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The ALICE Collaboration has measured inclusive J/ψ production in pp collisions at a center-of-mass energy √s=2.76 TeV at the LHC. The results presented in this Letter refer to the rapidity ranges |y|<0.9 and 2.5<y<4 and have been obtained by measuring the electron and muon pair decay channels, respectively. The integrated luminosities for the two channels are Linte=1.1 nb−1 and Lintμ=19.9 nb−1, and the corresponding signal statistics are NJ/ψe+e−=59±14 and NJ/ψμ+μ−=1364±53. We present dσJ/ψ/dy for the two rapidity regions under study and, for the forward-y range, d2σJ/ψ/dydpt in the transverse momentum domain 0<pt<8 GeV/c. The results are compared with previously published results at s=7 TeV and with theoretical calculations.
The ALICE experiment has measured low-mass dimuon production in pp collisions at √s=7 TeV in the dimuon rapidity region 2.5<y<4. The observed dimuon mass spectrum is described as a superposition of resonance decays (η,ρ,ω,η′,ϕ) into muons and semi-leptonic decays of charmed mesons. The measured production cross sections for ω and ϕ are σω(1<pt<5 GeV/c,2.5<y<4)=5.28±0.54(stat)±0.49(syst) mb and σϕ(1<pt<5 GeV/c,2.5<y<4)=0.940±0.084(stat)±0.076(syst) mb. The differential cross sections d2σ/dydpt are extracted as a function of pt for ω and ϕ. The ratio between the ρ and ω cross section is obtained. Results for the ϕ are compared with other measurements at the same energy and with predictions by models.
Heavy flavour decay muon production at forward rapidity in proton–proton collisions at √s=7 TeV
(2012)
The production of muons from heavy flavour decays is measured at forward rapidity in proton–proton collisions at √s=7 TeV collected with the ALICE experiment at the LHC. The analysis is carried out on a data sample corresponding to an integrated luminosity Lint=16.5 nb−1. The transverse momentum and rapidity differential production cross sections of muons from heavy flavour decays are measured in the rapidity range 2.5<y<4, over the transverse momentum range 2<pt<12 GeV/c. The results are compared to predictions based on perturbative QCD calculations.
Harmonic decomposition of two particle angular correlations in Pb–Pb collisions at √sNN=2.76 TeV
(2012)
Angular correlations between unidentified charged trigger (t) and associated (a) particles are measured by the ALICE experiment in Pb–Pb collisions at √sNN=2.76 TeV for transverse momenta 0.25<pTt,a<15 GeV/c, where pTt>pTa. The shapes of the pair correlation distributions are studied in a variety of collision centrality classes between 0 and 50% of the total hadronic cross section for particles in the pseudorapidity interval |η|<1.0. Distributions in relative azimuth Δϕ≡ϕt−ϕa are analyzed for |Δη|≡|ηt−ηa|>0.8, and are referred to as “long-range correlations”. Fourier components VnΔ≡〈cos(nΔϕ)〉 are extracted from the long-range azimuthal correlation functions. If particle pairs are correlated to one another through their individual correlation to a common symmetry plane, then the pair anisotropy VnΔ(pTt,pTa) is fully described in terms of single-particle anisotropies vn(pT) as VnΔ(pTt,pTa)=vn(pTt)vn(pTa). This expectation is tested for 1⩽n⩽5 by applying a global fit of all VnΔ(pTt,pTa) to obtain the best values vn{GF}(pT). It is found that for 2⩽n⩽5, the fit agrees well with data up to pTa∼3–4 GeV/c, with a trend of increasing deviation as pTt and pTa are increased or as collisions become more peripheral. This suggests that no pair correlation harmonic can be described over the full 0.25<pT<15 GeV/c range using a single vn(pT) curve; such a description is however approximately possible for 2⩽n⩽5 when pTa<4 GeV/c. For the n=1 harmonic, however, a single v1(pT) curve is not obtained even within the reduced range pTa<4 GeV/c.
The ALICE Collaboration reports the measurement of the relative J/ψ yield as a function of charged particle pseudorapidity density dNch/dη in pp collisions at √s=7 TeV at the LHC. J/ψ particles are detected for pt>0, in the rapidity interval |y|<0.9 via decay into e+e−, and in the interval 2.5<y<4.0 via decay into μ+μ− pairs. An approximately linear increase of the J/ψ yields normalized to their event average (dNJ/ψ/dy)/〈dNJ/ψ/dy〉 with (dNch/dη)/〈dNch/dη〉 is observed in both rapidity ranges, where dNch/dη is measured within |η|<1 and pt>0. In the highest multiplicity interval with 〈dNch/dη(bin)〉=24.1, corresponding to four times the minimum bias multiplicity density, an enhancement relative to the minimum bias J/ψ yield by a factor of about 5 at 2.5<y<4 (8 at |y|<0.9) is observed.
A measurement of the multi-strange Ξ− and Ω− baryons and their antiparticles by the ALICE experiment at the CERN Large Hadron Collider (LHC) is presented for inelastic proton–proton collisions at a centre-of-mass energy of 7 TeV. The transverse momentum (pT) distributions were studied at mid-rapidity (|y|<0.5) in the range of 0.6<pT<8.5 GeV/c for Ξ− and Ξ¯+ baryons, and in the range of 0.8<pT<5 GeV/c for Ω− and Ω¯+. Baryons and antibaryons were measured as separate particles and we find that the baryon to antibaryon ratio of both particle species is consistent with unity over the entire range of the measurement. The statistical precision of the current data has allowed us to measure a difference between the mean pT of Ξ− (Ξ¯+) and Ω− (Ω¯+). Particle yields, mean pT, and the spectra in the intermediate pT range are not well described by the PYTHIA Perugia 2011 tune Monte Carlo event generator, which has been tuned to reproduce the early LHC data. The discrepancy is largest for Ω− (Ω¯+). This PYTHIA tune approaches the pT spectra of Ξ− and Ξ¯+ baryons below pT<0.85 GeV/c and describes the Ξ− and Ξ¯+ spectra above pT>6.0 GeV/c. We also illustrate the difference between the experimental data and model by comparing the corresponding ratios of (Ω−+Ω¯+)/(Ξ−+Ξ¯+) as a function of transverse mass.
The ALICE Zero Degree Calorimeter system (ZDC) is composed of two identical sets of calorimeters, placed at opposite sides with respect to the interaction point, 114 meters away from it, complemented by two small forward electromagnetic calorimeters (ZEM). Each set of detectors consists of a neutron (ZN) and a proton (ZP) ZDC. They are placed at zero degrees with respect to the LHC axis and allow to detect particles emitted close to beam direction, in particular neutrons and protons emerging from hadronic heavy-ion collisions (spectator nucleons) and those emitted from electromagnetic processes. For neutrons emitted by these two processes, the ZN calorimeters have nearly 100% acceptance.
During the √sNN = 2.76 TeV Pb-Pb data-taking, the ALICE Collaboration studied forward neutron emission with a dedicated trigger, requiring a minimum energy deposition in at least one of the two ZN. By exploiting also the information of the two ZEM calorimeters it has been possible to separate the contributions of electromagnetic and hadronic processes and to study single neutron vs. multiple neutron emission.
The measured cross sections of single and mutual electromagnetic dissociation of Pb nuclei at √sNN = 2.76 TeV, with neutron emission, are σsingle EMD = 187:4 ± 0.2 (stat.)−11.2+13.2 (syst.) b and σmutual EMD = 5.7 ± 0.1 (stat.) ±0.4 (syst.) b, respectively [1]. This is the first measurement of electromagnetic dissociation of 208Pb nuclei at the LHC energies, allowing a test of electromagnetic dissociation theory in a new energy regime. The experimental results are compared to the predictions from a relativistic electromagnetic dissociation model.
We study a model where some investors ("hedgers") are bad at information processing, while others ("speculators") have superior information-processing ability and trade purely to exploit it. The disclosure of financial information induces a trade externality: if speculators refrain from trading, hedgers do the same, depressing the asset price. Market transparency reinforces this mechanism, by making speculators' trades more visible to hedgers. As a consequence, issuers will oppose both the disclosure of fundamentals and trading transparency. Issuers may either under- or over-provide information compared to the socially efficient level if speculators have more bargaining power than hedgers, while they never under-provide it otherwise. When hedgers have low financial literacy, forbidding their access to the market may be socially efficient.
The single most important policy-induced innovation in the international financial system since the collapse of the Bretton-Woods regime is the institution of the European Monetary Union. This paper provides an account of how the process of financial integration has promoted financial development in the euro area. It starts by defining financial integration and how to measure it, analyzes the barriers that can prevent it and the effects of their removal on financial markets, and assesses whether the euro area has actually become more integrated. It then explores to which extent these changes in financial markets have influenced the performance of the euro-area economy, that is, its growth and investment, as well as its ability to adjust to shocks and to allow risk-sharing. The paper concludes analyzing further steps that are required to consolidate financial integration and enhance the future stability of financial markets.
We investigate whether information sharing among banks has affected credit market performance in the transition countries of Eastern Europe and the former Soviet Union, using a large sample of firm-level data. Our estimates show that information sharing is associated with improved availability and lower cost of credit to firms. This correlation is stronger for opaque firms than transparent ones and stronger in countries with weak legal environments than in those with strong legal environments. In cross-sectional estimates, we control for variation in country-level aggregate variables that may affect credit, by examining the differential impact of information sharing across firm types. In panel estimates, we also control for the presence of unobserved heterogeneity at the firm level, as well as for changes in macroeconomic variables and the legal environment.
We establish that the labor market helps discipline asset managers via the impact of fund liquidations on their careers. Using hand-collected data on 1,948 professionals, we find that top managers working for funds liquidated after persistently poor relative performance suffer demotion coupled with a significant loss in imputed compensation. Scarring effects are absent when liquidations are preceded by normal relative performance or involve mid-level employees. Seen through the lens of a model with moral hazard and adverse selection, these results can be ascribed to reputation loss rather than bad luck. The findings suggest that performance-induced liquidations supplement compensation-based incentives.
Advertising arbitrage
(2014)
Speculators often advertise arbitrage opportunities in order to persuade other investors and thus accelerate the correction of mispricing. We show that in order to minimize the risk and the cost of arbitrage an investor who identifies several mispriced assets optimally advertises only one of them, and overweights it in his portfolio; a risk-neutral arbitrageur invests only in this asset. The choice of the asset to be advertised depends not only on mispricing but also on its "advertisability" and accuracy of future news about it. When several arbitrageurs identify the same arbitrage opportunities, their decisions are strategic complements: they invest in the same asset and advertise it. Then, multiple equilibria may arise, some of which inefficient: arbitrageurs may correct small mispricings while failing to eliminate large ones. Finally, prices react more strongly to the ads of arbitrageurs with a successful track record, and reputation-building induces high-skill arbitrageurs to advertise more than others.
In talent-intensive jobs, workers’ quality is revealed by their performance. This enhances productivity and earnings, but also increases layoff risk. Firms cannot insure workers against this risk if they compete fiercely for talent. In this case, the more risk-averse workers will choose less quality-revealing jobs. This lowers expected productivity and salaries. Public unemployment insurance corrects this inefficiency, enhancing employment in talent-sensitive industries, consistently with international evidence. Unemployment insurance dominates legal restrictions on firms’ dismissals, which penalize more talent-sensitive firms and thus depress expected productivity. Finally, unemployment insurance fosters education, by encouraging investment in risky human capital that enhances talent discovery.
We investigate the determinants of firms’ implicit insurance to employees, using a difference-in-difference approach: we rely on differences between family and non-family firms to identify the supply of insurance, and exploit variation in unemployment insurance across and within countries to gauge workers’ demand for insurance. Using a firm-level panel from 41 countries, we find that family firms feature more stable employment, greater wage flexibility and lower labor cost than non-family ones. Employment stability in family firms is greater, and the wage discount larger, in countries with more generous public unemployment insurance: private and public provision of employment insurance are substitutes.
his paper distils three lessons for bank regulation from the experience of the 2009-12 euro-area financial crisis. First, it highlights the key role that sovereign debt exposures of banks have played in the feedback loop between bank and fiscal distress, and inquires how the regulation of banks’ sovereign exposures in the euro area should be changed to mitigate this feedback loop in the future. Second, it explores the relationship between the forbearance of non-performing loans by European banks and the tendency of EU regulators to rescue rather than resolving distressed banks, and asks to what extent the new regulatory framework of the euro-area “banking union” can be expected to mitigate excessive forbearance and facilitate resolution of insolvent banks. Finally, the paper highlights that capital requirements based on the ratio of Tier-1 capital to banks’ risk-weighted assets were massively gamed by large banks, which engaged in various forms of regulatory arbitrage to minimize their capital charges while expanding leverage. This argues in favor of relying on a set of simpler and more robust indicators to determine banks’ capital shortfall, such as book and market leverage ratios.
Local crowding out in China
(2019)
In China, between 2006 and 2013, local public debt crowded out the investment of private firms by tightening their funding constraints, while leaving state-owned firms’ investment unaffected. We establish this result using a purpose-built dataset for Chinese local public debt. Private firms invest less in cities with more public debt, the reduction in investment being larger for firms located farther from banks in other cities or more dependent on external funding. Moreover, in cities where public debt is high, private firms’ investment is more sensitive to internal cash flow, also when cash-flow sensitivity is estimated jointly with the probability of being credit-constrained.
Advertising arbitrage
(2020)
Arbitrageurs with a short investment horizon gain from accelerating price discovery by advertising their private information. However, advertising many assets may overload investors' attention, reducing the number of informed traders per asset and slowing price discovery. So arbitrageurs optimally concentrate advertising on just a few assets, which they overweight in their portfolios. Unlike classic insiders, advertisers prefer assets with the least noise trading. If several arbitrageurs share information about the same assets, inefficient equilibria can arise, where investors' attention is overloaded and substantial mispricing persists. When they do not share, the overloading of investors' attention is maximal.
We investigate whether government credit guarantee schemes, extensively used at the onset of the Covid-19 pandemic, led to substitution of non-guaranteed with guaranteed credit rather than fully adding to the supply of lending. We study this issue using a unique euro-area credit register data, matched with supervisory bank data, and establish two main findings. First, guaranteed loans were mostly extended to small but comparatively creditworthy firms in sectors severely affected by the pandemic, borrowing from large, liquid and well-capitalized banks. Second, guaranteed loans partially substitute pre-existing non-guaranteed debt. For firms borrowing from multiple banks, the substitution mainly arises from the lending behavior of the bank extending guaranteed loans. Substitution was highest for funding granted to riskier and smaller firms in sectors more affected by the pandemic, and borrowing from larger and stronger banks. Overall, the evidence indicates that government guarantees contributed to the continued extension of credit to relatively creditworthy firms hit by the pandemic, but also benefited banks’ balance sheets to some extent.
Careers in finance
(2021)
The finance wage premium since the 1990s has arguably lured talent away from other industries. However, the allocation of talent is likely to respond to differences in career paths, not in wages at a given date. We use resume data to reconstruct the careers of 11,255 professionals in finance, high-tech and services from 1980 to 2017, and find that careers mostly develop within sectors. Careers in asset management feature higher and steeper pay profiles than those of employees in banking, insurance and non-finance, yet this career premium cannot be explained by higher risk. Labor market entry responds positively to career premia in asset management and high-tech, and these sectors are regarded as substitutes by potential entrants, consistently with high-tech competing with asset management in attracting talent.
Retail investors pay over twice as much attention to local companies than non-local ones, based on Google searches. News volume and volatility amplify this attention gap. Attention appears causally related to perceived proximity: first, acquisition by a nonlocal company is associated with less attention by locals, and more by nonlocals close to the acquirer; second, COVID-19 travel restrictions correlate with a drop in relative attention to nonlocal companies, especially in locations with fewer fights after the outbreak. Finally, local attention predicts volatility, bid-ask spreads and nonlocal attention, not viceversa. These findings are consistent with local investors having an information-processing advantage.
Using the pandemic as a laboratory, we show that asset markets assign a time- varying price to firms' disaster risk exposure. In 2020 the cross-section of realized and expected stock returns reflected firms' different exposure to the pandemic, as measured by their vulnerability to social distancing. Realized and expected return differentials initially widened and then narrowed, but disaster exposure still commanded a risk premium in December 2020. When inferred from market outcomes, resilience correlates not only with social distancing, but also with cash and environmental ratings. However, vulnerability to social distancing is the only characteristic that identifies persistently scarred firms.
Climate risk has become a major concern for financial institutions and financial markets. Yet, climate policy is still in its infancy and contributes to increased uncertainty. For example, the lack of a sufficiently high carbon price and the variety of definitions for green activities lower the value of existing and new capital, and complicate risk management. This column argues that it would be welfare-enhancing if policy changes were to follow a predictable longer-term path. Accordingly, the authors suggest a role for financial regulation in the transition.
Using novel monthly data for 226 euro-area banks from 2007 to 2015, we investigate the determinants of changes in banks’ sovereign exposures and their effects during and after the crisis. First, public, bailed out and poorly capitalized banks responded to sovereign stress by purchasing domestic public debt more than other banks, with public banks’ purchases growing especially in coincidence with the largest ECB liquidity injections. Second, bank exposures significantly amplified the transmission of risk from the sovereign and its impact on lending. This amplification of the impact on lending does not appear to arise from spurious correlation or reverse causality.
Has economic research been helpful in dealing with the financial crises of the early 2000s? On the whole, the answer is negative, although there are bright spots. Economists have largely failed to predict both crises, largely because most of them were not analytically equipped to understand them, in spite of their recurrence in the last 25 years. In the pre-crisis period, however, there have been important exceptions – theoretical and empirical strands of research that largely laid out the basis for our current thinking about financial crises. Since 2008, a flurry of new studies offered several different interpretations of the US crisis: to some extent, they point to potentially complementary factors, but disagree on their relative importance, and therefore on policy recommendations. Research on the euro debt crisis has so far been much more limited: even Europe-based researchers – including CEPR ones – have often directed their attention more to the US crisis than to that occurring on their doorstep. In terms of impact on policy and regulatory reform, the record is uneven. On the one hand, the swift and massive liquidity provision by central banks in the wake of both crises is, at least partly, to be credited to previous research on the role of central banks as lenders of last resort in crises and on the real effects of bank lending and monetary policy. On the other hand, economists have had limited impact on the reform of prudential and security market regulation. In part, this is due to their neglect of important regulatory choices, which policy-makers are therefore left to take without the guidance of academic research-based analysis.
The euro crisis was fueled by the diabolic loop between sovereign risk and bank risk, coupled with cross-border flight-to-safety capital flows. European Safe Bonds (ESBies), a union-wide safe asset without joint liability, would help to resolve these problems. We make three contributions. First, numerical simulations show that ESBies would be at least as safe as German bunds and approximately double the supply of euro safe assets when protected by a 30%-thick junior tranche. Second, a model shows how, when and why the two features of ESBies — diversification and seniority — can weaken the diabolic loop and its diffusion across countries. Third, we propose a step-by-step guide on how to create ESBies, starting with limited issuance by public or private-sector entities.
We employ a representative sample of 80,972 Italian firms to forecast the drop in profits and the equity shortfall triggered by the COVID-19 lockdown. A 3-month lockdown generates an aggregate yearly drop in profits of about 10% of GDP, and 17% of sample firms, which employ 8.8% of the sample’s employees, become financially distressed. Distress is more frequent for small and medium-sized enterprises, for firms with high pre-COVID-19 leverage, and for firms belonging to the Manufacturing and Wholesale Trading sectors. Listed companies are less likely to enter distress, whereas the correlation between distress rates and family firm ownership is unclear.
(JEL G01, G32, G33)