|
on International Finance |
| By: | Robert S. Harris (University of Virginia - Darden School of Business); Tim Jenkinson (University of Oxford - Said School of Business); Steven N. Kaplan (University of Chicago - Booth School of Business; NBER); Ruediger Stucke (Warburg Pincus LLC) |
| Abstract: | We present new evidence on the persistence of U.S. private equity (buyout and venture capital) funds using cash-flow data sourced from Burgiss’s large sample of institutional investors. Previous research, studying largely pre-2000 data, finds strong persistence for both buyout and venture capital (VC) firms. Using ex post or most recent fund performance (as of June2019), we confirm the previous findings on persistence overall as well as for pre-2001 and post-2000 funds. However, when we look at the information an investor would actually have – previous fund performance at the time of fundraising rather than final performance – we find little or no evidence of persistence for buyouts, both overall and post-2000. For post-2000 buyouts, the conventional wisdom to invest in previously top quartile funds does not hold. Using previous fund PME at fundraising, we find modest persistence, but it is driven by bottom, not top quartile performance. On the other hand, persistence for VC funds persists even when using information available at the time of fundraising. Therefore, the conventional wisdom of investors holds for VC. |
| JEL: | G11 G24 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2020-167&r=all |
| By: | Mirela Sandulescu (University of Michigan, Ross School of Business); Paul Schneider (University of Lugano - Institute of Finance; Swiss Finance Institute) |
| Abstract: | We develop Residual MisPricing (RMP), an index capturing mispricing relative to a linear benchmark asset pricing model, from the structure imposed by no-arbitrage. RMP is fully conditional and depends only on the returns of basic assets. Return data for several economies reveal that RMP is countercyclical and related to financial uncertainty. RMP further shows a strong positive relation to conditional international equity and currency risk premia, as well as a close link to market-wide funding liquidity shocks. The relations we document hold in particular out-of-sample. Our evidence points to new record highs for RMP during the COVID-19 era, similar to its behavior in the 2008 financial crisis. |
| Keywords: | stochastic discount factor, residual mispricing, financial uncertainty, exchange rates, machine learning |
| JEL: | G11 G12 G15 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2114&r=all |
| By: | Ricardo Correa (Board of Governors of the Federal Reserve System); Wenxin Du (University of Chicago - Booth School of Business; NBER); Gordon Liao (Board of Governors of the Federal Reserve System) |
| Abstract: | We characterize how U.S. global systemically important banks (GSIBs) supply short-term dollar liquidity in repo and foreign exchange swap markets in the post-Global Financial Crisis regulatory environment and serve as the "lenders-of-second-to-last-resort". Using daily supervisory bank balance sheet information, we find that U.S. GSIBs modestly increase their dollar liquidity provision in response to dollar funding shortages, particularly at period-ends, when the U.S. Treasury General Account balance increases, and during the balance sheet taper of the Federal Reserve. The increase in the dollar liquidity provision is mainly financed by reducing excess reserve balances at the Federal Reserve. Intra-firm transfers between depository institutions and broker-dealer subsidiaries within the same bank holding company are crucial to this type of "reserve-draining" intermediation. Finally, we discuss factors that contributed to the repo spike in September 2019 and the subsequent response of U.S. GSIBs to recent policy interventions by the Federal Reserve. |
| Keywords: | Liquidity, global banks, repos, reserves, covered interest rate parity |
| JEL: | G2 F3 E4 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2020-89&r=all |