Topic
Financial risk
About: Financial risk is a research topic. Over the lifetime, 11899 publications have been published within this topic receiving 231404 citations. The topic is also known as: economic risk.
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TL;DR: In this paper, the authors bring together the evidence on two asset pricing anomalies (continuation of prior returns (momentum) and market mispricing of distressed firms) using UK data, and demonstrate both these effects are driven by market underreaction to financial distress risk.
Abstract: This paper brings together the evidence on two asset pricing anomalies-continuation of prior returns (momentum) and the market mispricing of distressed firms-using UK data. Our analysis demonstrates both these effects are driven by market underreaction to financial distress risk. In particular, we find momentum is proxying for distress risk, and is largely subsumed by our distress risk factor. We also find, as with US studies, no evidence that size and book-to-market (B/M) effects in stock returns are linked to financial distress.
93 citations
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TL;DR: In this paper, the authors focus on financial interlinkages within Europe and potential contagion channeled through these inter-linkages, and assess the magnitude of cross-border exposures between emerging and western European countries based on the stylized facts on these exposures.
Abstract: This paper focuses on financial interlinkages within Europe and potential contagion channeled through these interlinkages. It discusses the increased role of external financing as a source of funding for credit growth; analyzes potential channels of contagion through financial linkages; and assesses the magnitude of cross-border exposures between emerging and western European countries. Based on the stylized facts on these exposures, the paper provides simple indices of exposure to regional contagion that could help identify the likely pressure points and capture potential spillover effects and propagation channels of a regional shock originating from a given country.
93 citations
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18 Dec 2009
TL;DR: The media's role in public policy formation and evaluation is discussed in this article, where Quixotics Unite! is proposed as a call to arms for the media to unite.
Abstract: Contents: Preface Introduction Luck, risk, and life chances The natural lottery and our genetic endowments Rational discrimination Markets that matter Financial risk and insurance The criminal justice system Public policy formation and evaluation The media's role "Quixotics Unite!" A call to arms Bibliography Index
93 citations
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TL;DR: The role of systemic risk in the recent financial crisis was examined in this article, which concluded that the economy could benefit from reforms that reduce systemic risks, such as the creation of an improved regime for resolving failures of large financial firms.
Abstract: How did problems in a relatively small portion of the home mortgage market trigger the most severe financial crisis in the United States since the Great Depression? Several developments played a role, including the proliferation o f complex mortgage-backed securities and derivatives with highly opaque structures, high leverage, and inadequate risk management. These, in turn, created systemic risk—that is, the risk that a triggering event, such as the failure of a large financial firm, will seriously impair financial markets and harm the broader economy. This article examines the role of systemic risk in the recent financial crisis. S ystemic concerns prompted the Federal Reserve and U.S. Department of the Treasury to act to prevent the bankruptcy of several large financial firms in 2008. The authors explain why the failures of financial firms are more likely to pose systemic risks than the failures of nonfinancial firms and discuss possible remedies for such risks. They conclude that the economy could benefit from reforms that reduce systemic risks, s uch as the creation of an improved regime for resolving failures of large financial firms. (JEL E44, E58, G01, G21, G28)
93 citations
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TL;DR: In this paper, the authors examined the risk of US direct foreign investments over the period 1982-98 in 59 host countries and found that unexplained country risk is qualitatively and quantitatively related to unobserved political risk.
Abstract: This paper examines the risk of US direct foreign investments over the period 1982–98 in 59 host countries. The first part of the analysis builds an empirical model to explain the time-series and cross-country patterns of return on capital. The estimation then uses the return on assets (ROA) as a measure of the return on capital, and investigates its determinants. There are four main findings. First, the ROA in a majority of countries does not simply track the worldwide ROA. Second, some cross-country differences are explained by financial risks. Third, unexplained country risk is qualitatively and quantitatively related to unobserved political risk. Fourth, unexplained country risk is also compensated with a higher ROA, enhancing its credibility as a measure of political risk. The unexplained country risk is thus used to calculate a new index of political risk ratings for 56 host countries that may be useful to managers, investors, policymakers, and academics.
92 citations