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Abstract This paper investigates the geographic distribution of payday lenders and banks that operate throughout the United States. State-level data are used to indicate differences in the regulatory environment across [...]

Following the 2008 financial crisis, multiple studies have contributed to the research on stock price crashes. However, most of the studies on stock price crashes are from the corporate management perspective, focusing on factors such as the board's character, the CEO's power, the brand's capital, and ESG performance. Few studies have taken external information, such as media coverage, into consideration. Meanwhile, in the era of 5G, internet media has witnessed exponential growth, heavily enhancing the speed of information transmission; this could possibly impact the future risk associated with stock price crashes. From this perspective, our study extends the coverage by investigating the relationship between internet media coverage and the potential risk of stock price crashes. Using a comprehensive dataset of the Chinese stock market from 2008 to 2021, we found that the optimistic (pessimistic) tones of internet media were positively (negatively) correlated with the future risk of crashes. These findings remained firm after accounting for winsorization, corporate governance control, firm fixed effects, and instrumental variable analysis. Further analyses showed that media tone impacts were more pronounced for firms with higher analyst coverage. Our study indicates that investors, especially retail investors, who are more easily influenced by internet media, should be more cautious about the increasingly favorable internet coverage of listed companies, which could result in a heightened future risk of stock price crashes. Moreover, regulators should inform investors when listed companies are experiencing more favorable internet coverage to minimize potential stock market fluctuations and investment losses for investors. [ABSTRACT FROM AUTHOR]

The short-lived arbitrage model has been shown to significantly improve in-sample option pricing fit relative to the Black–Scholes model. Motivated by this model, we imply both volatility and virtual interest rates to adjust minimum variance hedge ratios. Using several error metrics, we find that the hedging model significantly outperforms the traditional delta hedge and a current benchmark hedge based on the practitioner Black–Scholes model. Our applications include hedges of index options, individual stock options and commodity futures options. Hedges on gold and silver are especially sensitive to virtual interest rates. [ABSTRACT FROM AUTHOR]

This paper examines the role of education in China's fast‐growing peer‐to‐peer (P2P) lending market. The level of education, as part of a borrower's profile, is an important yet relatively neglected factor that can affect both the demand and supply of credit in an increasingly more technologically oriented marketplace. With this in mind, we test the relationship between a borrower's education level and the interest rate, loan amount, and loan maturity based on more than 10,000 transactions from Renrendai.com. Controlling for a variety of other factors, we find on average that an individual with a higher education level obtains a lower interest rate, larger loan amount, and longer maturity. In contrast, less educated individuals pay higher interest rates, obtain smaller loans, and for shorter time periods. [ABSTRACT FROM AUTHOR]

The authors investigate the role of mutual fund flows in incorporating market sentiment into asset prices. They show that retail investors adjust their investments among mutual fund categories in response to changes in market sentiment. Consistent with sentiment-induced price pressure through fund flows, they further find that firms favored by mutual funds, such as large-cap, dividend payers, and firms with high institutional ownership are sensitive to market sentiment. The authors construct a pricing factor representing sentiment risk and find that the sentiment factor is significant in standard asset pricing models and robust to various sorting procedure. [ABSTRACT FROM AUTHOR]

We consider returns from rebalanced and buy and hold portfolios consisting of the same stocks. Theoretical properties are derived using Jensen's inequality and the Hölder's Defect Formula. Simulations are used to confirm theory and to investigate ambiguous cases where theory is silent. Rebalancing decreases total return volatility, while buy and hold produces greater expected return. Results are more opaque with respect to Sharpe Ratios and expected geometric means. Our empirical tests are based on portfolios composed of the risk-free asset, CRSP market value returns and returns from five Fama-French industries. While rebalancing reduces volatility and momentum effect, our tests largely favor the buy and hold strategy due to the high relative returns enjoyed by stocks vis-a-vis the risk-free asset. Transactions cost for rebalancing the portfolio are economically negligible. [ABSTRACT FROM AUTHOR]

The lattice approximation to a continuous time process is an especially useful way to value American and real options. We choose lattice probabilities by extending density matching for diffusions to density matching for jump diffusions. Technically, this requires that diffusion and jump components be cast as independent state variables. In this setup, the diffusion probabilities are locally normal and the jump probabilities are locally a mixture of distributions. The lattice is structurally uniform and density matching ensures that all probabilities are legitimate without requiring jumps to non-adjacent nodes. The approach generalizes easily to several state variables, does not require node adjustments, and does not appear to be dominated by more specialized numerical algorithms. We demonstrate the model for scenarios where the option may depend on a jump diffusion with possible stochastic interest rates and convenience yields. © 2014 Wiley Periodicals, Inc. Jrl Fut Mark 35:385-398, 2015 [ABSTRACT FROM AUTHOR]