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Academic Research Europlace Institute of Finance Scientific Morning Conference: Liquidity Session 27 September, 2011
The aim of the Scientific Morning Conference is to discuss the latest developments in financial research through the research projects supported by the Europlace Institute of Finance. The conference is aimed at all players in the financial sector, both industry professionals - issuers, investors and intermediaries - and academics.

René Garcia, Professor of Finance at EDHEC Business School and Academic Director of the PhD in Finance at EDHEC-Risk Institute, will be presenting his working paper entitled, "Funding Liquidity and the Cross-Section of Stock Returns" at the "Liquidity Session" of the conference to be held at the Palais Brongniart in Paris on 27 September.

Funding liquidity, the ease with which traders and financial intermediaries obtain funding, has played a key role in the subprime crisis. Prof. Garcia’s paper measures the sensitivity of stock returns to the innovation in funding liquidity. It identifes and measures the value of funding liquidity from the cross-section of on-the-run bond premia by adding a liquidity factor to an arbitrage-free term structure model. The liquidity factor predicts lower risk premia for on-the-run and off-the-run bonds but higher risk premia on LIBOR loans, swap contracts and corporate bonds. It varies with transaction costs, S&P500 valuation ratios and aggregate uncertainty, as well as narrow measures of monetary aggregates and measures of bank reserves.

The paper explores the links between funding liquidity and returns on portfolios of stocks. It starts by looking at portfolios sorted according to size and book-to-market value, momentum, as well as at industry portfolios. It also considers hedge funds, whose reliance on liquidity is significant through leverage-based strategies. Finally, it compares the funding liquidity capacity to explain the cross-section of equity-based portfolios to the explanatory power of the broker-dealer leverage recently advanced by Adrian, Etula and Muir (2010).

The paper will be discussed by Catherine Casamatta from the Toulouse School of Economics (IAE, IDEI), and Laurent Fournier, Head of Business Analysis & Statistics, European Cash Markets Executions at NYSE Euronext.
Event Details
  When   Between 27/09/2011 08:00 AM and 27/09/2011 10:30 AM
Where   Palais Brongniart, 28 Place de la Bourse, 75002 Paris
Web  
 
Contact Details
  Name   Institut Europlace de Finance (EIF)
E-mail   info@europlace-finance.com
Phone  
 
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