003), I use an identification technique based on the heteroskedasticity of the two shocks. I find that the Fed does know more about macro variables and that monetary policy and information shocks have important but different effects on asset prices. Last, when I separate policy and information shocks, I find stronger effects of monetary policy on macroeconomic variables than when I use standard high-frequency identification.
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| 8. |
- Westergren, Kerstin
(författare)
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Essays on Inflation Expectations, Monetary Policy and Tax Reform
- 2021
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Doktorsavhandling (övrigt vetenskapligt/konstnärligt)abstract
- This thesis consists of three self-contained essays.Essay I: Why do consumers’ expenditure patterns matter for their inflation expectations? I propose a model of rational inattention where a consumer trades off paying attention between goods bought more or less frequently. For each good purchased, the consumer observes the rate of price change with an error that depends on the frequency at which the good is purchased. Goods bought less frequently are observed with a greater level of error. I apply a simple version of the model where the inflation index is decomposed into two sub-index components; one sub-index contains goods bought often, and the other contains goods that are not bought often. My results show that the consumer pays more attention to goods bought often. The model is able to match about 60% of the variation in the inflation expectations of the average Swedish household over the time period 2002-2017. A decomposition of the model shows that the consumer’s attention allocation trade-off between these two sub-index components is an important factor in the model’s ability to explain the variation in inflation expectations expressed by Swedish households.Essay II: What is the effect of monetary policy announcements on inflation expectations? Using survey data of Swedish households’ inflation expectations over the time period 2003-2015, I examine this question using a two-stage least squares regression model. The announced changes are instrumented by a monetary policy surprise variable, obtained from high-frequency swap trade data. I find that the immediate effect of an announced increase in the policy rate on inflation expectations is significant and positive. This result may be interpreted as the policy announcement signaling the central bank’s private information on the direction of future inflation. Specifically, a division of the monetary policy surprise associated with each announcement as either a pure monetary policy surprise or an information surprise shows that the effect of an announced increase in the policy rate on inflation expectations is significant and positive only for the latter type of surprise.Essay III (with Charlotte Paulie and Markus Ridder): For the past several decades, wealth inequality has increased in many countries. Do changes in the tax system contribute to these trends? Using a quantitative model, we examine the effect on wealth inequality of changing from a comprehensive to a dual tax system. We start with a standard open-economy incomplete-markets model, to which we add an entrepreneurial sector. The entrepreneurs in the model exploit the duality of the tax system after the reform by declaring income as capital (taxed at a flat rate) rather than labor income (taxed progressively). The model is parameterized to match the characteristics of the Swedish economy under dual taxation. In contrast to previous studies, we estimate the parameters of the stochastic process for entrepreneurial income using micro-data observations. We find that the introduction of a dual tax system increases wealth inequality and that the possibility of the entrepreneurs to declare income as capital plays an important role for this result. We also find that the level of aggregate capital and the share of entrepreneurs is higher in an economy with a dual tax system.
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