The collateralizability premium

A common prediction of macroeconomic models of credit market frictions is that the tightness of financial constraints is countercyclical. As a result, theory implies a negative collateralizability premium; that is, capit
A common prediction of macroeconomic models of credit market frictions is that the tightness of financial constraints is countercyclical. As a result, theory implies a negative collateralizability premium; that is, capital that can be used as collateral to relax financial constraints provides insurance against aggregate shocks and commands a lower risk compensation compared with non-collateralizable assets. We show that a longshort portfolio constructed using a novel measure of asset collateralizability generates an average excess return of around 8% per year. We develop a general equilibrium model with heterogeneous firms and financial constraints to quantitatively account for the collateralizability premium.
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Metadaten
Author:Hengjie Ai, Jun Li, Kai Li, Christian Schlag
URN:urn:nbn:de:hebis:30:3-514999
URL:http://dx.doi.org/10.2139/ssrn.3474975
Parent Title (English):SAFE working paper series ; No. 264
Series (Serial Number):SAFE working paper series (264)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2019
Year of first Publication:2019
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2019/10/28
Tag:Collateral Constraint; Cross-Section of Returns; Financial Frictions
Issue:October 9, 2019
Pagenumber:88
HeBIS PPN:455257566
Institutes:Wirtschaftswissenschaften
House of Finance (HoF)
Frankfurt MathFinance Institute (FMFI)
Center for Financial Studies (CFS)
Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:E2 Macroeconomics: Consumption, Saving, Production, Employment, and Investment
E3 Prices, Business Fluctuations, and Cycles
G12 Asset Pricing; Trading volume; Bond Interest Rates
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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