Refine
Year of publication
- 1999 (2) (remove)
Document Type
- Report (1)
- Working Paper (1)
Language
- English (2)
Has Fulltext
- yes (2)
Is part of the Bibliography
- no (2)
Keywords
- Aktienmarkt (1)
- Beta and return (1)
- Betafaktor (1)
- Capital Asset Pricing Model (1)
- Capital-Asset-Pricing-Modell (1)
- Deutschland (1)
- Geschichte 1960-1995 (1)
- Kapitalertrag (1)
- Market risk premium (1)
- Risikoprämie (1)
Institute
Traditional tests of the CAPM following the Fama / MacBeth (1973) procedure are tests of the joint hypotheses that there is a relationship between beta and realized return and that the market risk premium is positive. The conditional test procedure developed by Pettengill / Sundaram / Mathur (1995) allows to independently test the hypothesis of a relation between beta and realized returns. Monte Carlo simulations show that the conditional test reliably identifies this relation. In an empirical examination for the German stock market we find a significant relation between beta and return. Previous studies failed to identify this relationship probably because the average market risk premium in the sample period was close to zero. Our results provide a justification for the use of betas estimated from historical return data by portfolio managers.
Collateral, default risk, and relationship lending : an empirical study on financial contracting
(1999)
This paper provides further insights into the nature of relationship lending by analyzing the link between relationship lending, borrower quality and collateral as a key variable in loan contract design. We used a unique data set based on the examination of credit files of five leading German banks, thus relying on information actually used in the process of bank credit decision-making and contract design. In particular, bank internal borrower ratings serve to evaluate borrower quality, and the bank's own assessment of its housebank status serves to identify information-intensive relationships. Additionally, we used data on workout activities for borrowers facing financial distress. We found no significant correlation between ex ante borrower quality and the incidence or degree of collateralization. Our results indicate that the use of collateral in loan contract design is mainly driven by aspects of relationship lending and renegotiations. We found that relationship lenders or housebanks do require more collateral from their debtors, thereby increasing the borrower's lock-in and strengthening the banks' bargaining power in future renegotiation situations. This result is strongly supported by our analysis of the correlation between ex post risk, collateral and relationship lending since housebanks do more frequently engage in workout activities for distressed borrowers, and collateralization increases workout probability.