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This paper, starting from the effects of financial regulatory policies, considers the interaction between Chengxin_Moody and Lianhe_Fitch with the dual rating system and the multi-rating system, constructs a new ordered Logit model, and attempts to explore the impact of the Notice, the dual rating system and the multiple rating system on the probability of Chinese corporate bond defaults, rating upgrades, rating downgrades, and the magnitude of credit rating migrations. This study compares the effectiveness of different rating regulatory systems. Using nine thousand two hundred and sixty-two data of Chinese corporate bonds as the research samples. Empirical analysis and robustness test reveal the following findings: (1) The issuance of the Notice has a significant positive effect on the implementation of both the dual rating system and the multiple rating system, with a greater impact on the implementation of the multiple rating system; (2) The issuance of the Notice, along with the dual rating system and the multiple rating system, can all reduce the probability of corporate bond defaults, with the multiple rating system showing the best preventive effect against corporate bond defaults; (3) The dual rating system is more effective in promoting rating agencies to adjust rating behaviors, accurately correcting corporate bond ratings and effectively alleviating the issue of rating inflation. Competition among rating agencies intensifies rating shopping; (4) Under the dual rating system, rating agencies are more likely to expand the magnitude of credit rating upgrades and downgrades, enhancing the differentiation between high-quality corporate bonds and junk corporate bonds; (5) The selection of rating information from Chengxin_Moody and Lianhe_Fitch can appropriately adjust the degree of flexibility or tightening in response to rating regulatory systems. Chengxin_Moody demonstrates a more sensitive reaction compared to Lianhe_Fitch regarding the rating regulatory systems. This study provides valuable references for the formulation and evaluation of the effectiveness of Chinese corporate bond rating regulatory policies. [ABSTRACT FROM AUTHOR]

This article illustrates two fundamental uses of credit default swaps (CDS) in managing bond portfolios. The applications include CDSs in a buy-and-hold strategy to optimize a portfolio's return-to-risk profile and employing CDS indices to efficiently replicate corporate bond returns. Each application is thoroughly examined, demonstrating how CDS can serve as a versatile tool for mitigating credit risk while striving for higher returns. [ABSTRACT FROM AUTHOR]

We investigate the trading and yield effects of covenant-lite (cov-lite) high-yield bond contracts, which have a restricted (lite) set of covenants. The excluded covenants often are those that use accounting performance measures. Although much research has focused on the potential benefits of accounting as a basis for debt contracting, little is known about settings where it may be optimal to exclude accounting performance statistics from public debt contracts. We find that cov-lite high-yield bonds have a higher trading turnover and lower yield spreads. Our findings provide empirical support for theory, which predicts, for optimal bond covenant design, that a trade-off between improving trading ease versus enhanced investor protection needs to be managed. These results enhance our understanding of the limits of accounting's role in (bond) contracting design. [ABSTRACT FROM AUTHOR]

We investigate the effects of financial risk cycles on business cycles, using a panel spanning 73 countries since 1900. Agents use a Bayesian learning model to form their beliefs about risk. We construct a proxy of these beliefs and show that perceived low risk encourages risk-taking, augmenting growth at the cost of accumulating financial vulnerabilities, and, therefore, a reversal in growth follows. The reversal is particularly pronounced when the low-risk environment persists and credit growth is excessive. Global risk cycles have a stronger effect on growth than local risk cycles via their impact on capital flows, investment, and debt-issuer quality. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

We develop a stylized model that generates the following empirical predictions: the less (more) accessible the underlying market is ex ante , the more its liquidity improves (deteriorates) when basket trading becomes available. We empirically test these predictions using corporate bonds before and after the introduction of exchange-traded funds. Consistent with the model's prediction, liquidity improvement is larger for highly arbitraged, low-volume, and high-yield bonds, and for 144A bonds to which retail investor access is prohibited by law. Our article leads to a more nuanced understanding of the impact of basket security introduction than previous research suggested. [ABSTRACT FROM AUTHOR]

Using breadth of corporate bond fund ownership to proxy for the combination of short-sale constraints and divergence of opinions in the corporate bond market, this paper investigates whether and to what extent Miller's overpricing theory holds for corporate bonds. Consistent with the theory, we document a significant and positive relation between changes in breadth and the cross-section of future corporate bond returns. Because of the bounded upside of debt, the ability of changes in breadth to predict returns appears to be less pronounced for corporate bonds relative to stocks. Furthermore, this predictability is stronger among bonds with higher credit risk, indicating that the effect of short-sale constraints and divergence of opinions on bond mispricing tends to be larger for riskier bonds with more upside potential and, thus, more scope for overvaluation. This paper was accepted by Lukas Schmid, finance. Supplemental Material: The internet appendix and data are available at https://doi.org/10.1287/mnsc.2023.4950. [ABSTRACT FROM AUTHOR]

This document provides a list of recommended readings for undergraduate economics teachers, covering a range of topics including wealth taxation, corporate bonds, productivity growth, Federal Home Loan Banks, and non-fungible tokens (NFTs). It also mentions a special issue of the Journal of Benefit-Cost Analysis focusing on sustainable development goals. The document discusses the congestion pricing plan in Manhattan, implemented by the Metropolitan Transportation Authority (MTA), which aims to reduce traffic and raise funds for public transit. The Journal of Economic Education has published a symposium on economics education, highlighting the decline in students taking economics courses. Steven Levitt, co-author of Freakonomics, has retired from academic economics, citing a lack of impact and a desire to reach a wider audience through media platforms. The Dunning-Kruger effect, which refers to people lacking the expertise to recognize their own lack of expertise, is discussed in an interview with David Dunning. Edward Glaeser explores the concept of the "15-minute city" and its potential impact on racial and income segregation in American cities. The document also examines the changing nature of tipping in the United States, with tipping becoming more expected in various transactions. Lastly, it discusses the decline in the shareholder tax base in the United States, with foreign and tax-exempt investors now dominating stock ownership. [Extracted from the article]

The bond prospectus is an important source of disclosure for bond information, in which the quality of investor protection-related text conveys the issuer's efforts on investor protection and risk management. We try to find out whether reader-friendly prospectus make investors process information more easily, which finally leads to lower credit premium. This study innovatively explores the impact of investor protection-related text quality on bond credit risk premiums, using a total of 6,025 Chinese listed corporate bonds from 2006 to 2022 as a sample for regression. The results show that the higher the Fog Index of investor protection disclosure, the higher the bond credit risk premium; the higher the boilerplate of investor protection disclosure, the lower the bond credit risk premium. Meanwhile, we further find the positive moderating effect of option-embedded bonds in the above relationships, and conclude that option-embedded bonds have stronger relationships between bond credit risk premiums and boilerplate or Fog Index than normal bonds. This study holds significant reference value for regulators to formulate policies and standardize information disclosure to ensure investors' rights and interests. [ABSTRACT FROM AUTHOR]

The efficacy of retainers is a pivotal concern in orthodontic care. This study examined the biomechanical behaviour of retainers, particularly the influence of retainer stiffness and tooth resilience on force transmission and stress distribution. To do this, a finite element model was created of the lower jaw from the left to the right canine with a retainer attached on the oral side. Three levels of tooth resilience and variable retainer bending stiffness (influenced by retainer type, retainer diameter, and retainer material) were simulated. Applying axial or oblique (45° tilt) loads on a central incisor, the force transmission increased from 2% to 65% with increasing tooth resilience and retainer stiffness. Additionally, a smaller retainer diameter reduced the uniformity of the stress distribution in the bonding interfaces, causing concentrated stress peaks within a small field of the bonding area. An increase in retainer stiffness and in tooth resilience as well as a more oblique load direction all lead to higher overall stress in the adhesive bonding area associated with a higher risk of retainer bonding failure. Therefore, it might be recommended to avoid the use of retainers that are excessively stiff, especially in cases with high tooth resilience. [ABSTRACT FROM AUTHOR]

We revisit the link between interest rates and corporate bond credit spreads by applying Rigobon’s (2003) unique heteroskedasticity-based identification methodology to their interconnected dynamics through a bivariate VAR system. This different approach allows us to account for simultaneity issues and use this framework to test the various possible explanations for the credit spread – interest rate relation that have been proposed by the literature over the years. We find that credit spreads do indeed respond negatively to interest rates, a result consistent with Merton’s (1974) structural model. This negative relation is robust to macroeconomic shocks, market uncertainty, business cycles, different sample periods, bond callability, and bond ratings. We also find the magnitude of the negative relation to be larger for high-yield bonds than for investment-grade bonds, and are able to rule out the option-like feature of callable bonds proposed by Duffee (1998) as the main driver of the negative nature of the relationship. These results have important portfolio and risk management implications. [ABSTRACT FROM AUTHOR]

Purpose: To better understand the impact of choosing a carbon data provider for the estimated portfolio emissions across four asset classes. This is important, as prior literature has suggested that Environmental, Social and Governance scores across providers have low correlation. Design/methodology/approach: The authors compare carbon data from four data providers for developed and emerging equity markets and investment grade and high-yield corporate bond markets. Findings: Data on scope 1 and scope 2 is similar across the four data providers, but for scope 3 differences can be substantial. Carbon emissions data has become more consistent across providers over time. Research limitations/implications: The authors examine the impact of different carbon data providers at the asset class level. Portfolios that invest only in a subset of the asset class may be affected differently. Because "true" carbon emissions are not known, the authors cannot investigate which provider has the most accurate carbon data. Practical implications: The impact of choosing a carbon data provider is limited for scope 1 and scope 2 data for equity markets. Differences are larger for corporate bonds and scope 3 emissions. Originality/value: The authors compare carbon accounting metrics on scopes 1, 2 and 3 of corporate greenhouse gas emissions carbon data from multiple providers for developed and emerging equity and investment grade and high yield investment portfolios. Moreover, the authors show the impact of filling missing data points, which is especially relevant for corporate bond markets, where data coverage tends to be lower. [ABSTRACT FROM AUTHOR]

The article examines the impact of financial markets on economic growth, with a particular emphasis on Southeast Asia. It challenges the prevailing reliance on banking systems by advocating for the expansion of diversified financial markets. It underscores the necessity of embracing broader financial market structures for sustainable economic development.

Any global economic and financial disturbance affects trade and capital flows of our economy through exchange rate movements. The portfolio balance (PB) approach considers the capital flows as an additional variable explaining the exchange rate movements. This approach assumes domestic and foreign bonds to be imperfect substitutes. The bonds bearing high risk carry comparatively higher return in the form of risk premium. This study attempts to re-examine the empirical soundness of the PB model in respect of Indian rupee/ US dollar (INR/US $) exchange rate. It covers the period from 2000: 1 to 2023:1. Augmented Dickey Fuller test and Phillip Perron tests are used to test stationarity property of the variables. The Ordinary Least Square (OLS) methodology of regression is used for the purpose of estimation. Autocorrelation problem is dealt with by using the Cochrane Orcutt procedure. The PB model is estimated in naïve form as well as in partial adjustment form. The empirical finding shows that the PB model works well in partial adjustment framework rather than in its naïve form with speed of adjustment being three to four quarters. The money supply differential and relative real Gross Domestic Product (GDP) are identified as significant variables whereas the bond holding variable remained insignificant. However, in the long run, the model did not work. It is suggested that the fiscal and monetary policies that enhance capital spending in productive sectors should be implemented to achieve a gradually appreciating exchange rate. [ABSTRACT FROM AUTHOR]

Holding companies legally separate the assets and owners of a company creating a layer of liability protection. Theoretically, this feature lowers the risk attributable to holding companies, enabling them to offer lower-cost debts compared to stand-alone alternatives. However, no study has ever tested this hypothesis due to its technical and practical difficulties. Testing this hypothesis requires a separate classification of holding and stand-alone companies' outstanding debts to compare their risk spreads, controlling the bonds' risk ranking, maturities, and issue sizes. Further, a model is needed to make the callable bond spreads with unknown maturity dates comparable to non-callable bonds. This work is the first attempt to evaluate the risk spreads of stand-alone banks and bank holding companies in Spain by including all outstanding rated bonds offered by Spanish banks. In order to make callable bond spreads comparable with noncallable bond spreads, we obtained the option-adjusted spreads for the bonds using a lattice option-pricing model that treats the callable bonds as a bond with embedded options. We then regressed to option-adjusted spreads on control variables and ownership structure dummy to see if there exists a statistically and economically significant coefficient for the introduced dummy variable. We found that bank-holding company bonds have higher risk spreads compared to the stand-alone alternatives in Spain. This may be attributable to the characteristics of holding companies that introduce other risks that offset the gains obtained from the added layer of liability protection. [ABSTRACT FROM AUTHOR]

Using daily closing price observations between November 2017 and February 2023, this paper documents how the shocks of a cryptocurrency ETF resonate with ETFs representing traditional asset classes in terms of price and volatility. We find price transmission from the cryptocurrency ETF into the ETFs of several currencies, small-cap equities, and inflation. Risk propagation from the cryptocurrency ETF flows toward ETFs constituted of equities of various sizes, oil prices, high-yield corporate bonds, and inflation. There is scant evidence of transmission from ETFs with underlying conventional assets into the cryptocurrency ETF. The findings bear implications for low-cost risk management strategies. [ABSTRACT FROM AUTHOR]

In this paper, using a panel of annual observations ranging from 2005 to 2018, we employ the novel unconditional quantile regression by resorting to an augmented fiscal reaction function model to examine the distribution-varying fiscal response for 26 European Union countries. The results point to significant asymmetries regarding the fiscal response measured in terms of the cyclically adjusted primary balance to different covariates. More specifically, we report a U-shaped fiscal reaction to debt changes suggesting more explicit debt stabilization concerns during high-deficit periods. We also show a varying response when debt exceeds the 60% threshold, which is conditioned by the size of the fiscal position. In addition, we reveal a procyclical fiscal behaviour when balance is highly deteriorated. [ABSTRACT FROM AUTHOR]

The negative CAPM alphas of high‐beta and high‐variance stocks are attributable to an unaccounted factor in the CAPM. We use eight seemingly unrelated anomalies to construct a composite factor in the spirit of the optimal orthogonal portfolio (FOP). Accounting for FOP re‐establishes a positive relation between beta and average returns in time series regressions as well as cross‐sectional and explains the negative alphas of high‐beta and high‐variance stocks. To analyze economic drivers behind FOP, we perform a horse race between leverage constraints, investor sentiment, and disagreement. Our results highlight investor sentiment as the most promising explanation for the low‐risk effect. [ABSTRACT FROM AUTHOR]