Search

We investigate the relationship between weather or seasonal affective disorder and the financial market, using a wide variety of financial market data as well as several weather variables and a seasonal affective disorder proxy. We distinguish between a model with a direct effect of the weather and seasonal affective disorder on the financial market and one with an indirect effect via a latent variable mood. Whereas only the latter model is justified by psychological literature, the former model is often used as an approximation. One major innovation of this paper is a consistent econometric implementation of the indirect effects model. We demonstrate that the approximation by direct effects yields inconsistent estimates. Our study supports some weather related, but no seasonal affective disorder related effects on the financial market. We show that, instead of focusing on single market segments, an analysis of various financial market segments is required. We also show that the analysis of individual stock returns or bond spreads reveals additional information, compared to the analysis of aggregate stock or bond indexes.

This article presents joint econometric analysis of interest rate risk, issuer-specific risk (credit risk) and bond-specific risk (liquidity risk) in a reduced-form framework. We estimate issuer-specific and bond-specific risk from corporate bond data in the German market. We find that bond-specific risk plays a crucial role in the pricing of corporate bonds. We observe substantial differences between different bonds with respect to the relative influence of issuer-specific vs. bond-specific spread on the level and the volatility of the total spread. Issuer-specific risk exhibits strong autocorrelation and a strong impact of weekday effects, the level of the risk-free term structure and the debt to value ratio. Moreover, we can observe some impact of the stock market volatility, the respective stock's return and the distance to default. For the bond-specific risk we find strong autocorrelation, some impact of the stock market index, the stock market volatility, weekday effects and monthly effects as well as a very weak impact of the risk-free term structure and the specific stock's return. Altogether, the determinants of the spread components vary strongly between different bonds/issuers.

The goal of this article is to analyze the impact of imputed interest on equity provisions (equity tax shields), that prevailed in Austria from 2000 to 2004, on the capital structure of firms. Although the Austrian system granted only a rather small dose of equity tax shields, we find that the tax regime achieved its goal to increase the equity ratios. We also see that the government can control the companies' capital structures by changing the imputed interest rate on equity. Moreover, we can confirm the hypothesis of De Angelo/Masulis (1980) that non-debt tax shields act as a substitute for debt tax shields also in imputed interest on equity tax systems. It is interesting to see that, even though imputed interest on equity can be used by the government to influence the capital structure, non-debt tax shields show a higher significance than the imputed interest on equity. We also find strong and highly significant autocorrelation of the capital structure showing that the capital structure is not adjusted to a target level but rather the consequence of historical decisions.