Afleveringen

  • Saving the Toughest for Last: 50th Completers’ Final U.S. State High Points

    21 Pages Posted:

    Linus Wilson

    University of Louisiana at Lafayette - College of Business Administration

    Date Written: December 27, 2023

    Abstract

    This paper finds that the most difficult U.S. state high point climbs are saved for the end. 50th completers are significantly more likely to save more difficult U.S. state high points for their final high point ascent. There is also some more limited evidence that 50th completers save more distant high points for their final ascent.

    Keywords: altitude, Appalachian Trail, ascent, climbing, Denali, difficulty index, high point, highpointing, hiking, Mauna Kea, mount, mountain, mountaineering, peak, peak bagging, state high point, through-hike, trekking, Yosemite Decimal System

    JEL Classification: R42, Q38, Z2, & Z3

    Suggested Citation:

    Wilson, Linus, Saving the Toughest for Last: 50th Completers’ Final U.S. State High Points (December 27, 2023). Available at SSRN: https://ssrn.com/abstract=4677346. www.linuswilson.comwww.financeprofessor.org
  • Does Difficulty Affect U.S. State High Points Ascents?Download it at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4516746

    24 Pages Posted:

    Linus Wilson

    University of Louisiana at Lafayette - College of Business Administration

    Date Written: July 20, 2023

    Abstract

    We develop a six-factor ranking of U.S. state high points. While this index is significantly associated with fewer ascents, only one of the six factors drives that result. Technical difficulty is the only measure of high point difficulty that significantly discourages summits. Climbers seem indifferent to physical effort required and are significantly attracted to higher elevation U.S. state high points. We also show popular through hikes near the high point are associated with significantly more summits. This indicates that mountain communities could see surges in tourism if a route to the summit was made less technically difficult.

    Keywords: altitude, Appalachian Trail, ascent, climbing, Denali, difficulty index, high point, highpointing, hiking, mount, mountain, mountaineering, Mt. Whitney, Pacific Crest Trail, peak, peak bagging, state high point, through-hike, trekking, Yosemite Decimal System

    JEL Classification: R42, Q38, Z2, Z3

    Suggested Citation:

    Wilson, Linus, Does Difficulty Affect U.S. State High Points Ascents? (July 20, 2023). Available at SSRN: https://ssrn.com/abstract=4516746

    Dr. Linus Wilson[1]

    Professor of Finance

    Department of Economics & Finance

    B.I. Moody III College of Business

    University of Louisiana at Lafayette

    Moody Hall, Room 253

    P.O. Box 43709

    Lafayette, LA 70504

    (337) 482-6209

    linus [dot] wilson {at} louisiana [dot] edu

    https://www.linuswilson.com

    www.financeprofessor.org

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  • Dr. Linus Wilson reads his latest paper about the bank runs at SVB and Signature Bank and the Federal Reserve's emergency loan program to save the banks from further uninsured deposit runs.

    The Fed Funds Risk-Premium after the Silicon ValleyBank Run and the Bank Term Funding Program (BTFP)

    28 Pages Posted:

    Linus Wilson

    University of Louisiana at Lafayette - College of Business Administration

    Date Written: April 8, 2023

    Abstract

    We find the emergency lending program introduced on March 12, 2023, called the Bank Term Funding Program (BTFP) coincided with a statistically significant increase in the risk-premium on Fed funds loans relative to the shortest-term T-bills. We find that the risk-premium on Fed funds loans less 28-day T-bills increased by between 39 to 56 basis points in the wake of the Silicon Valley Bank and Signature Bank runs. This led to a stealth loosening of monetary conditions without a Fed funds rate cut in part due to the incentives created by the BTFP to have banks hoard Treasuries and other eligible collateral.

    Keywords: Bank Term Funding Program, BTFP, emergency lending Fed, Federal Reserve, Fed funds rate, Signature Bank, Silicon Valley Bank, T-bills, Treasuries

    JEL Classification: E43, E51, E52, G21, & G28

    Suggested Citation:

    Wilson, Linus, The Fed Funds Risk-Premium after the Silicon Valley Bank Run and the Bank Term Funding Program (BTFP) (April 8, 2023). Available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4413362

    See all of Dr. Linus Wilson's research at www.financeprofessor.org or www.linuswilson.com

    This is not investment advice.

  • byLinus WilsonAbstract

    The loan standards question in the Federal Reserve’s quarterly Senior Loan Officer Survey is shown to be predictive of quarterly stock returns a month or two after its release. This is an apparent violation of semi-strong form stock market efficiency. Out-of-sample, we use this signal and develop a simple risk and alpha model to market time the S&P 500. It outperformed the S&P 500 with a Sharpe (1966) ratio of 1.9 versus 0.34 for passive investment.

    Keywords: alpha, commercial and industrial loans, investing, loan standards, market efficiency, market timing, stock market, portfolio theory, returns, risk-model, semi-strong form, Senior Loan Officer Survey, Sharpe ratio, survey

    JEL Classification: G11, G14, G17, & G21

    Wilson, Linus, Profitable Timing of the Stock Market with the Senior Loan Officer Survey (January 21, 2023). Available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4332525

    See all of Dr. Linus Wilson's research at www.financeprofessor.org or www.linuswilson.com

    This is not investment advice.

  • This is the substantially revised version of this paper.

    Estimating the Value of Statistical Life (VSL) Losses from COVID-19 Infections in the United States

    29 Pages Posted: 21 Apr 2020 Last revised: 6 Dec 2021

    Linus Wilson

    University of Louisiana at Lafayette - College of Business Administration

    Date Written: December 3, 2021

    Abstract

    This paper uses the Value of Statistical Life (VSL) literature to weigh the costs and benefits of non-pharmaceutical interventions of the U.S. COVID-19 stay-at-home orders that affected 92 percent of the U.S. workforce at their peak in April 2020. We calculate the pre-vaccine COVID-19 infection fatality rate to have been 0.85 percent. We find that the stay-at-home orders saved most likely about 71,000 lives and led to a net benefit to the United States of 1.7 percent of GDP after accounting for lives saved and drops in workforce participation. Through October 31, 2021, the VSL of U.S. lives lost to COVID-19 was over $8.4 trillion.

    Keywords: cost-benefit, CFR, COVID-19, IFR, NPI, SARS-CoV-2, social distancing, stay-at-home orders, VSL

    JEL Classification: G22, I1, I18, J31, J65, K32

    Suggested Citation:

    Wilson, Linus, Estimating the Value of Statistical Life (VSL) Losses from COVID-19 Infections in the United States (December 3, 2021). Available at SSRN: https://ssrn.com/abstract=3580414 or http://dx.doi.org/10.2139/ssrn.3580414
  • Dr. Linus Wilson discusses and reads his most recent study about the cryptocurrency mining and computer hardware prices entitled "GPU Prices and Cryptocurrency Returns".

    "Abstract

    We look at the association between the price of a cryptocurrency and the secondary market prices of the hardware used to mine it. We find the prices of the most efficient Graphical Processing Units (GPUs) for Ethereum mining are significantly positively correlated with the daily price returns to that cryptocurrency. Journal of Economic Literature Codes: G12, G23, L11, L22, L63 Keywords: 3080, ASIC, Bitcoin, crypto, cryptocurrency, ETH, Ethereum, GeForce, GPU, mining, Nvidia, RTX

    by

    Dr. Linus WilsonAssociate Professor of Finance Department of Economics & Finance B.I. Moody III College of Business University of Louisiana at Lafayette "

    "1. Introduction We use a unique data set of scalper prices for graphical processing units (GPUs) to study the association between the price of Ethereum (ticker ETH) and the hardware used to mine it. We find the most efficient ETH mining GPUs as measured by secondary market price per productivity unit (called the hashrate) had secondary market price moves that were positively correlated with daily returns to ETH. Most of the prior research into cryptocurrency mining has focussed on Bitcoin and does not measure the impact between the cryptocurrency’s price’s correlation with key mining hardware. Dimitri (2017) and Ma et al. (2019) model Bitcoin mining as an all-pay tournament. Ma et al. (2019) argue that free entry in mining is ultimately wasteful in part because Bitcoin miners consumed more electricity than all of Australia. Easley et al. (2019) are sceptical about the usefulness of Bitcoin as a medium of exchange as its network could only process seven transactions per second versus Visa which can process 50,000 transactions per second. Cong et al. (2021) find that mining pools help cryptocurrency miners eliminate ideosyncratic risk. Kristoufek (2020) finds that price of Bitcoin over the long-term impacted the cost of mining components. Mueller (2020) looks at entry and exit thresholds for both Bitcoin and Ethereum miners. In section 2, the GPU mining market for cryptocurrency is discussed and basic model of GPU pricing with ETH mining is developed. The data sources are discussed in section 3. In section 4, the statistical analysis indicates that the Nvidia GeForce RTX 3060ti and the RTX 3080 GPUs are significantly more attractively priced for ETH mining, and their prices are positively correlated with daily price moves in Ethereum. "

    The paper link is at

    https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3922181

    (c) Linus Wilson, 2021, Vermilion Advisory Services, LLC

    www.linuswilson.com

    www.financeprofessor.org

    www.financeprofessor.net

  • Dr. Linus Wilson discusses and reads his new study:

    SARS-CoV-2, COVID-19, Infection Fatality Rate (IFR) Implied by the Serology, Antibody, Testing in New York City

    Wilson, Linus, SARS-CoV-2, COVID-19, Infection Fatality Rate (IFR) Implied by the Serology, Antibody, Testing in New York City (May 1, 2020). Available at SSRN:

    https://ssrn.com/abstract=3590771

    "Abstract

    The SARS-CoV-2, COVID-19, infection fatality rate (IFR) has been hard to accurately estimate. It is a key parameter for disease modeling and policy decisions. Asymptomatic spread and limited testing have understated infections in hard to predict ways across jurisdictions. We survey serology, antibody, studies of the COVID-19 infection to find official cases are understated by an average of 25-to-1. Further, we analyze the deaths and infections in New York City to estimate an overall IFR for the United States of 0.863 percent.

    ...5. Conclusion

    The COVID-19 pandemic has a lot of uncertainty about the ratio of deaths to total infections. That confounds the calculation of how deadly the novel coronavirus is. The serology sampling in New York City and elsewhere makes estimates of infections more reliable. We estimate that the infection fatality rate (IFR) from serology studies in nine different sampling locations in the United State and Europe is on average 0.38 percent. We analyze the data from New York City in-depth to estimate that the IFR for all ages and genders in New York City was 0.85 percent. New York City is a preferable location to estimate IFR because it has one of the highest infection rates in the world. Thus, random sampling is less prone to an upward bias in false positives. In addition, New York City’s official counts are less likely to understate deaths than in other locations in the United States. We find that the infection fatality rates from New York vary a great deal by age and gender. Females ages 0 to 17 can expect infection fatality rates of 0.001 percent while males of age 75 and over can expect infection fatality rates of 9.127 percent."

    Dr. Linus Wilson[1]

    Associate Professor of Finance

    Department of Economics & Finance

    B.I. Moody III College of Business

    University of Louisiana at Lafayette

    Moody Hall, Room 253

    P.O. Box 43709

    Lafayette, LA 70504

    (337) 482-6209

    linus [dot] wilson {at} louisiana [dot] edu

    https://www.linuswilson.com

    www.financeprofessor.org

  • Dr. Wilson reads and discusses his new paper:

    Wilson, Linus, Estimating the Life Expectancy and Value of Statistical Life (VSL) Losses from COVID-19 Infections in the United States (April 19, 2020). Available at SSRN: https://ssrn.com/abstract=3580414

    His the "Download this paper" button to get a free copy.

    Estimating the Life Expectancy and Value of Statistical Life (VSL) Losses from COVID-19 Infections in the United States

    By

    Dr. Linus Wilson

    Associate Professor of Finance

    Department of Economics & Finance

    B.I. Moody III College of Business

    University of Louisiana at Lafayette

    Theses are the views of the author alone.

    "

    Abstract

    Americans aged sixty or older stand to lose 153 to 222 days of life expectancy from contracting COVID-19. Over 90 percent of the U.S. population was under stay at home orders by April 2020. These social distancing measures to slow the spread of the SARS-CoV-2 or novel coronavirus have led to over 20 million new applications for unemployment benefits. Are these economic losses justified? We find the value of statistical lives lost (VSL) from an unconstrained spread of the virus which hypothetically infected 81 percent of the population would amount to $8 to $60 trillion.

    Journal of Economic Literature Codes: G22, I1, I18, J31, J65, K32

    Keywords: actuarial tables, mortality, death rates, CFR, COVID-19, IFR, life expectancy, SARS-CoV-2, school closures, social distancing, stay at home orders, VSL

    1. Introduction

    This paper attempts to open the discussion of how to model the benefits of social distancing measures in terms of the value of statistical lives (VSL) saved in the SARS-CoV-2 or COVID-19 pandemic. To do this we compare the infection fatality rates IFR’s of Ferguson et al. (2020) to the VSL from several studies. We find in figure 3 panels A and B that the costs of 50 percent of the U.S. population being infected with COVID-19 in lives lost and VSL are, respectively, between 0.659 million and 2.305 million lives lost and between $5 trillion and $37 trillion in VSL losses. The Gross Domestic Product (GDP) was only $21.7 trillion at the end of 2019 according to Mataloni and Aversa (2020).

    We use U.S. Census data to control for the age and gender of the population and show how a COVID-19 infection affects an individual’s life expectancy and compares to a typical year’s mortality. Life expectancy losses of between 153 and 222 days can be expected for Americans over 60 with a novel coronavirus infection, according to figure 2, panel C. Americans younger than forty can expect to lose less than two weeks of life expectancy from contracting the virus. In figure 1, panel C, persons over fifty can expect COVID-19 to be about as deadly or up to 70 percent more deadly than a year’s mortality risks. Persons younger than forty-years-old can expect less than half a year’s mortality risk in a COVID-19 infection.

    To argue against the social distancing measures, either the IFR of COVID-19 must be nearer to the low end of Ferguson et al. (2020)’s 95 percent confidence interval or the social distancing measure must be very ineffective in reducing the reproductive number, R0, of the SARS-CoV-2 virus. As to the former, a few studies suggest a much lower mean IFR than the 0.9 percent from Ferguson et al. (2020). Ioannidis (2020) argues that, after adjusting for the age of the infected on the Diamond Princess cruise ship, the IFR for the U.S. population should be 0.3 percent, which is below the lower bound of the 95 percent confidence interval calculated in Ferguson et al. (2020) and used here. Likewise, a population-weighted study, Bendavid et al. (2020), recruited people to be tested in Santa Clara County, California regardless of symptoms for COVID-19. It found infection rates were severely under-reported. They calculated an IFR between 0.12 and 0.2 percent.

    On the other hand, social distancing may be effective in reducing the spread of COVID-19. R0 is the number of additional persons that an infected person goes on to infect on average. Anecdotal evidence indicates that social distancing in late March and early April 2020 has been effective. Governor Andrew Cuomo of New York State, which has had the highest number of deaths and confirmed cases of COVID-19 of the U.S. states on April 16, 2020, argued in his daily briefing in CNBC (2020) that his modeling teams believed that R0 fell from a median of 2.5 in Wuhan before social distancing and 2.2 on the Diamond Princess Cruise ship to 0.9 in New York State after the mitigation efforts. Governor Cuomo argued that his advisors’ projected hospitals in the state would be overwhelmed with COVID-19 patients if R0 was persistently above 1.2.[1] Rocklöv et al. (2020) estimate that uncontrolled R0 for COVID-19 on the Diamond Princess cruise ship was 14.8 before social isolation and 1.8 afterward. Chowell et al. (2011) argued that school closures in Mexico reduced the R0 of the H1N1 outbreak by more than 30 percent.

    This paper will not attempt to measure the costs of social distancing which, no doubt, number in the many trillions of dollars in the United States alone. By April 7, 2020, Secon and Woodward (2020) reported that 95 percent of the U.S. population was under a stay at home order that meant all but “essential” businesses were shuddered. Morath and Chaney (2020) report that by April 16, 2020, 13 percent of the U.S. workforce or 22 million workers had filed unemployment insurance claims. The COVID-19 multi-state stay at home orders, and associated non-essential business shutdowns, began with California, on March 19, 2020, according to Mervosh et al. (2020). Before the SARS-CoV-2 disruptions, the U.S. unemployment rate stood at a record low 3.5 percent in February 2020 according to the Bureau of Labor Statistics.

    Eichenbaum et al. (2020) estimate containing COVID-19 “optimally” with social distancing will lead to consumption dropping by 22 percent versus 7 percent without containment of the virus. Since consumption is about 68.1 percent of GDP, according to the St. Louis Fed, and 2019 GDP was $21.7 trillion, they are arguing macroeconomic consumption losses are about (0.22 – .07)*$21.7 trillion = $3.26 trillion. The loss of freedom cannot just be measured in just macroeconomic statistics. Aggregate consumption does not measure the loss of consumer and producer surplus. There may also be long-term effects to school-age children or households facing bankruptcy that may not be captured fully in Eichenbaum et al. (2020). People losing their jobs also lose their health insurance and may be more likely to die as a result. Certainly, more empirical work can be done to estimate the actual costs of social distancing measures relative to their R0 benefits.

    One press release, Yale News (2020), from the Yale Tobin Center for Economic Policy estimated the daily losses of shutdowns at $19 billion per day or about $7 trillion per year. Nevertheless, $3 to $7 trillion annually is less than this paper’s low-end estimates of the VSL losses for anything resembling the unconstrained spread of the virus infecting 81 percent of the population that Ferguson et. al (2020) project. Our low-end VSL losses are $8 trillion for an 81 percent infection rate. For the high-end estimate, the value of statistical lives lost is about $60 trillion.

    Overall, the results of this paper point to sizable personal risks for individuals over sixty becoming infected with COVID-19 in terms of the increased chance of death and reduced life expectancy. We also find that the number of deaths and value of statistical life (VSL) losses are extremely high from high rates of COVID-19 infection. Thus, major economic disruptions from social distancing, stay at home orders, and school closures will be justified if the infection fatality rate estimates are reasonable. Measurement error of IFR, pharmaceutical treatments reducing the fatality rates, or a vaccine could make social distancing economic disruptions not worth the cost.

    [1] See the discussion around the 24:45 minute mark of CNBC (2020)."

  • A year from the inauguration, four of the top five Democratic 2020 U.S. Presidential election candidates in the polls are in their seventies. Using actuarial data and the history of Presidential assassinations, the top two contenders, Former Vice President Joe Biden and Vermont Senator Bernie Sanders, have a 24 to 29 percent chance of not surviving to the end of a hypothetical first term. The 77 and 78-year-old men’s chances of dying before the end of a second term as POTUS are between 46 and 56 percent.

    The 2020 Presidential Election: A Race Against Mortality

    by Dr. Linus Wilson, University of Louisiana at Lafayette

    Dr. Wilson reads his paper on episode 12 of The Finance Professor Podcast

    Download the full paper at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3523251 or go to linuswilson.com or financeprofessor.org

    Below is the introduction of the paper:

    "

    Introduction

    Generations of Americans have never lived to see an American President die in office. Indeed, the last President to die was John F. Kennedy who in 1963 died from an assassin’s bullet at the relatively young age of 46 years. That was over 56 years from the start of the first in the nation nominating contest in 2020, the February 3, Iowa Democratic Caucuses. You would have to go back to Franklin D. Roosevelt’s death in office in 1945 in his record 4th term to find a U.S. President who died of “natural causes”. To be alive for that event in 2020, someone would have to be 74 years old. To have voted for FDR, someone would have to be at least 96 years old. (The voting age was not lowered from 21 to 18 years old until March 21, 1971, with the ratification of the 26th Amendment to the U.S. Constitution.)

    According to Panetta (2020), on January 20, 2017, Donald Trump became the oldest President to be sworn in to his first term at 70 years 222 days old. Joseph Biden, Bernie Sanders, and Michael Bloomberg, aged 77, 78, and 77 were all at least three years older than Donald Trump, who was 73, on January 15, 2020. Biden, Sanders, and Bloomberg were 1st, 2nd, and 5th in the Real Clear Politics Democratic Primary polling average on that day. The 3rd place democratic candidate, Elizabeth Warren on that date was 70 and would be older than Donald Trump was at his inauguration in 2017 if she won the election and took office on January 20, 2021.

    The likely winner of the 2020 election based on betting markets will be pushing the bounds of life expectancy at birth at some time during his tenure in office. He or she will likely be the oldest person to take the oath of office of President of the United States. This paper seeks to quantify the chances that the leading candidates will die before their first or second term in office using actuarial life expectancy data.

    If we project out a year out from the January 20, 2021, inauguration, Former Vice President Joseph Biden, Vermont Senator Bernie Sanders, and Billionaire Michael Bloomberg have 24 to 29 percent chance of dying before the end of their first term as President of the United States. The range depends on the age and gender of the candidate and how we account for the chances of assassination. Those same leading Democratic challengers have a 46 to 56 percent chance of not surviving two terms as President of the United States (POTUS).

    Kenski and Jamieson (2010) found that perceptions of the septuagenarian Republican nominee John McCain changed through the course of the 2008 election. Voters increasing perceived him a “too old” as election day neared. Thus, the current preference for older candidates by voters may change as the 2020 election progresses. Senator McCain died in 2018 at the age of 81, according to Pitzl (2018).

    If the field of viable candidates survives to inauguration day, January 20, 2021, this paper finds that there is a 16 to 21 percent chance that the man or woman sworn in will die before the end of his or her four-year Presidential term on January 20, 2025.

    In section 2, we discuss our data collection and how we determined if a 2020 Presidential candidate was “viable.” In section 3, we discuss the death probability calculations in table 2. In section 4, the paper concludes.

    "

    www.financeprofessor.org

    www.linuswilson.com

  • Professor Linus Wilson discusses his new paper "Clickbait Works! The secret to getting views with the YouTube algorithm." There is a lot of contradictory advice about what metrics the largest video sharing site in the world and the second largest social network promotes. Using a new data set available to YouTube creators starting in 2018, Dr. Wilson finds that click-through rates are by far the most important predictor of a new video getting views from YouTube's black-box recommendation system.

    The link is https://ssrn.com/abstract=3369353

    Click the download button for a free download. Next, if you don’t want to register or login with SSRN, click “Download without registration” under the gray text under the picture of Greg Gordon.

    "Clickbait Works! The secret to getting views with the YouTube algorithm”

    By Dr. Linus Wilson

    Abstract

    In 2018, YouTube began releasing click-through rates (CTR) data to its video creators. Since 2012, YouTube has emphasized how it favors watch time over clicks in its recommendations to viewers. This is the first academic study employing that data to test what matters more for views on YouTube. Is watch time or CTR more important to getting views on YouTube? This paper finds no to limited evidence that higher percent audience retention or and total average watch time per view are associated with more views on YouTube. Instead, videos with higher CTR got significantly more views as did videos on trending or newsworthy topics. The marginal benefit in terms of views scaled by subscribers of increased CTR is between 71 and 318 times larger than the marginal benefits of increased watch time per view.

    Journal of Economic Literature Codes: D12, D22, D26, D83, D85, L15, L21, L82, L86, M15

    Keywords: YouTube, algorithm, search, discovery, video, CTR, click-through rates, clickbait, watch time, audience retention, neural networks, recommendation systems

    Wilson, Linus, Clickbait Works! The secret to getting views with the YouTube algorithm (April 9, 2019). Available at SSRN: https://ssrn.com/abstract=3369353

    For all of Linus Wilson’s research go to

    www.financeprofessor.org

    www.linuswilson.com

  • Find out about the secret $2.7 trillion bailout of Money Market Mutual Funds MMMFs in 2008. The collapse of Lehman Brothers its commercial paper default caused the Primary Reserve Fund to "break the buck" or sell for less than $1.00 per share.

    Wilson, Linus, Broken Bucks: Money Funds that Took Taxpayer Guarantees in 2008 (August 28, 2015). Available at SSRN: https://ssrn.com/abstract=2195358 or http://dx.doi.org/10.2139/ssrn.2195358

    The U.S. Treasury rolled out a bailout guarantee on September 19, 2008 without Congressional approval using the exchange rate stabilization fund led by Hank Paulson, David Nason, and Steve Shafran. Paulson and Shafran were Goldman Sach alums (p. 263) ON THE BRINK by Henry Paulson.

    Broken Bucks: Money Funds that Took Taxpayer Guarantees in 200842 Pages Posted: 2 Jan 2013 Last revised: 29 Aug 2015Linus WilsonUniversity of Louisiana at Lafayette - College of Business Administration

    Date Written: August 28, 2015

    AbstractThis is the first study to look at the characteristics of funds accepting the $2.7 trillion taxpayer guarantee of money market mutual funds during the 2008 financial crisis. Funds with lower asset maturities were significantly less likely to need federal or sponsor bailouts. Fund shares that benefited from Federal Reserve’s asset-backed commercial paper program were significantly more likely to get bailed out by taxpayers and sponsors. Finally, the paper tests if funds adhering to the SEC’s 2010 liquidity reforms prior to their enactment were less likely to be bailed out in 2008.

    Keywords: breaking the buck, bailout, Dodd-Frank, DLA, exchange rate stabilization fund, Financial Stability Oversight Council (FSOC), guarantees, liquidity, money market mutual funds, Primary Reserve Fund, regulation, SEC, Securities and Exchange Commission, U.S. Treasury, WAL, WAM, WLA

    JEL Classification: G01, G18, G22, G23, G28, H12, H81, L5

    Music by www.BenSound.com(c) Linus Wilson, 2019www.linuswilson.comwww.financeprofessor.org

    Janna Wilson performs Minuet by Boccherini.

  • Linus Wilson reads his recently updated working paper entitled "A Dove to Hawk Ranking of the Martin to Yellen Federal Reserves" and talks about the current state of Federal Reserve interest rate policy. He previews his talk with the New York Times Bestselling author Roger Lowenstein which will be released in an upcoming episode.

    The paper read is as follows:

    "A Dove to Hawk Ranking of the Martin to Yellen Federal Reserves"

    by

    Dr. Linus Wilson [1]

    Associate Professor of Finance University of Louisiana at Lafayette B. I. Moody III College of Business Department of Economics & FinanceWeb: http://www.linuswilson.com

    http://www.financeprofessor.org

    Abstract

    This note ranks the Federal Reserves based on the tenure of their chairs from William McChesney Martin, Jr. to Janet L. Yellen, using data from 1958 through 2018. Inflation “doves” are willing to tolerate more inflation than inflation “hawks.” Comparing the Taylor (1993) rule and core inflation to the effective fed funds rates, it is found that the Yellen Fed is the most dovish Fed since 1958.

    Journal of Economic Literature Codes: E52, E58

    Keywords: dove, Fed funds rates, Federal Open Market Committee, Federal Reserve, gender hawk, inflation, interest rates, monetary policy, overnight lending, output gap, Janet Yellen, Taylor rule, unemployment

    [1]This paper reflects the views of the author alone. The author thanks Zhenbin Liu for providing excellent research assistance.

    Wilson, Linus, A Dove to Hawk Ranking of the Martin to Yellen Federal Reserves, 2018, Available at SSRN: https://ssrn.com/abstract=2529195 or http://dx.doi.org/10.2139/ssrn.2529195

  • In this episode you will hear how nonrecourse loans can lead to option payoffs for the borrower. The securitzation market got a boost from the Federal Reserve during the financial crisis. Dr. Linus Wilson, Associate Professor of Finance at the University of Louisiana at Lafayette reads his working paper

    Toxic Asset Subsidies and the Early Redemption of TALF Loans

    https://ssrn.com/abstract=1742640

    Abstract

    This paper develops a formula to numerically estimate the unsubsidized, fair-market value of the toxic assets purchased with Federal Reserve loans. It finds that subsidy rates on these loans were on average 33.9 percent at origination. In contrast, by the 3rd quarter of the 2010, there was on average no subsidy in TALF loans. The theoretical model is used to predict the early redemption of Term Asset-Backed Securities Loan Facility (TALF) loans used to purchase commercial mortgage backed securities (CMBS). The predictions of the model are strongly supported by the data. In addition, this paper looks at the determinants of early redemption. CMBS originated inside the peak bubble years of 2005-2007 were much less likely to be redeemed early. The giant investment managers, Blackrock and PIMCO, were much more likely to redeem their TALF loans early than smaller investment managers.

    Journal of Economic Literature Codes: G12, G13, G18, G21, G28, G38

    Keywords: alternative investments; bailout; banking; Blackrock; call options; commercial mortgage backed securities; CMBS; CDOs; Dodd-Frank Financial Reform Law of 2010; emergency lending; EESA; Emergency Economic Stabilization Act; lending; Legacy Securities Program; mortgages; PIMCO; Public-Private Investment Partnership; PPIP; put options; TALF; Term Asset-Backed Securities Loan; TARP; Troubled Asset Relief Program; toxic assets

    Come and see Dr. Wilson present the paper at the 2018 Midwest Economics Association meeting on March 24, 2018, at 1:15PM in session 7E Credit.

    The MEA conference in at the Hilton Orrington in Evanston, Illinois.

    http://mea.grinnell.edu/conferences

    Like the Finance Professor Podcast's Facebook page to see any Facebook live versions of MEA conference presentations.

    https://www.facebook.com/FinanceProfessorOrg/

    Check out the video presentation of the episode 6 podcast guest:

    https://www.youtube.com/watch?v=ZyjqU_vEVHs

    on the Linus Wilson YouTube channel:

    https://www.youtube.com/channel/UCYY02-A8UQ6307k8PPDj5hQ

    Professor Andrew Metrick is the Michael H. Jordan Professor of Finance and Management at the Yale School of Management. He is the director, Yale Program on Financial Stability and the Faculty Director, Masters in Systemic Risk program at Yale.

  • Linus Wilson reads his joint work with Wendy Yan Wu of Wilfrid Laurier University and updates the plans for the 2018 for the The Finance Professor Podcast.

    Does Receiving TARP Funds Make it Easier to Roll Your Commercial Paper Onto the Fed?

    32 Pages Posted: 17 Aug 2011 Last revised: 24 Aug 2011

    Linus Wilson

    University of Louisiana at Lafayette - College of Business Administration

    Yan Wendy Wu

    Wilfrid Laurier University

    Date Written: August 22, 2011

    Abstract

    The Commercial Paper Funding Facility (CPFF) bought commercial paper from highly-rated issuers of U.S. dollar commercial paper during the financial crisis of 2008 to 2009. This is the only study to analyze the characteristics of firms selected for this Federal Reserve program. CPFF participants and non-participants differed little in terms of profitability, solvency, or liquidity ratios. Nevertheless, CPFF participants were significantly more likely to come from the financial sector, to pose greater systemic risks, and to have received funds from the Troubled Asset Relief Program (TARP) bailout. The baseline predicted probability of participation in the CPFF jumps from 37.2 percent to 65.9 percent if the commercial paper issuer participated in the TARP bailout.

    Keywords: ABCP, Asset Backed Commercial Paper, bailout, banks, Capital Purchase Program (CPP), commercial paper, Commercial Paper Funding Facility (CPFF), emergency lending, Federal Reserve, multinational firms, section 13(3), Troubled Asset Relief Program (TARP), U.S. Treasury, unsecured commercial paper

    JEL Classification: G01, G18, G2, G28

    Suggested Citation:

    Wilson, Linus and Wu, Yan Wendy, Does Receiving TARP Funds Make it Easier to Roll Your Commercial Paper Onto the Fed? (August 22, 2011). Available at SSRN: https://ssrn.com/abstract=1911454 or http://dx.doi.org/10.2139/ssrn.1911454

    The show blog is at

    https://financeprofessorpodcast.wordpress.com/

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    https://www.facebook.com/FinanceProfessorOrg/

  • Professor Andrew Metrick is the Michael H. Jordan Professor of Finance and Management at the Yale School of Management. He is the director, Yale Program on Financial Stability and the Faculty Director, Masters in Systemic Risk program at Yale. Professor Metrick was an assistant professor in economics at Harvard University and was an assistant and associate professor of finance at the Wharton School of Business at the University of Pennsylvania. He also served as a senior economist and the cheif economist on President Obama's Council of Economic Advisers while the administration worked on the Dodd–Frank Wall Street Reform and Consumer Protection Act and tried to manage the hugely unpopular bailout of the financial sector, the Troubled Asset Relief Program (TARP). The latter bailout turned a modest profit and many believe it helped to stabilize the financial system.

    Professor Metrick outlines the responses to the 2008 financial crises in the USA and abroad and speaks about the tension between regulation and shadow banking.

    The YouTube version of this talk is at

    https://www.youtube.com/watch?v=ZyjqU_vEVHs&t=220s

    The Finance Professor Podcast's facebook page is

    https://www.facebook.com/FinanceProfessorOrg/

    Subscriber to the youtube channel at

    https://www.youtube.com/channel/UCYY02-A8UQ6307k8PPDj5hQ?sub_confirmation=1

    Check out Dr. Metrick's CV athttp://faculty.som.yale.edu/andrewmetrick/documents/cv.pdf

    The Financial Management Association 2017 program from its Boston meeting is at http://fmaconferences.org/Boston/BostonProgram.htmThis was session 214 at the Marriot Copley Place.#FMABoston2017www.facebook.com/FMA.orgThe next meeting is in San Diego.

    Dr. Linus Wilson is an associate professor of finance at the University of Louisiana at Lafayette. He has published extensively on the TARP bailout and has studied the bailouts orchestrated by the U.S. Federal Reserve and the FDIC during the financial crisis of 2008. You can see his research at www.linuswilson.comwww.financeprofessor.org

    I mentioned the following papers whose working paper versions are at

    Wilson, Linus, Debt Overhang and Bank Bailouts (September 12, 2009). Available at SSRN: https://ssrn.com/abstract=1336288 or http://dx.doi.org/10.2139/ssrn.1336288

    Wilson, Linus and Wu, Yan Wendy, Common (Stock) Sense about Risk-Shifting and Bank Bailouts (January 1, 2010). Financial Markets and Portfolio Management, Vol. 24, No. 1, pp. 3-29, 2010. Available at SSRN: https://ssrn.com/abstract=1321666

    Wilson, Linus, Broken Bucks: Money Funds that Took Taxpayer Guarantees in 2008 (August 28, 2015). Available at SSRN: https://ssrn.com/abstract=2195358 or http://dx.doi.org/10.2139/ssrn.2195358

    Wilson, Linus and Wu, Yan Wendy, 'Escaping TARP' (September 21, 2010). Journal of Financial Stability, Vol. 8, No. 1, 2012. Available at SSRN: https://ssrn.com/abstract=1619689 or http://dx.doi.org/10.2139/ssrn.1619689

    Wilson, Linus and Wu, Yan Wendy, Does Receiving TARP Funds Make it Easier to Roll Your Commercial Paper Onto the Fed? (August 22, 2011). Available at SSRN: https://ssrn.com/abstract=1911454 or http://dx.doi.org/10.2139/ssrn.1911454

    Wilson, Linus, Toxic Asset Subsidies and the Early Redemption of TALF Loans (August 17, 2011). Available at SSRN: https://ssrn.com/abstract=1742640 or http://dx.doi.org/10.2139/ssrn.1742640

    Look to my CV for the full citation of published papers.

    Professor Linus Wilson is the host of the Finance Professor Podcast at https://www.stitcher.com/podcast/linus-wilson/the-finance-professor-podcasthttps://itunes.apple.com/us/podcast/the-finance-professor-podcast/id1226939293?mt=2

    Dr. Jeffry L Coles a Professor of Finance at the David Eccles School of Business at the University of Utah and served as the Vice President of the 2017 Annual Meeting Program .

  • Professor Linus Wilson reads his paper "Discrete Portfolio Adjustment with Fixed Transaction Costs"

    Suggested Citation:

    Wilson, Linus, Discrete Portfolio Adjustment with Fixed Transaction Costs (January 3, 2016). Available at SSRN: https://ssrn.com/abstract=2406021 or http://dx.doi.org/10.2139/ssrn.2406021

    Abstract

    This paper presents a closed form solution to the portfolio adjustment problem in discrete time when the investor faces fixed transaction costs. This transaction cost model assumes a mean-variance investor who wants to adjust her holdings of a risky and risk-free asset. It is shown how this model can be calibrated to be used with a variety of risk models such as life cycle portfolio weights and value at risk (VaR) models. The decision problem can easily be inputted into and calculated in Excel.

    Keywords: adjustment costs, alpha models, brokerage commissions, fixed costs, lifecycle funds, portfolio selection, portfolio theory, risk management, transaction costs, Value at Risk (VaR)

    JEL Classification: G11

    Click the orange download button to get the full paper on SSRN.

  • Linus Wilson reads his joint work at

    https://ssrn.com/abstract=1977345

    "Overpaid CEOs Got FDIC Debt Guarantees"

    By Linus Wilson, University of Louisiana at Lafayette and Yan Wendy Wu, Wilfrid Laurier University

    abstract

    From 2008 to 2009, the FDIC guaranteed hundreds of billions of dollars of newly issued bank debt through the Temporary Liquidity Guarantee Program (TLGP). We find that CEOs making more than their peer groups were significantly more likely to steer their companies to obtain federal guarantees for their banks’ debt. The average bank in our sample with a debt guarantee had a CEO who was paid $1.6 million per year more than the average CEO in his or her peer group. In addition, there is strong evidence that large, systemically important banks were more likely to obtain FDIC debt guarantees.

    Keywords: bailout, banks, CDS, Citigroup, CEO Compensation, corporate governance, credit default swaps, debt, debt guarantees, Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, emergency lending, FDIC, Federal Deposit Insurance Corporation, Federal Reserve, financial crisis, FOIA, Freedom

    Get the show notes blog at www.financeprofessor.org and sign up for the free newsletter. There will be links to the facebook page. The podcast is on iTunes

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  • In the latest episode, I read my new working paper:

    How to Compare Faculty Pay Across the Business School by Linus Wilson

    You can download it by hitting the orange download button at the link.

    https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2954800

    The abstract is below:

    "By scaling pay by AACSB averages pay across business school disciplines can be analyzed. This study looks at a unique data set of business school professors at the University of Louisiana at Lafayette. It finds large disparities in pay between the business disciplines that cannot be explained by the market price of scholars in the disciplines, research productivity, or faculty to major ratios. The finance professors were the lowest paid of six disciplines as a percent of AACSB pay, but had the highest research productivity and majors per research faculty member at the Moody College of Business Administration (MCOBA). Finance professors were paid about 20 percent less as a percent of the AACSB average for their rank and discipline than other research faculty at the MCOBA. Members of the management department were paid significantly higher percent of AACSB average pay than other professors in the business school. This data may be indicative of a misallocation of resources. The approach in this paper could be applied to analyze pay practices at many other business schools and over many other time periods."

    The video version of the paper is at https://youtu.be/A7vM2qNj-h4

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  • The JOBS Act opened up a lot of crowdfunding opportunities for entrepreneurs. That also means much more research opportunities for finance professors. In the second episode, I read my recent working paper "A Little Bit of Money Goes a Long Way: Crowdfunding on Patreon by YouTube Sailing Channels". The abstract says:

    "This study finds that YouTube channels crowdfunding on Patreon have more frequent video creation. The median YouTube channel that crowdfunded on Patreon produced a video every 7.5 days compared to 105 days for the median comparable channel that did not link to Patreon. Crowdfunders have more views per video, are more likely to link to their Facebook pages, and uploaded videos more frequently. While two channels in the sample, each earned over $150,000 in 2016 from Patreon, the typical crowdfunding sailing channel earned $73 per video, per month, or creation. It appears that a little bit of money was associated with a big increase in new video production."

    I believe my study is the first academic study about this rapidly crowdfunding platform called Patreon.

  • The Finance Professor Podcast is hosted by Linus Wilson. Dr. Wilson earned his Ph.D. in 2007 from Oxford University. He has taught thousands of finance students at all levels. His research is in banking, financial crises, CEO pay, and corporate finance. I’ll be reading my academic research initially.