We analyze the impact of news (information shocks) in economies where liquidity plays a role. While we also consider news about real factors, like productivity, one motivation is that central bank announcements evidently affect markets, as taken for granted by advocates of forward guidance policy. The dynamic effects can be complicated, with information about monetary policy or real factors aff...

We revisit the question whether commodities should be included in investors' portfolios. We employ for the first time a stochastic dominance efficiency (SDE) approach to construct optimal portfolios with and without commodities and we evaluate their comparative performance. SDE circumvents the necessity to posit a specific utility function to describe investor's preferences and it does not impo...

The paper explores the linkage between equity and commodity markets, focusing in particular on its evolution over time. It documents that a country’s equity market value has significant out-of-sample predictive ability for the future global commodity price index for several primary commodity-exporting countries. The out-of-sample predictive ability of the equity market appears around 2000s. The...

This paper examines the presence of herd formation in equity markets by defining a new measure for equity return dispersion. We build on Christie and Huang (1995) results and analyze security returns for the same time period using a modified version of their dispersion measure. Our results contradict with theirs. We find evidence to herding by market participants during periods of unusually lar...

In addition to providing utility, and possibly capital gains, housing facilitates credit transactions when home equity serves as collateral. We document big increases in home-equity loans coinciding with the US house-price boom, and suggest a connection. When it is used as collateral, housing bears a liquidity premium. Since liquidity is endogenous, and depends to some extent on beleifs, even w...

The existing literature on law and finance generally assumes that firms are passive recipients of the influence of investor protections on their ability to raise external financing. In this paper, we empirically identify a commitment mechanism, i.e., dividend payouts, which firms use to establish a reputation for better treatment of outside shareholders in order to compensate for country-level ...

Legal restrictions on international capital movements are imposed in many countries in an attempt to (partially) insulate their economies from abroad and pursue some degree of domestic policy independence. But is the imposition of capital controls effective in achieving these goals? We investigate this issue from a new angle by linking de jure restrictions on three specific asset categories of ...

Article history: Received 2 July 2012 Received in revised form 7 November 2013 Accepted 7 November 2013 Available online 22 November 2013 This paper proposes a simple multi-industry trade model with search frictions in the labor market. Unimpeded access to global financial markets enables capital owners to invest abroad, thereby fostering unemployment at the extensive industry margin. Whether a...

Established illiquidity measures are constructed for emerging markets in Africa and used to determine which best explain trading costs. Costs of equity are derived from an augmented CAPM for a sample of emerging financial markets generally ignored in the literature. These include: South Africa and Namibia, three countries in North Africa and four in SSA, plus London and Paris as examples of int...

Established illiquidity measures are constructed for emerging markets in Africa and used to determine which best explain trading costs. Costs of equity are derived from an augmented CAPM for a sample of emerging financial markets generally ignored in the literature. These include: South Africa and Namibia, three countries in North Africa and four in SSA, plus London and Paris as examples of int...