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Capital Markets

Our economists research and analyze a range of issues involving asset pricing, market microstructure, and other financial market topics.

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The Second New York Fed — Princeton Liquidity Conference Financial markets experienced extraordinary events in August 2007. The increase in delinquency rates in subprime mortgages coupled with the mismatch of the maturity structure of off-balance-sheet conduits and structured investment vehicles led to a sudden drying up of the asset-backed commercial paper market and higher money market interest rate spreads. This conference brought together experts in liquidity and researchers to further the understanding of these mechanisms and to link them to current policy tools.

RECENT ARTICLES

Liquidity and Leverage The authors present evidence that marked-to-market leverage is strongly procyclical and argue that such behavior has aggregate consequences. By Tobias Adrian and Hyun Song Shin, Staff Reports 328, May 2008

Liquidity, Monetary Policy, and Financial Cycles The authors of this study argue that the growth rate of aggregate balance sheets may be the most fitting measure of liquidity in a market-based financial system. By Tobias Adrian and Hyun Song Shin, Current Issues in Economics and Finance (14) 1, January/February 2008

Signal or Noise? Implications of the Term Premium for Recession Forecasting This article examines whether changes in the term premium can distort the recession signal given by an inverted yield curve. The authors compare the recession forecasting performance of models with and without the term premium and find that, while the interest rate expectations component of the term spread is a leading indicator of recession, the term premium component is not. By Joshua V. Rosenberg and Samuel Maurer, Economic Policy Review, Forthcoming

Market Sidedness: Insights into Motives for Trade Initiation We infer motives for trade initiation from market sidedness. We define trading as more two-sided (one-sided) if the correlation between the numbers of buyer- and seller-initiated trades increases (decreases), and assess changes in sidedness (relative to a control sample) around events that identify trade initiators. By Asani Sarkar and Robert A. Schwartz, The Journal of Finance, Forthcoming

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CURRENT FINANCIAL INDICATORS

The Yield Curve as a Leading Indicator  Research on the yield curve as a predictor of future real U.S. economic activity.

Business Finance Bonds issued, corporate equity proceeds, seasonally-adjusted business loans and seasonally-adjusted nonfinancial commercial paper outstanding. 1 page / 23 kb

Household Debt Statistics Household debt burden, debt service and borrowing rates. 1 page / 16 kb

Interest Rates Short and long-term interest rates and Treasury yield curve. 1 page / 16 kb

Stock Price Indexes and Valuation Ratios Stock price indexes, price-to-earnings ratio and dividend yield. 1 page / 23 kb

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