Lijing Du
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Banking and income inequality of the American community: an analysis
Lijing Du , Michail Dewally , Ying Ying Shao , Daniel Singer doi: http://dx.doi.org/10.21511/bbs.11(1).2016.06Community banks in American urban areas are found to have a significant effect on the local distribution of income. Banking activity is seen to both decrease inequality by increasing the median level of income and simultaneously increase inequality by increasing the size of either tail of the income distribution. The net effect of banks providing liquidity to the American local economy and increasing access to the banking infrastructure is to decrease income inequality in these communities
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Inclusion of debt claims in asset pricing models: Evidence from the CDS Index
Investment Management and Financial Innovations Volume 20, 2023 Issue #2 pp. 127-136
Views: 304 Downloads: 148 TO CITE АНОТАЦІЯAsset pricing theory suggests that the correct proxy for the market portfolio should contain both the debt and equity claims of the economy, whereas prevailing empirical studies fail to include the debt claim. Motived by the discrepancy between the theoretical and empirical models and the difficulty in constructing proxies, the study uses the Credit Default Swaps (CDS) market index as a proxy for the debt market and empirically tests its explanatory power in explaining stock return variations. Employing panel regression and Fama-MacBeth regression of all publicly traded U.S. companies from 2005 to 2020, the study finds a negative relationship between CDS index returns and stock returns. On average, a one standard deviation increase in CDS index return is associated with a 0.02% decrease in daily stock returns. Results of two-stage regressions show that the estimated systematic credit risk is positively priced in stock returns with similar economic magnitude as the well-documented beta risk. These results support asset pricing theories in the inclusion of debt claim and the risk-return tradeoff, while contradicting the credit risk puzzle documented in prior studies.
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