The Collateralizability Premium
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Datum
2019-10-09
Autor
Ai, Hengjie
Li, Jun E.
Li, Kai
Schlag, Christian
SAFE No.
264
Metadata
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Zusammenfassung
A common prediction of macroeconomic models of credit market frictions is that the tightness of financial constraints is countercyclical. As a result, theory implies a negative collateralizability premium, that is, capital that can be used as collateral to relax financial constraints provides insurance against aggregate shocks and commands a lower risk compensation compared with non-collateralizable assets. We show that a longshort portfolio constructed using a novel measure of asset collateralizability generates an average excess return of around 8% per year. We develop a general equilibrium model with heterogeneous firms and financial constraints to quantitatively account for the collateralizability premium.
Forschungsbereich
Financial Markets
Schlagworte
cross-section of returns, financial frictions, collateral constraint
JEL-Klassifizierung
E2, E3, G12
Thema
Saving and Borrowing
Corporate Finance
Macro Finance
Corporate Finance
Macro Finance
Beziehungen
1
Publikationstyp
Working Paper
Link zur Publikation
Collections
- LIF-SAFE Working Papers [334]