Showing results 1 - 6 of 6
| Malcolm Baker | George Serafeim
Financing the Response to Climate Change: The Pricing and Ownership of U.S. Green Bonds. Malcolm Baker, George Serafeim, April 27, 2018, Paper, "Estimates suggest that mitigating and adapting to climate change will cost trillions of dollars. We study the developing market for green bonds, which are bonds whose proceeds are used for environmentally sensitive purposes. After an overview of the U.S. corporate and municipal green bonds market, we…
| Malcolm Baker
Risk Neglect in Equity Markets. Malcolm Baker, Spring 2016, Paper. "The link between measures of risk and return within the equity market has been very weak over the past 47 years: in the United States, returns on high-risk stocks have cumulatively fallen short of the returns on low-risk stocks, during a period when the equity market as a whole experienced high returns relative to Treasury bills. In the spirit of Fischer Black’s 1993 article “…
| Malcolm Baker
Do Strict Capital Requirements Raise the Cost of Capital? Bank Regulation, Capital Structure, and the Low-Risk Anomaly. Malcolm Baker, May 2015, Paper, Traditional capital structure theory predicts that reducing banks' leverage reduces the risk and cost of equity but does not change the weighted average cost of capital, and thus the rates for borrowers. We confirm that the equity of better-capitalized banks has lower beta and idiosyncratic risk…
| Malcolm Baker
The Risk Anomaly Tradeoff of Leverage. Malcolm Baker, December 14, 2014, Paper. "The “low risk anomaly” refers to the empirical pattern that apparently high-risk equities do not earn commensurately high returns. In this paper, we consider the possibility that the risk anomaly represents mispricing, not a misspecification of risk, and develop the implications for corporate capital structure. The risk anomaly generates a simple tradeoff model:…
| Malcolm Baker
Do Strict Capital Requirements Raise the Cost of Capital? Bank Regulation, Capital Structure, and the Low Risk Anomaly, Malcolm Baker, January 2015, Paper, The instability of banks in the financial crisis has led to stricter bank capital requirements, both globally through Basel III and in the U.S. through further constraints imposed by the Federal Reserve. Setting these requirements requires balancing many costs and benefits, both social and…
| Malcolm Baker
Do Strict Capital Requirements Raise the Cost of Capital? Banking Regulation and the Low Risk Anomaly. Malcolm Baker, May 2013, Paper. "Minimum capital requirements are a central tool of banking regulation. Setting them balances a number of factors, including any effects on the cost of capital and in turn the rates available to borrowers. Standard theory predicts that, in perfect and efficient capital markets, reducing banks’ leverage reduces…