Intermediaries and Asset Prices: International Evidence since 1870

Review of Financial Studies

153 Pages Posted: 14 Feb 2018 Last revised: 2 Jul 2021

See all articles by Matthew Baron

Matthew Baron

Cornell University - Samuel Curtis Johnson Graduate School of Management

Tyler Muir

University of California, Los Angeles (UCLA) - Anderson School of Management; National Bureau of Economic Research (NBER)

Date Written: July 2, 2021

Abstract

We study data on commercial banks and securities firms across multiple countries since 1870. Balance sheet expansion of leveraged intermediaries negatively predicts returns of stocks, bonds, currencies, and housing. The predictability is stronger at shorter horizons, is robust to macroeconomic controls, and holds outside distress periods, in contrast to models featuring nonlinearities during distress. Intermediaries in global financial centers predict international equity returns. A new dataset on individual stock holdings of Japanese intermediaries since 1955 shows intermediaries affect returns of stocks directly held. Our results suggest a strong universal link between intermediaries and asset returns distinct from macroeconomic channels.

Keywords: intermediary asset pricing, return predictability

JEL Classification: G12, G15, G21

Suggested Citation

Baron, Matthew and Muir, Tyler, Intermediaries and Asset Prices: International Evidence since 1870 (July 2, 2021). Review of Financial Studies, Available at SSRN: https://ssrn.com/abstract=3116417 or http://dx.doi.org/10.2139/ssrn.3116417

Matthew Baron (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

Tyler Muir

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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