IDEAS home Printed from https://ideas.repec.org/p/brd/wpaper/88.html
   My bibliography  Save this paper

Skin in the game: The Performance of Insured and Uninsured Municipal Debt

Author

Listed:
  • Daniel Bergstresser

    (Brandeis University)

  • Randolph Cohen

    (Massachusetts Institute of Technology, Definitive Capital)

  • Siddharth Shenai

    (Bracebridge Capital)

Abstract

The period since 1989 has seen significant changes in the structure of household ownership of municipal debt, with ownership becoming concentrated in a smaller number of households over time. The share of households holding any municipal debt fell from 4.6 percent to 2.4 percent between 1989 and 2013. The share of total debt that is held by the wealthiest 0.5 percent of households rose from 24 percent to 42 percent over the same period. These changes have coincided with the growth of tax-deferred retirement investment accounts such as 401(k) plans as a primary location of household investing. Municipal bonds, which pay tax-exempt interest, are almost never held inside of these tax-deferred accounts. These changing patterns of ownership have implications for the political economy of the municipal bond market.

Suggested Citation

  • Daniel Bergstresser & Randolph Cohen & Siddharth Shenai, 2015. "Skin in the game: The Performance of Insured and Uninsured Municipal Debt," Working Papers 88, Brandeis University, Department of Economics and International Business School.
    • Handle: RePEc:brd:wpaper:88
    as

    Download full text from publisher

    File URL: http://www.brandeis.edu/economics/RePEc/brd/doc/Brandeis_WP88.pdf
    File Function: First version, 2015
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Adam B. Ashcraft & Paul Goldsmith-Pinkham & James Vickery, 2010. "MBS ratings and the mortgage credit boom," Staff Reports 449, Federal Reserve Bank of New York.
    2. Christo A. Pirinsky & Qinghai Wang, 2011. "Market Segmentation and the Cost of Capital in a Domestic Market: Evidence from Municipal Bonds," Financial Management, Financial Management Association International, vol. 40(2), pages 455-481, June.
    3. Vikram Nanda & Rajdeep Singh, 2004. "Bond Insurance: What Is Special About Munis?," Journal of Finance, American Finance Association, vol. 59(5), pages 2253-2280, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Albert Lee Chun & Ethan Namvar & Xiaoxia Ye & Fan Yu, 2019. "Modeling Municipal Yields With (and Without) Bond Insurance," Management Science, INFORMS, vol. 65(8), pages 3694-3713, August.
    2. Agrawal, Ashwini & Kim, Daniel, 2021. "Municipal bond insurance and the U.S. drinking water crisis," LSE Research Online Documents on Economics 118888, London School of Economics and Political Science, LSE Library.
    3. Cornaggia, Kimberly & Hund, John & Nguyen, Giang, 2022. "Investor attention and municipal bond returns," Journal of Financial Markets, Elsevier, vol. 60(C).
    4. Jess N. Cornaggia & Kimberly J. Cornaggia & Ryan D. Israelsen, 2020. "Where the Heart Is: Information Production and the Home Bias," Management Science, INFORMS, vol. 66(12), pages 5532-5557, December.
    5. Natee Amornsiripanitch, 2022. "Bond Insurance and Public Sector Employment," Working Papers 22-03, Federal Reserve Bank of Philadelphia.
    6. Amornsiripanitch, Natee, 2022. "The real effects of municipal bond insurance market disruptions11This paper was previous circulated with the title “Bond Insurance and Public Sector Employment.” I thank Gary Gorton, Andrew Metrick, H," Journal of Corporate Finance, Elsevier, vol. 75(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Thomas Luke Spreen & Ed Gerrish, 2022. "Taxes and tax‐exempt bonds: A literature review," Journal of Economic Surveys, Wiley Blackwell, vol. 36(4), pages 767-808, September.
    2. Cornaggia, Kimberly & Hund, John & Nguyen, Giang, 2022. "Investor attention and municipal bond returns," Journal of Financial Markets, Elsevier, vol. 60(C).
    3. Marco Pagano, 2013. "Finance: Economic Lifeblood or Toxin?," World Scientific Book Chapters, in: Viral V Acharya & Thorsten Beck & Douglas D Evanoff & George G Kaufman & Richard Portes (ed.), The Social Value of the Financial Sector Too Big to Fail or Just Too Big?, chapter 8, pages 109-146, World Scientific Publishing Co. Pte. Ltd..
    4. Efing, Matthias, 2015. "Arbitraging the Basel securitization framework: Evidence from German ABS investment," Discussion Papers 40/2015, Deutsche Bundesbank.
    5. Adelino, Manuel & Scott Frame, W. & Gerardi, Kristopher, 2017. "The effect of large investors on asset quality: Evidence from subprime mortgage securities," Journal of Monetary Economics, Elsevier, vol. 87(C), pages 34-51.
    6. Jiahe Lin & George Michailidis, 2019. "Approximate Factor Models with Strongly Correlated Idiosyncratic Errors," Papers 1912.04123, arXiv.org.
    7. Bar-Isaac, Heski & Shapiro, Joel, 2013. "Ratings quality over the business cycle," Journal of Financial Economics, Elsevier, vol. 108(1), pages 62-78.
    8. Josephson, Jens & Shapiro, Joel, 2020. "Credit ratings and structured finance," Journal of Financial Intermediation, Elsevier, vol. 41(C).
    9. Keser, Claudia & Özgümüs, Asri & Peterlé, Emmanuel & Schmidt, Martin, 2017. "An experimental investigation of rating-market regulation," Journal of Economic Behavior & Organization, Elsevier, vol. 144(C), pages 78-86.
    10. Bourdeau-Brien, Michael & Kryzanowski, Lawrence, 2020. "Natural disasters and risk aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 818-835.
    11. Lim, Terence & Lo, Andrew W. & Merton, Robert C. & Scholes, Myron S., 2006. "The Derivatives Sourcebook," Foundations and Trends(R) in Finance, now publishers, vol. 1(5–6), pages 365-572, April.
    12. Aditya Keshari & Amit Gautam, 2022. "Empirical Testing of Co-integration of International Financial Markets with Reference to India, the USA, Japan, and Hong Kong," Jindal Journal of Business Research, , vol. 11(1), pages 34-43, June.
    13. Hang Luo & Linfeng Chen, 2019. "Bond yield and credit rating: evidence of Chinese local government financing vehicles," Review of Quantitative Finance and Accounting, Springer, vol. 52(3), pages 737-758, April.
    14. Manuel Adelino & Kristopher Gerardi & Barney Hartman-Glaser, 2016. "Are Lemons Sold First? Dynamic Signaling in the Mortgage Market," FRB Atlanta Working Paper 2016-8, Federal Reserve Bank of Atlanta.
    15. Chen, Yongmin & Gu, Dingwei & Yao, Zhiyong, 2013. "Rating Inflation versus Deflation: On Procyclical Credit Ratings," MPRA Paper 51159, University Library of Munich, Germany.
    16. Murphy, Austin, 2018. "Bond pricing in the biggest city bankruptcy in history: The effects of state emergency management laws on default risk," International Review of Law and Economics, Elsevier, vol. 54(C), pages 106-117.
    17. Bae, Kee-Hong & Driss, Hamdi & Roberts, Gordon S., 2019. "Does competition affect ratings quality? Evidence from Canadian corporate bonds," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 605-623.
    18. Kisgen, Darren J. & Nickerson, Jordan & Osborn, Matthew & Reuter, Jonathan, 2020. "Analyst Promotions within Credit Rating Agencies: Accuracy or Bias?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 55(3), pages 869-896, May.
    19. Brown, Craig O., 2017. "The politics of government financial management: Evidence from state bonds," Journal of Monetary Economics, Elsevier, vol. 90(C), pages 158-175.
    20. Bertaut, Carol & DeMarco, Laurie Pounder & Kamin, Steven & Tryon, Ralph, 2012. "ABS inflows to the United States and the global financial crisis," Journal of International Economics, Elsevier, vol. 88(2), pages 219-234.

    More about this item

    Keywords

    Municipal bonds; bond insurance;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:brd:wpaper:88. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Andrea Luna (email available below). General contact details of provider: https://edirc.repec.org/data/gsbraus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.