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The green bond market has significantly improved in recent years thanks to the development of financial instruments and the rising climate change concerns. Given this backdrop, this paper investigates the effects of returns in different financial markets, i.e. the United States Treasury Bonds, the Standard & Poor's stock market, the United States Dollar, Gold, Crude Oil, and Bitcoin on the Green Bond returns (the Standard & Poor's Green Bond Index) from September 17, 2014, to September 1, 2022. The results from the robust linear and machine learning estimators indicate that the returns of the United States Treasury Bonds and the United States Dollar are negatively related to the Green Bond returns. Meanwhile, Gold returns positively affect Green Bond returns. The quantile regression estimations of Machado–Santos Silva also show that these findings are valid in different quantiles. The paper also discusses policy implications related to climate change and the development of financial instruments to promote green investments. [ABSTRACT FROM AUTHOR]

This paper analyzes the time‐varying causality between government bond and oil returns of the United States over the monthly period of 1859:10 to 2019:03, that is, the longest possible span of historical data, starting from the beginning of the modern era of the petroleum industry. While the standard constant parameter causality test fails to pick up any evidence of causality, the time‐varying framework shows evidence of bi‐directional spillovers over the entire sample period. The results are robust to the inclusion of stock returns as a control variable in the model. We also detect evidence of time‐varying causality‐in‐volatility between sovereign bond and oil markets, as well as spillovers in returns and volatility from the oil market to corporate bonds. [ABSTRACT FROM AUTHOR]

This paper examines the spillover effects of U.S. unconventional monetary policy (UMP) on emerging market capital flows and asset prices. Affine term structure model estimates show that U.S. monetary policy shocks, identified with high-frequency Treasury futures data, represent revisions to expected short-term yields and term premia, especially during the UMP period. The policy shocks exhibit sizable effects on U.S. holdings of emerging market assets. These effects disproportionately manifest through valuation changes versus physical flows, are more pronounced for equity relative to bond markets, and are asymmetric between the quantitative easing and tapering periods, with flows more important during the unwinding. [ABSTRACT FROM AUTHOR]

This paper exploits an influx of Chinese students to U.S. universities from 2000 through 2018 to study synergies between banks' deposit-taking and lending activities. Banks that are more recognizable by Chinese students experience higher deposit inflows and increase their local credit supply. This credit supply expansion only occurs in information-sensitive credit markets: small business loans and second lien mortgages. Such increase concentrates in nontradable sectors and is more pronounced at locations where managers have more autonomy. The results indicate that deposits from local consumers convey private information about the local credit market, which helps banks in information-sensitive lending. [ABSTRACT FROM AUTHOR]

The paper discusses the announcement effects of Series I savings bonds on U.S. Treasury inflation-protected securities (TIPS). The author uses an event study methodology to study yield movements both preannouncement and postannouncement for on-the-run TIPS issues surrounding the biannual announcement dates going back to the start of the Series I savings bond program in 1998. Since the Treasury offers 5-, 10-, 20-, and 30-year TIPS, and the Series I savings bond can be held and earn interest from 1 to 30 years, the announcement effect is tested for all on-the-run TIPS. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to develop and validate a cross-national framework to identify the motivation underpinning consumers' (i.e. the general public's) loyalty toward credit card usage. The following research questions guided the study: (1) What factors motivate consumers to stay loyal to their credit card? (2) Does the investment model (regarding satisfaction and investment size) mediate the relationship between factors motivating consumers to stay loyal to their credit card? Design/methodology/approach: This study employs the investment model theory (Rusbult, 1980) as a theoretical framework and uses structural equation modeling to develop and validate a cross-national framework, addressing factors that motivate consumers to stay loyal to credit card brands. In addition, the authors test the mediating effect of the investment model on the relationship. Survey data were collected from the United States and France. Findings: The findings revealed four factors (incentives, customer service, investment size and satisfaction) that impact consumer credit card loyalty behavior in the two mature credit card markets. The authors find empirical support for two of four hypotheses. That is, investment size mediates the relationship between incentives and consumer loyalty, and satisfaction mediates the relationship between customer service and consumer loyalty. Moreover, unlike the French sample, the American sample produced a significant finding for investment size to mediate the relationship between customer service and consumer loyalty. Originality/value: This paper validates and extends the investment model theory in the marketing of credit cards within a cross-national setting. Most studies on credit card consumption focus on the college student segment, and there is less understanding of the motivation to stay loyal to using a credit card from the general public who are not necessarily college students. Given the scarce stream of empirical studies dealing with cross-national consumer motivation, choice criteria of credit cards, and loyalty toward credit cards, this research comes at an opportune moment as credit card firms differentiate their card brands in the global marketplace. Further, a dataset originating from two mature Western economies has been put forward for the benefit of practitioners and researchers. [ABSTRACT FROM AUTHOR]

Economists both failed to predict the global financial crisis and underestimated its consequences for the broader economy. Focusing on the second of these failures, this paper makes two contributions. First, I review research since the crisis on the role of credit factors in the decisions of households, firms, and financial intermediaries and in macroeconomic modeling. This research provides broad support for the view that credit market developments deserve greater attention from macroeconomists, not only for analyzing the economic effects of financial crises but in the study of ordinary business cycles as well. Second, I provide new evidence on the channels by which the recent financial crisis depressed economic activity in the United States. Although the deterioration of household balance sheets and the associated deleveraging likely exacerbated the initial economic downturn and the slowness of the recovery, I find that the unusual severity of the Great Recession was due primarily to the panic in funding and securitization markets, which disrupted the supply of credit. This finding helps to justify the government's extraordinary efforts to stem the panic in order to avoid greater damage to the real economy. [ABSTRACT FROM AUTHOR]

In this paper, we study the impact of the New Market Tax Credit (NMTC) program in the United States on overall jobs and jobs held by minority and rural populations within the 2010–2019 period using a dynamic event‐study analysis. We also investigate if the jobs that can be attributed to the program stayed in program recipient neighborhoods or whether those jobs were occupied by non‐residents. The results show that there is clear evidence that the program increased overall workplace jobs and workplace jobs held by White and minority populations in the program recipient tracts. We also see that a larger share of workplace jobs due to the program went to minorities compared to the job shares held by various racial and ethnic groups at the beginning of the investment period. The results further show that even though the NMTC program increased the number of jobs available in a program recipient tract, the individuals who live outside that tract are holding many of the jobs created. The results also suggest that the program had a negative impact on jobs held by residents in nonmetropolitan tracts. [ABSTRACT FROM AUTHOR]

The article presents a discussion of the paper "Demographic Fractionalization and the Municipal Bond Market" by Daniel Bergstresser, Randolph Cohen and Siddharth Shenai. Topics covered include the relationship between ethnic and religious diversity and municipal borrowing costs and the limit of efficiency of the U.S. municipal bond market. Also mentioned is the issuance of bonds by more diverse localities in the secondary market.

The announcement made by the Fed Chairman, Ben Bernanke, on May 22, 2013 regarding the reduction of the quantitative easing programme that took by storm the financial markets determined the significant volatility increase of the US markets and it was not limited to it. The financial markets in the emerging countries that benefited from an increase in their financial flows during the quantitative easing programme were the most affected by this announcement through the volatility increase, depreciation of exchange rate and massive capital outflows. The current paper tackles volatility and volatility transmission from the US market determined by the change of monetary policy to the Eastern European markets. To study the volatility of each stock and bond market of the countries in Eastern Europe, we used univariate heteroscedastic models while for the analysis of volatility transmission from the US market to the Eastern European markets we used the multivariate heteroscedastic models. The results obtained confirm the volatility transmission both on the stock markets, with the exception of Latvia and Lithuania, and on the bond markets in Eastern Europe. [ABSTRACT FROM AUTHOR]

In recent years, an increasing interest has been shown in pure discount bonds. A number of papers have looked at corporate capital structure in an option pricing framework, assuming the issuance of pure discount bonds by corporations. Merton has presented a theoretical discussion of the impact of default risk upon pure discount bonds. Racette and Lewellen have argued that long-term pure discount bond issues could present special tax advantages to corporations. Fisher and Weil have suggested that long-term pure discount bonds would be very attractive to holders of bond portfolios in order to immunize these portfolios against changes in interest rates. A similar position is taken by Caks. In spite of the claimed advantages of pure discount bonds from the viewpoint of both potential bondholders and stockholders, in the United States long-term pure discount bonds are not issued by corporations or governments. This paper will provide an explanation of this non-issuance by showing that the tax treatment of original issue pure discount bonds is highly disadvantageous to potential bondholders and firms. U.S. tax law requires the original purchaser of a long-term pure discount bond to amortize as regular income over the bond's life the difference between the purchase price and the face value (to be received at maturity). One purpose of this paper is to show that this tax law implies that, in equilibrium, pure discount bond issue prices would have to be negative for a wide spectrum of tax rates. Corporations would never issue bonds at negative prices, since the corporation would never receive any cash inflows. Secondly, it will be shown that pure discount bonds initially issued at positive prices can subsequently have negative prices if interest rates were to rise. Consequently, such bonds would be very risky to potential purchasers. [ABSTRACT FROM AUTHOR]

In 2016 Allan D. Grody and Peter J. Hughes proposed a method and system termed 'Risk Accounting', an integrated financial and risk accounting framework. Risk Accounting incorporates a novel operational risk exposure quantification technique based on the Risk Unit (RU), a new common additive metric designed to express all forms of operational risk in banks. In this paper, we report on initial tests of the inherent predictiveness of the RU. The test focused on the period leading up to the global financial crisis of 2007-8 and involved the restatement into RUs of publicly available accounting data in the United States relative to a subset of large US banks. We contend that the RU's inherent predictiveness could be concluded if it is demonstrated that an accelerated increase in trended operational risk RUs and subsequent material unexpected losses are positively correlated. We further describe how a monetary value can be stochastically derived and assigned to the RU over time. The inclusion of valued RUs in accounting systems will potentially enable the systematic adjustment of financial performance and condition relative to accepted nonfinancial risks to complement the accounting treatment already applied to financial (credit and market) risks. The resulting harmonisation of the accounting treatment applied to both financial and nonfinancial risks based on stochastic modelling will enable risk-adjusted economic profit to be adopted as the primary business performance metric and economic capital as the primary method of determining both operating and regulatory capital requirements. The real-time or near-real-time production of portfolio views of operational risk exposures based on the RU adds analytical rigour to their management and causes risk mitigation to become both a risk reduction and a profit optimisation initiative. The more effective management, oversight and governance of exposures to operational risks is the anticipated outcome. [ABSTRACT FROM AUTHOR]

This paper explores the history of inflation-indexed bond markets in the United States and the United Kingdom. It documents a massive decline in long-term real interest rates from the 1990s until 2008, followed by a sudden spike during the financial crisis of 2008. Breakeven inflation rates, calculated from inflation-indexed and nominal government bond yields, were stable from 2003 until the fall of 2008, when they showed dramatic declines. The paper asks to what extent short-term real interest rates, bond risks, and liquidity explain the trends before 2008 and the unusual developments that followed. Low yields and high short-term volatility of returns do not invalidate the basic case for inflation-indexed bonds, which is that they provide a safe asset for long-term investors. Governments should expect inflation-indexed bonds to be a relatively cheap form of debt financing in the future, even though they have offered high returns over the past decade. [ABSTRACT FROM AUTHOR]

This article focuses on issues relating to the U.S. stock and bond markets, and its implications for demography. A key issue is the ability of the model to explain both interest rates and stock prices. If baby-boomers are saving for retirement, their behavior should push up the prices of both stocks and long-term bonds, lowering expected returns on both. Unlike stocks, bonds come with a little yield that tells exactly what the expected return on the bond is. As of March 2004, due to the development of the market in Treasury inflation-protected securities, yield comes in both nominal and real varieties. As a result, real bond yields are considered an accurate way to measure expected returns. In this paper, although short-term interest rates are out of phase with the demographic variables and the level of the stock market, real long-term interest rates and the stock market move in perfect coordination. Long-term bond prices and stock prices therefore move together as well. Therefore, this paper implies that when stock prices are very high, as in the late 1990s, bond prices should also be high, and when stock prices are very low, as in the mid-1970s, bond prices should be low. However, this is not what actually occurred. Since bond prices and stock prices seem to be telling different scenarios, it is useful to look for other evidence on expected returns over the past decade.

We trace the evolution of extreme illiquidity discounts among Treasury securities during the financial crisis, when bond prices fell more than 6% below more liquid but otherwise identical notes. Using high-resolution data on market quality and trader identities and characteristics, we find that the discounts amplify through feedback loops, where cheaper, less-liquid securities flow to longer-horizon investors, thereby increasing their illiquidity and thus their appeal to these investors. The effect of the widened liquidity gap on transactions costs is further amplified by a surge in the price liquidity providers charge for access to their balance sheets in the crisis. Received September 28, 2016; editorial decision January 2, 2018 by Editor Philip Strahan. 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]

Observed differentials among yield series for different types of long-term instruments—U.S, government bonds, municipal bonds, corporate bonds and residential mortgages—vary considerably over time. Many factors can contribute to observed long-term yield spreads, the most important of which are "technical" factors that relate to differences in the particular characteristics of instruments or in the investors that purchase them. These include the tax status of various types of income accruing to the security and the degree of certainty associated with that income. Long-term yield spreads might also be affected by relative security supplies and relatively exogenous demands, e.g., Federal agency demands for residential mortgages, particularly if institutional constraints on permissible yields or on the various sectors that purchase the long-term instruments exist. Failure to consider the effects of all of these factors has frequently created misunderstanding both in the financial press and in academia about the causes of observed yield spreads. For example, attempts have been made to measure the impact on long-term yield spreads of individual factors—such as default risk or relative security supplies—by comparing yield series without proper regard for the concurrent impact of other technical and/or fundamental factors. This paper deals exclusively with long-term corporate and U.S. government bond yields. The most widely used series are Salomon Brother's Aa deferred call new issue utility yield and the Federal Reserve Bulletin's average yield on bonds maturing or callable in 10 years or more. The spread between these series is shown as the solid line in Chart 1. (The dashed line will be discussed later.) The spread has moved over a wide range, rising sharply from 40 basis points in late 1965 to 235 basis points in the second quarter of 1970, subsequently falling to 140 basis points in early 1973, and then rising to almost 300 b... [ABSTRACT FROM AUTHOR]

This paper analyzes the emergence of the inflation premium in long-term interest rates as the explicit result of borrowers' and lenders' behavior in the bond market in response to expectations' of price inflation. By exploiting a structural modelling approach, this analysis seeks not only to estimate the magnitude of the inflation premium due to this portfolio behavior but also to identify the (in general differential) contributions to it of borrowers' and lenders' behavior. To anticipate, the empirical results suggest that the equilibrium portfolio responses to a marginal 1% of expected price inflation change the nominal long-term interest rate by about 2⁄3%, and that this premium reflects approximately equal responses by borrowers and lenders. [ABSTRACT FROM AUTHOR]

Despite powerful advances in interest rate curve modeling for data-rich countries in the last 30 years, comparatively little attention has been paid to the key practical problem of estimation of the term structure of interest rates for emerging markets. This may be partly due to limited data availability. However, emerging bond markets are becoming increasingly important and liquid. It is, therefore, important to be understand whether conclusions drawn from developed countries carry over to emerging markets. We estimate model parameters of fully flexible Nelson-Siegel-Svensson term structures model which has become one of the most popular term structure model among academics, practitioners, and central bankers. We investigate four sets of bond data: U.S. Treasuries, and three major emerging market government bond data-sets (Brazil, Mexico and Turkey). By including both the very dense U.S. data and the comparatively sparse emerging market data, we ensure that are results are not specific to a particular data-set. We find that gradient and direct search methods perform poorly in estimating term structures of interest rates, while global optimization methods, particularly the hybrid particle swarm optimization introduced in this paper, do well. Our results are consistent across four countries, both in- and out-of-sample, and for perturbations in prices and starting values. For academics and practitioners interested in optimization methods, this study provides clear evidence of the practical importance of choice of optimization method and validates a method that works well for the NSS model. [ABSTRACT FROM AUTHOR]

Purpose The purpose of this paper is to explore Islamic borrowing at the local level in redevelopment authorities in the USA through an ijara and esham framework.Design/methodology/approach A hypothetical example is approached with a real redevelopment authority in the City of Pompano Beach, Florida. Actual data from past borrowing in a tax increment financing district are compared to an Islamic financing approach to test for competitiveness to a conventional approach.Findings It was found that when incorporating a crowdsourced option along with an ijara and esham approach, the returns on investment are higher than for a conventional approach. The risk is higher, but the returns are also higher which possibly increases the incentive to invest in these options.Research limitations This scenario is only hypothetical and based on many assumptions. A real-world application of the approach would have to be attempted to confidently determine its viability.Practical implications The potential competitiveness of this financing approach as well as its higher sustainability makes this a favorable approach for local redevelopment authorities to implement for needed money for infrastructure projects in blighted areas of the city. It is also of interest to Muslim countries that are devolving authority to their local governments.Originality/value This paper considers an alternative approach to tax increment financing which relies on a revenue sharing arrangement called an esham–ijara and esham–sukuk risk-sharing structure in Islamic financing terminology. There is currently very little discussion of esham in Islamic finance and no discussion of the application of Islamic finance to local economic development enterprises. [ABSTRACT FROM AUTHOR]

Purpose – The purpose of this paper is to present an innovative model to evaluate the fair price of a subset of structured products for a hypothetical US structured bond. Design/methodology/approach – The authors assume that interest rates dynamics are described by the Cox–Ingersoll–Ross process. They conduct robustness checks by stress testing against parameter and model uncertainty. Findings – The fair value of the bond is robust under any parameter or model misspecification. In addition, a change in the price seems to be more sensitive to long-term yields rather than short-or mid-term yields. The authors provide a better understanding of the relationship between bond prices and business cycles: a slight change in the current structure would have a significant effect on the bond price only during economic expansions. Social implications – The recent global financial crisis has led policymakers and the financial press to blame financial innovation through accusations of structured products being highly complex. Much of the criticism is based on the fact that investors were not able to properly price and fully understand the risks of their investments. Regulators should ensure proper pricing of these products to protect both the investors and the system. Fair pricing is important for bond issuers, governments or corporations to design their product at an attractive price for investors. Originality/value – This paper fills a gap in the extant literature by providing an innovative model based on an Euler–Maruyama Monte Carlo scheme to price structured products. [ABSTRACT FROM AUTHOR]

This paper studies the economic recessions and the financial crisis in US economy, as these crisis periods affect not only USA but the rest of the world. The wrong government policies and the regulations in bond market among others lead to the longest and deepest financial crisis since the Great depression of 1929. In this paper we examine three models in order to predict the economic recession or expansion periods in USA. The first one is the Logit model, the second is the Probit model and the last one is a fuzzy rule based system binary regression with sigmoid membership function. We examine the in-sample period 1913-2005 and we test the models in the outof sample period 2006-2009. The estimation results indicate that the fuzzy regression outperforms the Logit and Probit models, especially in the out-of sample period. This indicates that fuzzy regressions provide a better and more reliable signal on whether or not a financial crisis will take place. Furthermore, based on the estimated values for the period 1913-2009 we estimate the forecasts to investigate if the economic recession will be continued or not during 2010. The conclusion is that Logit model presents a signal that the economic recession will be continued during the whole period 2010, while based on Probit and fuzzy regressions the economic recovery might begin in the second half of 2010. [ABSTRACT FROM AUTHOR]

Purpose The purpose of this paper is to identify the arbitrage opportunities between US industry-level credit and stock markets with a focus on dynamic lead-lag relationships given that these markets involve heterogeneous agents operating over various time horizons.Design/methodology/approach The authors use daily data of 11 US industries stock markets and their credit counterparts to model the dynamic dependence and casual nexuses using time-frequency approach, namely, wavelet squared coherence (WTC).Findings The WTC estimation results show that credit and stock markets are out of phase (counter cyclical) and stock markets lead their credit counterparts. The coherence between two markets increases during financial crises. The banks (utilities) industry credit and stock markets have relatively high (low) dependence.Research limitations/implications The casual nexuses between stock and credit markets have multilateral dimensions. Greater interest in examining the relationship between stock markets and credit default swap (CDS) spreads emerged as an important albeit a complex area of research, and gained prominence especially at the onset and following the global financial crises of 2007-2008 which clearly showed that the positive views of CDSs contribution in creating a resilient and efficient financial sector was nothing further from the truth.Practical implications The arbitrage and hedging opportunities between stock and credit markets are industry dependent and vary over investment time horizons. The utilities industry seems attractive for the investment with the objective to exploit arbitrage, but not for hedging.Originality/value The paper, for the first time, employs time-frequency approach to assess the arbitrage opportunities between US industry-level credit and stock markets. [ABSTRACT FROM AUTHOR]

Although bonds have been commonly used for financing construction works in developed countries such as the United States, Asian governments would like to see their construction growth increasingly funded by alternative sources such as the capital market, instead of overrelying on bank loans. Yet even in relatively active markets such as Hong Kong and Singapore, the use of bond financing for infrastructure development is limited. In a recent study based on two questionnaire surveys with subsequent interviews about retail and institutional investors, results demonstrated that credit risk was a major concern and that deterrents include lack of bond market information, illiquidity of domestic bonds, and the reliability of external credit ratings. Institutional investors, however, welcome infrastructure bonds because of the stable income stream matching their long-term commitments. To address these practical concerns, we have proposed credit and liquidity enhancement measures in this paper as the critical success factors for international construction promoters to tap into the bond market for financing construction works in Asia. Hence, this paper will be of interest to academics and practitioners who are working on project financing, because empirical findings reveal investors' concerns, which are then addressed with recommendations. [ABSTRACT FROM AUTHOR]

This paper examines the economic impact of the Sarbanes-Oxley Act (SOX) by studying foreign firms’ choice of whether to issue bonds in the U.S. public bond market or elsewhere before and after the law’s enactment in 2002. After controlling for firm characteristics, bond features, home-country attributes, and market conditions, I find that foreign firms rely less on the U.S. public bond market after SOX. Additionally, some determinants of choosing the U.S. public bond market have changed since the passage of SOX: firms listing equities on U.S. stock exchanges, adopting International Financial Reporting Standards (IFRS), and doing large bond issuances are more likely to choose this market in the post-SOX period than in the pre-SOX period. Overall, these results are consistent with a shift in the expected costs and benefits of choosing the U.S. public bond market following SOX. This paper provides the first evidence about how SOX influences debt financing decisions and alters capital flows across international bond markets. [ABSTRACT FROM AUTHOR]