{"title":"The Elephant in the Room: The Impact of Labor Obligations on Credit Markets","authors":"Jack Y Favilukis, Xiaoji Lin, Xiaofei Zhao","doi":"10.1257/AER.20170156","DOIUrl":"https://doi.org/10.1257/AER.20170156","url":null,"abstract":"We show that labor market frictions are first-order for understanding credit markets. Wage growth and labor share forecast aggregate credit spreads and debt growth as well as or better than alternative predictors. They also predict credit risk and debt growth in a cross section of international firms. Finally, high labor share firms choose lower financial leverage. A model with labor market frictions and risky long-term debt can explain these findings, and produce large credit spreads despite realistically low default probabilities. This is because precommitted payments to labor make other committed payments (i.e., interest) riskier. (JEL D33, E23, E24, E25, E44, F23, G32)","PeriodicalId":340455,"journal":{"name":"Institute for Quantitative Research in Finance 2017 (Q-Group) (Archive)","volume":"47 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-04-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126858571","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Factor Based Clustering","authors":"Apollon Fragkiskos, E. Bauman","doi":"10.2139/ssrn.3089985","DOIUrl":"https://doi.org/10.2139/ssrn.3089985","url":null,"abstract":"We propose a novel approach to cluster funds based on their factor exposures. The approach uses investment returns as input data and calculates similarity scores across funds, which are then used to form clusters. The derived clusters avoid common pitfalls that correlation based or other cluster methods fall into. They can be used as peer group alternatives to what vendors provide or to further refine existing categories that might be too obscure to make sense of. When tested against long/short equity funds, we find that we can form clusters with relatively high levels of stability across time.","PeriodicalId":340455,"journal":{"name":"Institute for Quantitative Research in Finance 2017 (Q-Group) (Archive)","volume":"30 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-12-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125409302","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}