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Intermediaries and Asset Prices: International Evidence since 1870

Author

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  • Matthew Baron
  • Tyler Muir

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 data set 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.

Suggested Citation

  • Matthew Baron & Tyler Muir, 2022. "Intermediaries and Asset Prices: International Evidence since 1870," The Review of Financial Studies, Society for Financial Studies, vol. 35(5), pages 2144-2189.
    • Handle: RePEc:oup:rfinst:v:35:y:2022:i:5:p:2144-2189.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhab077
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    Citations

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    Cited by:

    1. Molero-González, L. & Trinidad-Segovia, J.E. & Sánchez-Granero, M.A. & García-Medina, A., 2023. "Market Beta is not dead: An approach from Random Matrix Theory," Finance Research Letters, Elsevier, vol. 55(PA).
    2. Darrell Duffie & Michael J. Fleming & Frank M. Keane & Claire Nelson & Or Shachar & Peter Van Tassel, 2023. "Dealer Capacity and U.S. Treasury Market Functionality," Staff Reports 1070, Federal Reserve Bank of New York.
    3. Josh Davis & Alan M. Taylor, 2022. "The Leverage Factor: Credit Cycles and Asset Returns," Management Science, INFORMS, vol. 68(10), pages 7350-7361, October.
    4. Isaenko, Sergey, 2023. "Trading strategies and the frequency of time-series," The Quarterly Review of Economics and Finance, Elsevier, vol. 90(C), pages 267-283.
    5. Liu, Yang, 2023. "Government debt and risk premia," Journal of Monetary Economics, Elsevier, vol. 136(C), pages 18-34.
    6. Kristy Jansen, 2023. "Long-term Investors, Demand Shifts, and Yields," Working Papers 769, DNB.

    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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