Asset pricing - Bank of Canada
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Bank of Canada RSS Feedsen2024-03-28T16:20:26+00:00Borrow Now, Pay Even Later: A Quantitative Analysis of Student Debt Payment Plans
https://www.bankofcanada.ca/2023/10/staff-working-paper-2023-54/
We investigate alternative student debt contracts that defer payments and ease the burden of student loans on US households by preserving disposable income early in borrowers’ lives. Our model shows substantial welfare gains from these contracts relative to existing plans and gains similar to the Biden administration's proposals but with a significantly lower cost.2023-10-27T08:59:08+00:00enBorrow Now, Pay Even Later: A Quantitative Analysis of Student Debt Payment Plans2023-10-27Asset pricingEconomic modelsFinancial marketsLabour marketsMarket structure and pricingStaff Working Paper 2023-54https://www.bankofcanada.ca/wp-content/uploads/2023/10/swp2023-54.pdfBorrow Now, Pay Even Later: A Quantitative Analysis of Student Debt Payment PlansMichael BoutrosNuno ClaraFrancisco GomesOctober 2023EE2GG5HH3Generalized Autoregressive Gamma Processes
https://www.bankofcanada.ca/2023/08/staff-working-paper-2023-40/
We introduce generalized autoregressive gamma (GARG) processes, a class of autoregressive and moving-average processes in which each conditional moment dynamic is driven by a different and identifiable moving average of the variable of interest. We show that using GARG processes reduces pricing errors by substantially more than using existing autoregressive gamma processes does.2023-08-02T15:32:16+00:00enGeneralized Autoregressive Gamma Processes2023-08-02Asset pricingEconometric and statistical methodsStaff Working Paper 2023-40https://www.bankofcanada.ca/wp-content/uploads/2023/08/swp2023-40.pdfGeneralized Autoregressive Gamma ProcessesBruno FeunouAugust 2023CC5C58GG1G12It takes a panel to predict the future: What the stock market says about future economic growth in Canada
https://www.bankofcanada.ca/2023/07/staff-analytical-note-2023-9/
Valuation ratios in the Canadian stock market can help reveal investors’ expectations about future economic growth because the impact of economic growth on valuation ratios can vary across industries. We find that this variation helps produce accurate forecasts of future growth of real gross domestic product in Canada. The forecasts from our model declined by just over 3 percentage points between January 2022 and February 2023—a period when the Bank of Canada rapidly increased the overnight rate. As well, we find that interest-rate-sensitive industries had an outsized contribution to this expected slowdown in growth. 2023-07-27T14:00:19+00:00enIt takes a panel to predict the future: What the stock market says about future economic growth in Canada2023-07-27Pricing Indefinitely Lived Assets: Experimental Evidence
https://www.bankofcanada.ca/2023/04/staff-working-paper-2023-25/
We study the trading of an asset with bankruptcy risk. The traded price of the asset is, on average, 40% of the expected total dividend payments. We investigate which economic models can explain the low traded price.2023-04-24T14:52:48+00:00enPricing Indefinitely Lived Assets: Experimental Evidence2023-04-24Asset pricingFinancial marketsStaff Working Paper 2023-25https://www.bankofcanada.ca/wp-content/uploads/2023/04/swp2023-25.pdfStaff Working Paper 2023-25John DuffyJanet Hua JiangHuan XieApril 2023CC9C91C92DD8D81GG1G12What we can learn by linking firms’ reported emissions with their financial data
https://www.bankofcanada.ca/2023/04/staff-analytical-note-2023-4/
We analyze the financial statements and stock prices of publicly traded firms incorporated in Canada that report greenhouse gas emissions. We find that these firms primarily use equity financing. We also find that equity investors increasingly account for firms’ emissions when making investment decisions but the impact appears small. This suggests that assets exposed to climate change remain at risk of a sudden repricing.2023-04-03T15:00:08+00:00enWhat we can learn by linking firms’ reported emissions with their financial data2023-04-03Analyzing the house price boom in the suburbs of Canada’s major cities during the pandemic
https://www.bankofcanada.ca/2022/06/staff-analytical-note-2022-7/
We assess how location affects house prices in Canada. The gap in prices between suburbs and downtown was closing gradually before the pandemic. The gap has been closing faster since spring 2020. This finding reflects a shift in preferences toward more living space.2022-06-20T10:00:06+00:00enAnalyzing the house price boom in the suburbs of Canada’s major cities during the pandemic2022-06-20Financial Intermediaries and the Macroeconomy: Evidence from a High-Frequency Identification
https://www.bankofcanada.ca/2022/05/staff-working-paper-2022-24/
We provide empirical evidence of effects to the aggregate economy from surprises about financial intermediaries’ net worth based on a high-frequency identification strategy. We estimate that news of a 1% decline in intermediaries’ net worth leads to a 0.2%–0.4% decrease in the market value of nonfinancial firms.2022-05-20T15:46:50+00:00enFinancial Intermediaries and the Macroeconomy: Evidence from a High-Frequency Identification2022-05-20Asset pricingBusiness fluctuations and cyclesCredit and credit aggregatesFinancial institutionsFinancial marketsFinancial system regulation and policiesMonetary and financial indicatorsStaff Working Paper 2022-24https://www.bankofcanada.ca/wp-content/uploads/2022/05/swp2022-24.pdfStaff Working Paper 2022-24Pablo OttonelloWenting SongMay 2022EE3E32E4E44E5E51GG0G01G1G12G2G21G23G24G3G32Expectation-Driven Term Structure of Equity and Bond Yields
https://www.bankofcanada.ca/2022/05/staff-working-paper-2022-21/
Recent findings on the term structure of equity and bond yields pose serious challenges to existing models of equilibrium asset pricing. This paper presents a new equilibrium model of subjective expectations to explain the joint historical dynamics of equity and bond yields (and their yield spreads).2022-05-11T15:27:58+00:00enExpectation-Driven Term Structure of Equity and Bond Yields2022-05-11Asset pricingFinancial marketsInterest ratesStaff Working Paper 2022-21https://www.bankofcanada.ca/wp-content/uploads/2022/05/swp2022-21.pdfMing ZengGuihai ZhaoMay 2022EE4E43GG0G00G1G12Real Exchange Rate Decompositions
https://www.bankofcanada.ca/2022/03/staff-discussion-paper-2022-6/
We break down the exchange rate based on an explicit link between fixed income and currency markets. We isolate a foreign exchange risk premium and show it is the main driver of the exchange rate between the Canadian and US dollars, especially on monetary policy and macroeconomic news announcement days.2022-03-22T09:18:33+00:00enReal Exchange Rate Decompositions2022-03-22Asset pricingExchange ratesInternational financial marketsMonetary policy transmissionStaff Discussion Paper 2022-6https://www.bankofcanada.ca/wp-content/uploads/2022/03/sdp2022-6.pdfStaff Discussion Paper 2022-6Bruno FeunouJean-Sébastien FontaineIngomar KrohnMarch 2022EE4E43FF3F31GG1G12The Financial Origins of Non-fundamental Risk
https://www.bankofcanada.ca/2022/01/staff-working-paper-2022-4/
We explore the idea that the financial sector can be a source of non-fundamental risk to the rest of the economy. We also consider whether policy can be used to reduce this risk—either by increasing the supply of publicly backed safe assets or by reducing the demand for safe assets.2022-01-14T14:32:08+00:00enThe Financial Origins of Non-fundamental Risk2022-01-14Asset pricingFinancial marketsFinancial stabilityStaff Working Paper 2022-4https://www.bankofcanada.ca/wp-content/uploads/2022/01/swp2022-4.pdfStaff Working Paper 2022-4Sushant AcharyaKeshav DograSanjay SinghJanuary 2022DD5D52D8D84EE6E62GG1G10G12