This paper decomposes the break-even inflation rates derived from inflation-indexed bonds into inflation risk premia, liquidity risk premia, and inflation expectations. I estimate a common factor model with autoregressive conditionally heteroscedastic (ARCH) errors that extracts co-movements from twentytwo monthly and quarterly indicators to identify these three components. The results indicate...

Stocks under …nancial distress, measured by the Default Likelihood Indicator (DLI, Vassalou and Xing 2004) earn large returns during the …rst month after portfolio formation, a phenomenon di¢ cult to explain using standard asset pricing models. We argue that when stocks experience …nancial distress, they become less liquid at the same time. This lack of liquidity leads to temporary price conces...

This paper looks into how the liquidity of the Hong Kong stock market has evolved since the Asian financial crisis, and examines the determinants of changes in liquidity. Various conventional liquidity indicators are constructed for the study period from 1997 to June 2001. They show that, having deteriorated during the Asian financial crisis and the Russian crisis, market liquidity has mostly r...

Because prices are a function of expected future liquidity levels, a component of unexpected returns is due to new information about future costs to trade. The first two chapters of this dissertation explore this relationship. Chapter 1 extends the Campbell (1991) return decomposition to include liquidity news, which captures the component of unexpected returns due to revisions in future expect...

The purpose of this study is to establish the firms level aspects which have more influence on the Credit risk managing of domestic and foreign banks in Pakistan. The study is based on secondary data from the period of 2001 to 2010. To check the stationarity of the data, Augmented Dickey Fuller test is used and Johansson’s Co-integration is used for long run relationship. Linear regression mode...

In this paper, we investigate the impact of liquidity requirements on bank risk. We take advantage implementation Liquidity Balance Rule (LBR) in Netherlands 2003 and analyze its default The LBR was imposed Dutch banks only did not apply to other operating elsewhere within Eurozone. Using differential regulatory treatment overcome identification concerns, find that following introduction LBR, r...

This paper examines the optimal design of capital and liquidity regulations under fire sale externalities. The lack of complementary liquidity ratio requirements harms the purpose of capital adequacy requirements by yielding not only inefficiently low risky investment but also more severe financial crises. When capital is regulated but liquidity is not, banks still keep liquid assets for micro-...

Secondary markets for long-term assets might be illiquid due to adverse selection. In a model in which moral hazard is confined to project initiation, I find that: (1) when agents expect a liquidity dry-up on such markets, they optimally choose to self-insure through the hoarding of non-productive but liquid assets; (2) such a response has negative externalities as it reduces ex-post market par...