Papers by Giovanna Paladino
Journal of the Knowledge Economy
Archives Italiennes De Biologie, 1990
Journal of Empirical Finance, Dec 1, 2016
Banks use internal models to optimize risk weights and better account for the specific risk of ea... more Banks use internal models to optimize risk weights and better account for the specific risk of each asset. As the choice of risk weights affects the regulatory capital ratio, economic theory suggests that banks with a higher cost of equity should be more aggressive in reducing risk weights. We consider a large panel of international banks and find that, after controlling for a number of bank and country characteristics and contrary to what happens for a non-Basel II bank, for a Basel II bank a higher cost of equity is not associated with a higher ratio between risk-weighted assets and total assets. These results are obtained in the context of state-of-the-art endogeneity-robust econometric procedures and across several specifications. We propose an indicator of risk weights saving and assess its impact on several performance measure during the 2008-2009 and the 2010-2012 crises. We find that for European banks not located in peripheral countries, a higher degree of RWA-saving is associated with more equity raising during the European crisis, more volatility, lower distance-to-default. European banks located in peripheral countries engaged less strongly in RWA-saving than European banks located in core countries, and its impact on the various performance measures is almost non-existent, except for a decrease in the distance-todefault.
Journal of Banking and Finance, Dec 1, 2013
The financial crisis has affected the landscape of the banking sector around the world. We use a ... more The financial crisis has affected the landscape of the banking sector around the world. We use a sample of transactions taking place in Europe in 2007-2010 to study the acquirer's stock price market reaction to announcements and completions of acquisitions. We find that there are no significant abnormal returns around the announcement of an acquisition while there are positive abnormal returns at completions. We study the cross-sectional determinants of abnormal returns and find that announcement returns are mainly explained by the acquirer bank characteristics, while completion returns depend on opacity of the target and in large part on the drop in volatility associated with a reduction of uncertainty.
Journal of Empirical Finance, 2016
Banks use internal models to optimize risk weights and better account for the specific risk of ea... more Banks use internal models to optimize risk weights and better account for the specific risk of each asset. As the choice of risk weights affects the regulatory capital ratio, economic theory suggests that banks with a higher cost of equity should be more aggressive in reducing risk weights. We consider a large panel of international banks and find that, after controlling for a number of bank and country characteristics and contrary to what happens for a non-Basel II bank, for a Basel II bank a higher cost of equity is not associated with a higher ratio between risk-weighted assets and total assets. These results are obtained in the context of state-of-the-art endogeneity-robust econometric procedures and across several specifications. We propose an indicator of risk weights saving and assess its impact on several performance measure during the 2008-2009 and the 2010-2012 crises. We find that for European banks not located in peripheral countries, a higher degree of RWA-saving is associated with more equity raising during the European crisis, more volatility, lower distance-to-default. European banks located in peripheral countries engaged less strongly in RWA-saving than European banks located in core countries, and its impact on the various performance measures is almost non-existent, except for a decrease in the distance-todefault.
IFAC Proceedings Volumes, 1989
After a presentati on of the existing structural models of exchange-rate determination we show th... more After a presentati on of the existing structural models of exchange-rate determination we show that their out-of-sample predictive performance of the lira! $ exchange rate is inferior to that of the simple random walk model. Only by moving away from these single equati on , semi-reduced form models towards suitable economy-wide macroeconometric models can one hope to beat the random walk. Following this course , we show that the Mark V version of our continuous time macroeconometric model of the Italian economy outperforms both the existing structural models and the random-walk process, in out-of-sample forecasting tests concerning the lira !$ exchange rate .
Social Science Research Network, 2023
European Conference on Games Based Learning
Escape from the Castle is a digital escape game created with the collaboration of the Museum of S... more Escape from the Castle is a digital escape game created with the collaboration of the Museum of Saving in Turin (Italy), Neuroscience Lab Intesa Sanpaolo Innovation Center, and the GAME Science Research Center of IMT School for Advanced Studies Lucca. In the escape game, players must help Mica, the mascot of the Museum, to run away from the Ghost of the Baroness, from its Castle. To do that, every player has to solve four puzzles in four different rooms. Each room is correlated to a financial issue, such as saving strategies and planning. The game aims to increase the awareness that money represents a means for achieving a purpose (i.e., use value of money) and not an end, from a behavioural and neuroscientific point of view. So we built a study about the behaviour of teenagers. According to the literature, the cooperative approach proposes emotional and cognitive involvement as a tool to strengthen learning, increases awareness of self-efficacy and, when applied to money management...
Research Papers in Economics, Nov 25, 2011
The financial crisis has affected the landscape of the banking sector around the world. We use a ... more The financial crisis has affected the landscape of the banking sector around the world. We use a sample of transactions taking place in Europe in 2007-2010 to study the acquirer's stock price market reaction to announcements and completions of acquisitions. We find that there are no significant abnormal returns around the announcement of an acquisition while there are positive abnormal returns at completions. We study the cross-sectional determinants of abnormal returns and find that announcement returns are mainly explained by the acquirer bank characteristics, while completion returns depend on opacity of the target and in large part on the drop in volatility associated with a reduction of uncertainty.
The Journal of Economic Asymmetries, 2020
Abstract We investigate the time varying dynamics of the linkages between sovereign and bank defa... more Abstract We investigate the time varying dynamics of the linkages between sovereign and bank default risks over the period 2006–2015, using the credit default swap (CDS) spreads of the bonds of major banks and sovereign issuers in the EMU. The nexus between bank risk in core countries and sovereign risk of peripheral countries is also analyzed and found to be relevant. The use of a time-varying regime switching analysis, the STCC-GARCH, identifies the asymmetric impact of the economic variables behind the state shifts, the so-called “transition variables”. This approach also dates both the positive shifts in the size of the nexus that are due to financial shocks (viz. the Lehman crisis, the evolution of the Greek crisis) and the negative shifts that follow the implementation of unconventional monetary policy measures.
SSRN Electronic Journal, 2015
We use the results of the ECB's Comprehensive Assessment to evaluate the importance of bank b... more We use the results of the ECB's Comprehensive Assessment to evaluate the importance of bank business model on risk assessment and the persuasive effectiveness of different supervisory styles on banks’ recapitalization. Our analysis reveals inconsistencies in the information content provided by the various regulatory measures used for assessing bank stability. Moreover, opposite to the RWA density and CET1 ratio, the leverage ratio provides assessments on business models closer to a market-based measure of bank risk. We also find that the effectiveness of the supervisory action depends on the specific type of supervisory model. In particular, countries adopting the hybrid model are more severe and effective in persuading banks to recapitalize preventively. Differently, countries adopting the integrated and the sectorial model seem less prone or able to be effective in their requests.
The buffer stock model redux? An analysis of the dynamics of foreign reserve accumulation
SSRN Electronic Journal, 2018
The Greek crisis has brought to light the strong nexus between the credit risks of European banks... more The Greek crisis has brought to light the strong nexus between the credit risks of European banks and their sovereign. We study this phenomenon in Germany, France, Italy and Spain by estimating the conditional correlations between sovereign and bank CDS bond spreads over the period 2006-2015. A trivariate time-varying regime switching correlation analysis, the STCC-GARCH, is implemented to associate the state shifts to the dynamics of the so-called "transition variable". We start selecting as transition variable the first difference of the spread between Greek and German sovereign bond yields. We then expand the model-via a DSTCC-GARCH parameterization-and introduce a second transition variable, representing the influence of the Italian sovereign debt. There is a clear evidence of significant changes in the correlations structure due to the evolution of the Greek crisis and to the sustainability of the Italian debt, which in turns impinges on the tenability of the euro project. The role of Italy on the nexuses of France and Germany increases after 2011.
International Journal of Accounting and Financial Reporting, 2018
The Greek crisis has brought to light the strong nexus between the credit risks of European banks... more The Greek crisis has brought to light the strong nexus between the credit risks of European banks and their sovereign. We study this phenomenon in Germany, France, Italy and Spain by estimating the conditional correlations between sovereign and bank CDS bond spreads over the period 2006-2015. Trivariate time-varying regime switching correlation analyses, such as the STCC-GARCH and DSTCC-GARCH, are implemented to associate causally the state shifts to the dynamics of the so-called “transition variables”. We find evidence of significant changes in the correlation structures due to the evolution of both the Greek and Italian crises.
SSRN Electronic Journal, 1999
The problem is to evaluate the likelihood that a country will face a currency or balance of payme... more The problem is to evaluate the likelihood that a country will face a currency or balance of payments crisis over a given horizon. When is it rational for market participants to expect a depreciation of the currency? On the basis of considerable empirical studies we know that in both banking and currency crises, there is a multitude of weak and deteriorating economic fundamentals. Our theme is that there is an economic logic to medium and longer-term movements in exchange rates, within the context of a consistent dynamic stock-flow model. The equilibrium real exchange rate is a trajectory, not a point. We provide objective measures of the real fundamentals that determine the moving equilibrium real exchange rate, and explain the dynamic economic mechanism whereby the actual exchange rate converges to this moving equilibrium exchange rate, called the NATREX. The fundamentals are primarily social consumption/GDP, which is generally driven by fiscal policy, and the productivity of the economy. Trends in social consumption/GDP, and in fiscal policy, reflected political regime changes in France, Germany and Italy.
Economic Notes, 2019
We use the results of the ECB's comprehensive assessment to evaluate the importance of the bank b... more We use the results of the ECB's comprehensive assessment to evaluate the importance of the bank business model on risk assessment and the persuasive effectiveness of different supervisory styles on banks' recapitalization. Our analysis reveals inconsistencies in the information content provided by the various regulatory measures used for assessing bank stability. Moreover, opposite to CET1 ratio, the leverage ratio provides assessments on business models more consistent with a market-based measure of bank risk exposure and Z-SCORE. Accounting for several control variables both at the bank and country level, we also find evidence that the effectiveness of the supervisory action depends on the specific type of supervisory model. In particular, countries adopting the hybrid model seem more effective in persuading banks to recapitalize preventively.
Research in International Business and Finance, 2018
Over the last 15 years, exchange rate movements have been smoother and slower than expected, give... more Over the last 15 years, exchange rate movements have been smoother and slower than expected, given the entity of the sharp shifts in the fundamental variables brought about by the international financial crisis. Since the beginning of the '90s researchers have explored different approaches in order to understand high frequency exchange rate dynamics. Among them the model that assumes heterogeneous trading strategies, where 'fundamentalists' coexist with 'chartists' in nonlinear transitional specifications, plays an increasingly relevant if puzzling role. We study the US dollar, the British pound and the Japanese yen vs the euro over the period 2002 to 2016 using weekly data. The most important contribution of this paper is that we find empirical evidence that both types of agent react to the same transition variable, viz. the absolute distance of the actual exchange rate to its relative PPP value. The spot foreign currency demand of fundamentalists is driven by the size of the misalignment both directly and through a transition function, which models the adoption of fundamental strategies by newcomers. The number of chartists also varies according to the absolute distance of the exchange rate change from its fundamental value. Evidence supports the existence of stabilizing and destabilizing behaviour not only by chartists but also by fundamentalists.
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Papers by Giovanna Paladino