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Abstract:
The effects of political risk emanating from unexpected changes in the economic policies of the US presidency are measured on a cross-section of stock portfolios. Unlike previous efforts to measure the effects of the "presidential puzzle", this paper makes use of advances in the measurement of ideology and political activity that allows measurement of political risk that is both reproducible without the use of dummy variables, and allows for finer distinctions. Surprises to the market associated with presidential policy are significant in both explaining the cross-section of returns and in minimizing pricing errors, even when controlling for other factors.

Abstract:
I examine the theoretical determinants for US and European credit default swap spreads. In contrast to previous results, I find that interest rates play a smaller role in determining spreads, and that other equity factors, such as momentum and the Fama-French small-minus-big factor play substantial roles in determining credit default swap spreads. I also allow for coefficients to change over time and find that determinants of credit default swaps spreads change significantly as the volatility of swap spreads rise. Interest rates are found to be significant determinants of the underlying volatility of swap spreads.

swaps, credit default, CDS

Abstract:
The effect of European Central Bank monetary policy upon EONIA swap spreads is investigated with GARCH-Jump models. I find that monetary policy, as expressed through the MRO (Main Refinancing Operations) rate, has an inverse relationship with the spread in EONIA swaps. At the same time, monetary policy has a positive relationship with volatility in spreads. The effect of monetary policy upon the likelihood of jumps in volatility is mixed. Temporary liquidity fluctuations in between main refinancing operations increase the likelihood of jumps in the swap term structure and in the size of the jumps.

monetary policy, swaps

Abstract:
As pointed out by Henisz (2000) and others, political policy can effect stock market returns through two basic ways: Macroeconomically, where arbitrary changes in economic policy, regulation and taxation can lead to greater investment uncertainty, thus leading to an overall increase in the price of market risk; secondly, through economic rent seeking, firms in favored industries can earn economic rents and/or alter their exposure to market risk by shifting investment to seeking economic rents. The effects of Democratic versus Republican (Liberal versus Conservative regimes) is tested at the industry level. While little support is found for the idea that different presidential parties leads to an overall increase in market risk, evidence supporting rent-seeking by industries is found.

Politicaql risk, policy, stock market , abnormal returns

Abstract:
The recent changes in the Chinese currency regime are examined by proposing, that due to a misunderstanding, the Chinese government was assumed to be adopting a currency basket, when their announced intention was really a period of “experimentation” that is intended to eventually lead to a managed float regime for the Yuan/renminbi (RMB), tempered by maintaining a certain purchasing power for the RMB. Using new structural breakpoint analysis developed by Qu and Perron (2007) , and robust regression analysis, confirms that there have been six distinct eras of currency policy for the RMB since July of 2005, including reference versus the US dollar, Japanese yen, and the euro that have featured flexible weightings over time. The true regime seems to be one of a currency policy that attempts to balance a more flexible currency with a need to maintain a certain degree of purchasing power and price stability.