Publications from the department of finance

Publications

• Priestley, Richard & Møller, Stig (2023)
  The Role of the Discount Rate in Investment and Employment Decisions
  Journal of Financial and Quantitative Analysis. Doi: 10.1017/S0022109021000715
• Klingler, Sven & Sundaresan, Suresh M. (2023)
  Diminishing Treasury Convenience Premiums: Effects of Dealers' Excess Demand In Auctions
  Journal of Monetary Economics.
• Zhang, Tong (2023)
  Critical Realism: A Critical Evaluation
  Social Epistemology, 37(1), p. 14-29. Doi: 10.1080/02691728.2022.2080127
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  Critical realism, championed by its proponents as the most promising post-positivist social science paradigm, has gained significant influence in the last few decades. This paper provides a critical evaluation of the critical realism movement in the hope of facilitating more fruitful dialogues between its proponents and rivalling schools of sociologists. Two concerns are raised about contemporary critical realism. First, critical realism is not the only philosophical school against positivism and not necessarily the best. Second, critical realists exaggerate the importance of critical realism to social science and conflate philosophy of science with sociological theories.

• Knüpfer, Samuli (2023)
  CEO health
  Leadership Quarterly. Doi: 10.1016/j.leaqua.2022.101672
• Croce, Mariano Massimiliano; Marchuk, Tatyana & Schlag, Christian (2023)
  The Leading Premium
  The Review of financial studies. Doi: 10.1093/rfs/hhad009
• Klingler, Sven & Sundaresan, Suresh (2023)
  Diminishing treasury convenience premiums: Effects of dealers’ excess demand and balance sheet constraints
  Journal of Monetary Economics. Doi: 10.1016/j.jmoneco.2023.01.002
• Wold, Ella Getz; Juelsrud, Ragnar Enger, Summers, Lawrence H. & Eggertsson, Gauti (2023)
  Negative nominal interest rates and the bank lending channel
  Review of Economic Studies.
• Zhang, Tong (2022)
  Ethics and Society: A Theory of Comparative Worldviews
  Journal of Sociology and Christianity (JSC), 12(2), p. 7-28.
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  This article outlines a theist social science paradigm. The central thesis, derived from the assumption of an omnibenevolent and powerful God, is the Law of Divine Selection. It states that the motives of people, or the worldviews they adopt, fundamentally determine their society’s organization and evolution. In particular, the more hedonic or Nietzscheist a society is, the less progressed it will be, and the more ascetic a society is, the more progressed it will be. This provides a consistent and parsimonious explanation of many puzzles in macro-historical studies, among them the Great Divergence between the West and China, the sudden eruption of the two World Wars, and the religious distribution of Nobel Laureates.

• Zhang, Tong (2022)
  Reinterpreting Science as a Vocation
  Max Weber Studies, 22(1), p. 55-73. Doi: 10.15543/maxweberstudies.22.1.55
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  Weber’s “science as a vocation” has often been viewed as a therapeutic concept with no functional significance in the fully bureaucratized and professionalized modern science. However, development in the philosophy of science in the last century, especially the Kuhnian thesis of the discontinuity of scientific progress and the Duhem-Quine thesis of underdetermination, shows that Weber’s distinction between science as a vocation and science as a profession (career) can potentially answer one of the oldest questions in science studies: What makes scientific breakthroughs possible?

• Elkahmi, Redouane; Kim, Daniel, Jo, Chanik & Salerno, Marco (2022)
  Agency Conflicts and Investment: Evidence from a Structural Estimation
  The Review of Corporate Finance Studies. Doi: 10.1093/rcfs/cfac019
• Chalak, Karim; Kim, Daniel, Miller, Megan & Pepper, John (2022)
  Reexamining the evidence on gun ownership and homicide using proxy measures of ownership
  Journal of Public Economics, 208. Doi: 10.1016/j.jpubeco.2022.104621
• Kisser, Michael & Rapushi, Loreta (2022)
  Equity issues, creditor control and market timing patterns: Evidence from leverage decreasing recapitalizations
  Journal of Empirical Finance, 67, p. 196-216. Doi: 10.1016/j.jempfin.2022.03.007
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  We contribute to the literature on “market timing” by exploring periods of simultaneous equity issues and debt retirements (a leverage decreasing recapitalization, LDR). Contrary to traditional equity issues, LDRs are predicted by measures of creditor control whereas capital investment has no such predictive power. Nevertheless, LDRs occur after stock price run- ups and in periods of high valuation which subsequently decrease. The valuation dynamics are robust and also obtain for subsamples of LDR firms violating financial covenants. A comparison to debt retirements financed by illiquid asset sales and an analysis of discretionary cost items further corroborates the interpretation that LDR firms successfully “time the market” to finance the debt retirement.

• Rime, Dagfinn; Schrimpf, Andreas & Syrstad, Olav (2022)
  Covered Interest Parity Arbitrage
  The Review of financial studies, 35(11), p. 5185-5227. Doi: 10.1093/rfs/hhac026
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  To understand deviations from covered interest parity (CIP), it is crucial to account for heterogeneity in funding costs across both banks and currency areas. For most market participants, the no-arbitrage relation holds fairly well when implemented using marginal funding costs and risk-free investment instruments. However, a few high-rated banks do enjoy CIP-arbitrage opportunities. Dealers avert inventory imbalances stemming from lower-rated banks' usage of FX swaps to obtain dollar funding by inducing opposite (arbitrage) flows from high-rated banks. Arbitrage trades are difficult to scale, however, because funding costs increase as soon as arbitrageurs increase positions.

• Klingler, Sven (2022)
  High Funding Risk and Low Hedge Fund Returns
  Critical Finance Review, 11(3-4), p. 505-539. Doi: 10.1561/104.00000119
• Keloharju, Matti; Knüpfer, Samuli & Tåg, Joacim (2022)
  What prevents women from reaching the top?
  Financial Management. Doi: 10.1111/fima.12390
• Zhang, Tong (2022)
  The Logic of Wasteful Production
  Journal of Economics, Theology and Religion (JETR), 2(2), p. 51-66.
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  Economic neoliberalism promises social efficiency with self-interested participants and free competition. This doctrine is challenged by the extensive production of wasteful goods and services in the contemporary West. By studying three types of wasteful production—conspicuous goods, conspicuous profession, and information overproduction— this article argues that the cause of wasteful production is nothing but the producers’ profit motive. The discussion of wasteful production provides a first attempt to extend Max Weber’s interpretivist sociology to the study of Nietzscheism, an ideal-type worldview preaching self-realization and power struggle. It adds novel empirical and theoretical support to the Weber thesis by showing that ascetic Protestantism facilitates productive efficiency by reducing not only hedonistic idleness and laziness, but also egoistic power-seeking and the induced wasteful production.

• Knüpfer, Samuli; Rantapuska, Elias & Sarvimäki, Matti (2022)
  Social Interaction in the Family: Evidence from Investors’ Security Holdings
  Review of Finance. Doi: 10.1093/rof/rfac060
• Lopez Lira Y Ramirez, Jose Alejandro (2021)
  Why do managers disclose risks accurately? Textual analysis, disclosures, and risk exposures
  Economics Letters, 204. Doi: 10.1016/j.econlet.2021.109896
• Klingler, Sven & Syrstad, Olav (2021)
  Life After Libor
  Journal of Financial Economics, 141(2), p. 783-801. Doi: 10.1016/j.jfineco.2021.04.017
• Fagereng, Andreas; Mogstad, Magne & Rønning, Marte (2021)
  Why Do Wealthy Parents Have Wealthy Children?
  Journal of Political Economy, 129(3), p. 703-756. Doi: 10.1086/712446
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  We show that family background matters significantly for children’s accumulation of wealth and investor behavior as adults, even when removing the genetic connection between children and the parents raising them. The analysis is made possible by linking Korean-born children who were adopted at infancy by Norwegian parents to a population panel data set with detailed information on wealth and socio-economic characteristics. The mechanism by which these Korean- Norwegian adoptees were assigned to adoptive families is known and effectively random. This mechanism allows us to estimate the causal effects from an adoptee being raised in one type of family versus another.

• Eggertsson, Gauti; Robbins, Jacob & Wold, Ella Getz (2021)
  Kaldor and Piketty's facts: The rise of monopoly power in the United States
  Journal of Monetary Economics, 124, p. 519-538. Doi: 10.1016/j.jmoneco.2021.09.007
• Fagereng, Andreas; Holm, Martin Blomhoff & Torstensen, Kjersti Næss (2021)
  Housing wealth in Norway, 1993–2015
  Journal of Economic and Social Measurement, 45(1), p. 65-81. Doi: 10.3233/JEM-200471
• Bøhren, Øyvind; Gjærum, Per Ivar & Hasle, Torkel (2021)
  Solstrøm fra boligtak er ofte godt for både klima og økonomi, men ikke i dagens Norge
  Samfunnsøkonomen, 135(5), p. 33-51.
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  Vi bruker kvantitativ livsløpsanalyse (vugge-til-grav) og finner at solceller på private boligtak har stor, positiv effekt på klima og økonomi når de lages med ren, billig strøm og erstatter skitten, dyr strøm. Beliggenhet er derfor den grunnleggende forklaringen på solcellers verdiskaping. Selv om et solcelleanlegg på 60 m2 av et norsk boligtak produserer mye strøm, reduserer det likevel ikke klimautslippet med mer enn utslippet i Kina øker når anlegget lages. Derfor skapes det ingen global klimagevinst under våre forutsetninger. Brukes derimot anlegget i land der alternativ strøm er skitten, reduseres årlig CO2-utslipp med mer enn EUs samlede årsutslipp pr. innbygger. I Norge, hvor alternativ strøm både er ren og forholdsvis billig, finner vi at solstrøm er ulønnsomt samfunnsøkonomisk og ofte også privatøkonomisk. Norge er trolig blant de få land der både klimaeffekten og økonomieffekten av solceller på boligtak er negativ. Bedre solcelleteknologi, mer elektrifisering, høyere strømpris og mer strømeksport kan lett forbedre denne situasjonen.

• Fagereng, Andreas; Holm, Martin Blomhoff & Natvik, Gisle James (2021)
  MPC Heterogeneity and Household Balance Sheets
  American Economic Journal: Macroeconomics, 13(4), p. 1-54. Doi: 10.1257/mac.20190211
• Hull, Isaiah & Sattath, Or (2021)
  Revisiting the Properties of Money
  arXiv.org. Doi: 10.48550/arXiv.2111.04483
• Hull, Isaiah; Bertsch, Christoph & Zhang, Xin (2021)
  Monetary Normalizations and Consumer Credit: Evidence from Fed Liftoff and Online Lending
  The International Journal of Central Banking.
• Hull, Isaiah; Bertsch, Christoph & Zhang, Xin (2021)
  Narrative fragmentation and the business cycle
  Economics Letters. Doi: 10.1016/j.econlet.2021.109783
• Hull, Isaiah; Olovsson, Conny, Walentin, Karl & Westermark, Andreas (2021)
  Manufacturing decline and house price volatility
  Review of economic dynamics. Doi: 10.1016/j.red.2021.06.005
• Hull, Isaiah; Apel, Mikael & Blix Grimaldi, Marianna (2021)
  How Much Information Do Monetary Policy Committees Disclose? Evidence from the FOMC's Minutes and Transcripts
  Journal of Money, Credit and Banking. Doi: 10.1111/jmcb.12885
• Branger, Nicole; Konermann, Patrick, Meinerding, Christoph & Schlag, Christian (2020)
  Equilibrium Asset Pricing in Directed Networks
  Review of Finance, 25(3), p. 777-818. Doi: 10.1093/rof/rfaa035
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  Directed links in cash flow networks affect the cross-section of risk premia through three channels. In a tractable consumption-based equilibrium asset pricing model, we obtain closed-form solutions that disentangle these channels for arbitrary directed networks. First, shocks that can propagate through the economy command a higher market price of risk. Second, shock-receiving assets earn an extra premium since their valuation ratios drop upon shocks in connected assets. Third, a hedge effect pushes risk premia down: when a shock propagates through the economy, an asset that is unconnected becomes relatively more attractive and its valuation ratio increases.

• Juelsrud, Ragnar Enger & Wold, Ella Getz (2020)
  Risk-weighted capital requirements and portfolio rebalancing
  Journal of Financial Intermediation. Doi: 10.1016/j.jfi.2018.10.002
• Bjønnes, Geir Høidal; Osler, Carol L. & Rime, Dagfinn (2020)
  Price Discovery in Two-Tier Markets
  International Journal of Finance and Economics. Doi: 10.1002/ijfe.1953
• Fagereng, Andreas; Guiso, Luigi, Malacrino, Davide & Pistaferri, Luigi (2020)
  Heterogeneity and Persistence in Returns to Wealth
  Econometrica, 88(1), p. 115-170. Doi: 10.3982/ECTA14835
• Andrews, Spencer; Colacito, Riccardo, Croce, Mariano Massimiliano & Gavazzoni, Federico (2020)
  Concealed Carry
  Social Science Research Network (SSRN). Doi: 10.2139/ssrn.3743205
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  The slope carry consists of taking a long (short) position in the long-term bonds of countries with steeper (flatter) yield curves. The traditional carry is a long (short) position in countries with high (low) short-term rates. We document that: (i) the slope carry risk premium is slightly negative (strongly positive) in the pre (post) 2008 period, whereas it is concealed over longer samples; (ii) the traditional carry risk premium is lower post-2008; and (iii) there has been a sharp decline in expected global growth and global inflation post-2008. We connect these empirical findings through an equilibrium model in which investors price news shocks, financial markets are complete, and countries feature heterogeneous exposure to news shocks about both global output expected growth and global inflation.

• Gavazzoni, Federico & Santacreu, Ana Maria (2020)
  International R&D Spillovers and Asset Prices
  Journal of Financial Economics, 136(2). Doi: 10.1016/j.jfineco.2019.09.009
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  We study the international propagation of long-run risk in the context of a general equilibrium model with endogenous growth. Innovation and international diffusion of technologies are the channels at the core of our mechanism. A calibrated version of the model matches several asset pricing and macroeconomic quantity moments, alleviating some of the puzzles highlighted in the international macro-finance literature. Our model predicts that country pairs that share more research and development (R&D) have less volatile exchange rates and more correlated stock market returns. Using data from a sample of 19 developed countries, we provide suggestive empirical evidence in favor of our model’s predictions.

• Zhanhui, Chen; Ehling, Paul & Xiouros, Costas (2020)
  Risk Aversion Sensitive Real Business Cycles
  Management science. Doi: 10.1287/mnsc.2019.3561
• Zhanhui, Chen; Cooper, Ilan, Ehling, Paul & Xiouros, Costas (2020)
  Risk Aversion Sensitive Real Business Cycles
  Management science. Doi: 10.1287/mnsc.2019.3561
• Hull, Isaiah; Sattath, Or, Diamanti, Eleni & Wendin, Göran (2020)
  Quantum technology for economists
  arXiv.org. Doi: 10.48550/arXiv.2012.04473
• Hull, Isaiah; Bertsch, Christoph, Armelius, Hanna & Zhang, Xin (2020)
  Spread the Word: International Spillovers from Central Bank Communication
  Journal of International Money and Finance. Doi: 10.1016/j.jimonfin.2019.102116
• Hull, Isaiah; Bertsch, Christoph & Zhang, Xin (2020)
  Bank misconduct and online lending
  Journal of Banking & Finance. Doi: 10.1016/j.jbankfin.2020.105822
• Fabozzi, Frank J.; Klingler, Sven, Mølgaard, Pia & Nielsen, Mads Stenbo (2020)
  Active Loan Trading
  Journal of Financial Intermediation. Doi: 10.1016/j.jfi.2020.100868
• Cooper, Ilan; Mitrache, Andreea & Priestley, Richard (2020)
  A Global Macroeconomic Risk Model for Value, Momentum, and Other Asset Classes
  Journal of Financial and Quantitative Analysis. Doi: 10.1017/S0022109020000824
• Ostergaard, Charlotte; Sasson, Amir & Sørensen, Bent E. (2020)
  Cash flow sensitivities and bank-finance shocks in non-listed firms
  International Journal of Banking, Accounting and Finance, 11(1), p. 35-70. Doi: 10.1504/IJBAAF.2020.104483
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  We study how small firms manage cash flows by estimating cash flow sensitivities for all sources and uses of cash. Our data are Norwegian non-listed firms which can be matched to the banks they borrow from. Firms with low cash holdings mainly use external finance to offset cash flow fluctuations over the cycle, whereas firms with high cash holdings rely mainly on internal finance. Estimating how cash flow sensitivities change with exogenous bank shocks, we find that the cyclicality of cash-poor firms' investment is amplified because they do not substitute internal for external finance. Our results imply that for small firms, the transmission of financial shocks to the real economy is closely tied to their accumulation of cash.

• Natvik, Gisle James; Rime, Dagfinn & Syrstad, Olav (2020)
  Does publication of interest rate paths provide guidance?
  Journal of International Money and Finance, 103(May), p. 1-22. Doi: 10.1016/j.jimonfin.2019.102123
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  Does the central bank practice of publishing interest rate projections (IRPs) improve how market participants map new information into future interest rates? Using high-frequency data on forward rate agreements (FRAs) we compute market forecast errors; differences between expected future interest rates and ex-post realizations. We assess their change in narrow windows around monetary policy announcements and macroeconomic releases in Norway and Sweden. Overall, communication of future policy plans does not improve markets’ response to information, irrespective of whether or not IRPs are in place. A decomposition of market reactions into responses to the current monetary policy action (“target”) and responses to signals about the future (“path”), reveals that only policy actions lead to improvements in market forecasts.

• Cooper, Ilan & Maio, Paulo (2019)
  Asset Growth, Profitability, and Investment Opportunities
  Management science, 65(9), p. 3988-4010. Doi: 10.1287/mnsc.2018.3036
• Bjønnes, Geir Høidal; Rime, Dagfinn & Solheim, Haakon (2019)
  The impact of different players on the volume-volatility relation in the foreign exchange market
  Beta, 33(1), p. 43-60. Doi: 10.18261/issn.1504-3134-2019-01-04
• Klingler, Sven & Sundaresan, Suresh M. (2019)
  An Explanation of Negative Swap Spreads: Demand for Duration from Underfunded Pension Plans
  Journal of Finance, 74(2), p. 675-710. Doi: 10.1111/jofi.12750
• Branger, Nicole; Konermann, Patrick & Schlag, Christian (2019)
  Optimists and Pessimists in (In)Complete Markets
  Journal of Financial and Quantitative Analysis, 55(8), p. 2466-2499. Doi: 10.1017/S002210901900070X
• Bøhren, Øyvind; Stacescu, Bogdan, Almli, Line & Søndergaard, Kathrine (2019)
  When Does the Family Govern the Family Firm?
  Journal of Financial and Quantitative Analysis, 54(5), p. 2085-2117. Doi: 10.1017/S0022109018001102
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  We find that the controlling family holds both the chief executive officer and chair positions in 79% of Norwegian family firms. The family holds more governance positions when it owns large stakes in small, profitable, low-risk firms. This result suggests that the family trades off expected costs and benefits by conditioning participation intensity on observable firm characteristics. We find that the positive effect of performance on participation is twice as strong as the positive effect of participation on performance. The endogeneity of participation, therefore, should be carefully accounted for when analyzing the effect of family governance on the family firm’s behavior.

• Hull, Isaiah & Grodecka, Anna (2019)
  Measuring the Impact of Taxes and Public Services on Property Values: A Double Machine Learning Approach
  arXiv.org. Doi: 10.48550/arXiv.2203.14751
• Hull, Isaiah (2019)
  A Note on Measuring US Time Series Volatility During the Great Moderation
  Macroeconomic Dynamics. Doi: 10.1017/S1365100519000592
• Chalak, Karim & Kim, Daniel (2019)
  Measurement Error Without the Proxy Exclusion Restriction
  Journal of business & economic statistics. Doi: 10.1080/07350015.2019.1617156
• Berzins, Janis; Bøhren, Øyvind & Stacescu, Bogdan (2019)
  Dividends and taxes: The moderating role of agency conflicts
  Journal of Corporate Finance, 58, p. 583-604. Doi: 10.1016/j.jcorpfin.2019.07.003
• Zheng, Zeqi; Gao, Yuandong, Yin, Likang & Rabarison, Monika K (2019)
  Modeling and analysis of a stock-based collaborative filtering algorithm for the Chinese stock market
  Expert Systems With Applications. Doi: 10.1016/j.eswa.2019.113006
• Atanasov, Victoria; Møller, Stig & Priestley, Richard (2019)
  Consumption Fluctuations and Expected Returns
  Journal of Finance, p. 1-37. Doi: 10.1111/jofi.12870
• Gerard, Bruno (2019)
  ESG and Socially Responsible Investment: A Critical Review
  Beta, 33(1), p. 61-83. Doi: 10.18261/issn.1504-3134-2019-01-05
• Chalak, Karim & Kim, Daniel (2019)
  Measurement error in multiple equations: Tobin’s q and corporate investment, saving, and debt
  Journal of Econometrics. Doi: 10.1016/j.jeconom.2019.08.001
• Berg, Magnus; Bøhren, Øyvind & Vassnes, Erik (2018)
  Modeling the response to exogenous shocks: The capital uplift rate in petroleum taxation
  Energy Economics, 69, p. 442-455. Doi: 10.1016/j.eneco.2017.12.010
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  We show how a recent drop in the Norwegian capital uplift rate by two percentage points changes optimal field design and reduces field value for shareholders. Although optimal design changes considerably and value drops by 12%, the ability to reoptimize design after the shock is worth only 1.5% of field value. This evidence suggests that large behavioral effects of a shock do not necessarily imply large value effects, making it less important to always account for the taxpayers' response. The valuation error in such cases may be moderate if one instead uses the simplifying and widespread assumption of unresponsive taxpayers.

• Berzins, Janis; Bøhren, Øyvind & Stacescu, Bogdan (2018)
  Shareholder conflicts and dividends
  Review of Finance, 22(5), p. 1807-1840. Doi: 10.1093/rof/rfx046
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  We examine how dividend policy is used to mitigate potential conflicts of interest between majority and minority shareholders in private Norwegian firms. The average payout is 50% higher if the majority shareholder’s equity stake is 55% (high conflict potential) rather than 95% (low conflict potential). Such minority-friendly payout is also associated with higher subsequent minority shareholder investment. These results suggest that controlling shareholders voluntarily use dividends to reduce agency conflicts and build trust, rather than opportunistically preferring private benefits to dividends. We show that our results are unlikely to arise from liquidity or signaling motives.

• Adams, Renee Birgit; Keloharju, Matti & Knüpfer, Samuli (2018)
  Are CEOs born leaders? Lessons from traits of a million individuals
  Journal of Financial Economics, 130(2), p. 392-408. Doi: 10.1016/j.jfineco.2018.07.006
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  What makes a successful CEO? We combine a near-exhaustive sample of male CEOs from Swedish companies with data on their cognitive and noncognitive ability and height at age 18. CEOs differ from other high-skill professions most in noncognitive ability. The median large-company CEO belongs to the top 5% of the population in the combination of the three traits. The traits have a monotonic and close to linear relation with CEO pay, but their correlations with pay, firm size, and CEO fixed effects in firm policies are relatively low. Traits appear necessary but not sufficient for making it to the top.

• Cooper, Ilan & Maio, Paulo (2018)
  New Evidence on Conditional Factor Models
  Journal of Financial and Quantitative Analysis. Doi: 10.1017/S0022109018001606
• Andreou, Panayiotis; Cooper, Ilan, Garcia de Olalla Lopez, Ignacio & Louca, Christodoulos (2018)
  Managerial Overconfidence and the Buyback Anomaly
  Journal of Empirical Finance, 49, p. 142-156. Doi: 10.1016/j.jempfin.2018.09.005
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  While positive, long-run abnormal returns following share repurchase announcements are substantially lower when CEOs are overconfident. This effect is particularly strong for (i) difficult to value firms, such as small, young, non-dividend paying, distressed, and having negative earnings firms, (ii) firms with poor past stock return performance and high book-to-market ratio, indicators of possible overreaction to bad news, and (iii) financially constrained firms. Overall, these results are consistent with the mispricing hypothesis as a motive for repurchases and as an explanation for the buyback anomaly. Additionally, irrespective of the CEO’s level of confidence, abnormal returns are considerably larger for financially constrained firms, implying their managers require larger undervaluation due to the higher cost of capital.

• Colacito, Riccardo; Croce, Mariano Massimiliano, Gavazzoni, Federico & Ready, Robert (2018)
  Currency Risk Factors in a Recursive Multi-Country Economy
  Journal of Finance, 73(6). Doi: 10.1111/jofi.12720
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  Focusing on the 10 most traded currencies, we provide empirical evidence regarding a significant heterogeneous exposure to global growth news shocks. We incorporate this empirical fact in a frictionless risk-sharing model with recursive preferences, multiple countries, and multiple consumption goods whose supply features both global and local short- and long-run shocks. Since news shocks are priced, heterogeneous exposure to long-lasting global growth shocks results in a relevant reallocation of international resources and currency adjustments. Our unified framework replicates the properties of the HML-FX and HML-NFA carry-trade strategies studied by Lustig, Roussanov, and Verdelhan and Della Corte, Riddiough, and Sarno.

• Bjønnes, Geir Høidal & Kathitziotis, Neophytos (2018)
  Hva koster det å kjøpe og selge valuta? :
  Praktisk økonomi & finans, 34(3), p. 239-254. Doi: 10.18261/issn.1504-2871-2018-03-07
• Jørgensen, Kjell; Skjeltorp, Johannes A. & Ødegaard, Bernt Arne (2018)
  Throttling hyperactive robots - Order to Trade Ratios at the Oslo Stock Exchange
  Journal of financial markets, 37, p. 1-16. Doi: 10.1016/j.finmar.2017.09.001
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  We investigate the effects of introducing a fee on excessive order-to-trade ratios (OTRs) on market quality at the Oslo Stock Exchange (OSE). We find that traders reacted to the regulation as measured OTRs fell. However, market quality, measured with depth, spreads, and realized volatility, remain largely unaffected. This result differs sharply from the experience in other markets, such as Italy and Canada, where similar regulatory changes have been accompanied by a worsening of liquidity. The unchanged market quality at the OSE is likely due to the different design of the regulation, which is tailored to encourage liquidity supply.

• Klingler, Sven & Lando, David (2018)
  Safe Haven CDS Premiums
  The Review of financial studies, 31(5), p. 1856-1895. Doi: 10.1093/rfs/hhy021
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  Credit default swaps can be used to lower the capital requirements of dealer banks entering into uncollateralized derivatives positions with sovereigns. We show in a model that the regulatory incentive to obtain capital relief makes CDS contracts valuable to dealer banks and empirically that, consistent with the use of CDS for regulatory purposes, there is a disconnect between changes in bond yield spreads and in CDS premiums, especially for safe sovereigns. Additional empirical tests related to the volume of contracts outstanding, effects of regulatory proxies, and the corporate bond and CDS markets support that CDS contracts are used for capital relief.

• Cooley, Thomas F. & Henriksen, Espen (2018)
  The Demographic Deficit
  Journal of Monetary Economics, 93, p. 45-62. Doi: 10.1016/j.jmoneco.2017.11.005
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  There has been a slowdown in growth in the world’s most advanced economies. In this paper we argue that changing demographics, in particular aging populations combined with increased life expectancy, may be part of the explanation for why we observe slower growth, falling interest rates and falling productivity growth. Using Japan and the U.S. in the years prior to the financial crises as a case study, we provide estimates of the growth deficit that arises from an aging cohort structure and increasing life expectancy. We also provide projections of the impact of predictable demographic changes on future growth in the U.S. and Japan.

• Ehling, Paul; Gallmeyer, Michael, Heyerdahl-Larsen, Christian & Illeditsch, Philipp (2018)
  Disagreement about Inflation and the Yield Curve
  Journal of Financial Economics, 127(3), p. 459-484. Doi: 10.1016/j.jfineco.2018.01.001