Essays on Asset Pricing and Financial Intermediation [electronic resource].

9781085776851

Ann Arbor : ProQuest Dissertations & Theses, 2019.

1 online resource (195 p.)

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This dissertation consists of three essays on the topics of asset pricing, transmission of monetary policy, and financial crises.In the first essay I show that the pre-FOMC announcement drift - the tendency of the market to appreciate in the run-up to scheduled FOMC announcements - arises in a model with time-varying exposure of the aggregate market to monetary policy news. With time-varying risk loadings, there are two sources of uncertainty regarding a Fed announcement: 1) the news contained in the policy statement, and 2) market exposure to a given announcement. Resolution of uncertainty regarding market exposure at announcement time leads to an upward drift prior to the news release. In the model, discrete timing of announcements induces a seasonality in expected returns even though fundamentals change at a constant rate. I provide time-series and cross-sectional evidence consistent with the mechanism.The second essay is motivated by another puzzling fact in recent asset price data: the high-frequency variation in the Treasury bond exposure to stock market returns. In this essay I show that the precautionary savings motive can account for high-frequency variation in the stock-bond covariance. An increase in the price of risk lowers risky asset prices on account of an increase in risk premia; it lowers bond yields on account of the precautionary savings component. Consequently, a price of risk shock moves risky and safe asset prices in the opposite direction. I argue that times when the price of risk is volatile see more a negative stock-bond covariance. Empirically, I show that stock-bond covariance is a strong determinant of credit spreads and can predict excess returns, issuance, and sectoral holdings of safe assets.The third essay, co-authored with Gary Gorton and Andrew Metrick, studies the Global Financial Crisis. In this essay we supply new evidence on the importance of runs in the sale-and-repurchase ("repo") market. The academic literature and policy community remain unsettled about the role of repo runs, because detailed data on repo quantities is not available. We provide quantity evidence of the run on repo through an examination of the collateral brought to emergency liquidity facilities of the Federal Reserve. We show that the magnitude of repo discounts ("haircuts") on specific collateral is related to the likelihood of that collateral being brought to Fed facilities.

Dissertations & Theses @ Yale University.

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English

January 17, 2020

Thesis (Ph.D.)--Yale University, 2019.

Yale University. Management.