Liberty Street Economics
Return to Liberty Street Economics Home Page

10 posts on "Stocks"
May 26, 2021

The Overnight Drift in U.S. Equity Returns

Since the advent of electronic trading in the late 1990s, S&P 500 futures have traded close to 24 hours a day. In this post, which draws on our recent Staff Report, we document that holding U.S. equity futures overnight has earned a large positive return during the opening hours of European markets. The largest positive returns in the 1998–2019 sample have accrued between 2 a.m. and 3 a.m. U.S. Eastern time—the opening of European stock markets—and averaged 3.6 percent on an annualized basis, a phenomenon we call the overnight drift.

January 6, 2021

The International Spillover of U.S. Monetary Policy via Global Production Linkages

Julian di Giovanni describes work with Galina Hale that employs an empirical framework to quantify the role of the global production network in transmitting U.S. monetary policy across international stock markets.

December 21, 2020

What’s Up with Stocks?

“U.S. stocks are racing toward a second consecutive quarter of dramatic gains, continuing a historic stock-market recovery that few predicted in the depths of the March downturn,” said a September Wall Street Journal article. “The stock market is detached from economic reality. A reckoning is coming,” said the Washington Post. What is going on? In this post, I look not at what stocks have actually done or will do, but at what investors expected should have happened, and what they expect will happen going forward. It turns out that, at least by the particular measure of expectations I consider, investors expected stock returns to be high all along and continue to expect the same in the future.

Posted at 7:00 am in Financial Markets, Stocks | Permalink | Comments (0)
May 15, 2019

Did Changes in Economic Expectations Foreshadow Swings in the 2018 Elections?

In our previous post, we looked at political polarization in economic expectations based on county-level results in the 2016 presidential election. In this post, we analyze how expectations leading up to and following the 2018 midterm elections evolved based on how districts voted in the House of Representatives elections. Do we see a similar post-election change in political polarization of beliefs when comparing congressional districts in which a Republican won in 2018 with those won by a Democrat? Were observed changes in expectations leading up to the 2018 elections systematically different in areas where the election resulted in a change in the party holding the House seat? We show that economic expectations deteriorated notably between the 2016 and 2018 elections in districts that switched from Republican to Democratic control, compared to districts that remained Republican.

January 17, 2019

The Indirect Costs of Lehman’s Bankruptcy

In our previous post, we assessed losses to customers and clients from foregone opportunities after Lehman Brothers filed for bankruptcy in September 2008. In this post, we examine losses to Lehman and its investors in anticipation of bankruptcy. For example, if bankruptcy is expected, Lehman’s earnings may decline as customers close their accounts or certain securities (such as derivatives) to which Lehman is a counterparty may lose value. We estimate these losses by analyzing Lehman’s earnings and stock, bond, and credit default swap (CDS) prices.

Posted at 7:00 am in Banks, Crisis, Stocks | Permalink | Comments (0)
October 6, 2014

What Can We Learn from Prior Periods of Low Volatility?

Volatility, a measure of how much financial markets are fluctuating, has been near its record low in many asset classes.

May 9, 2014

Crisis Chronicles: Central Bank Crisis Management during Wall Street’s First Crash (1792)

As we observed in our last post on the Continental Currency Crisis, the finances of the United States remained chaotic through the 1780s as the young government moved to establish its credit.

April 9, 2014

Lunch Anyone? Volatility on the Tokyo Stock Exchange around the Lunch Break on May 23, 2013, and Stock Market Circuit Breakers

Stock market circuit breakers halt trading activity on a single stock or an entire exchange if a sudden large price move occurs.

May 8, 2013

Are Stocks Cheap? A Review of the Evidence

We surveyed banks, we combed the academic literature, we asked economists at central banks.

Posted at 7:00 am in Financial Markets, Stocks | Permalink | Comments (21)
July 11, 2012

The Puzzling Pre-FOMC Announcement “Drift”

For many years, economists have struggled to explain the “equity premium puzzle”—the fact that the average return on stocks is larger than what would be expected to compensate for their riskiness.

About the Blog

Liberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.

The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Asani Sarkar, all economists in the Bank’s Research Group.

Liberty Street Economics does not publish new posts during the blackout periods surrounding Federal Open Market Committee meetings.

The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.

Economic Research Tracker

Liberty Street Economics is now available on the iPhone® and iPad® and can be customized by economic research topic or economist.

Comment Guidelines

We encourage your comments and queries on our posts and will publish them (below the post) subject to the following guidelines:

Please be brief: Comments are limited to 1500 characters.

Please be quick: Comments submitted after COB on Friday will not be published until Monday morning.

Please be aware: Comments submitted shortly before or during the FOMC blackout may not be published until after the blackout.

Please be on-topic and patient: Comments are moderated and will not appear until they have been reviewed to ensure that they are substantive and clearly related to the topic of the post. We reserve the right not to post any comment, and will not post comments that are abusive, harassing, obscene, or commercial in nature. No notice will be given regarding whether a submission will or will not be posted.‎

Send Us Feedback

Disclosure Policy

The LSE editors ask authors submitting a post to the blog to confirm that they have no conflicts of interest as defined by the American Economic Association in its Disclosure Policy. If an author has sources of financial support or other interests that could be perceived as influencing the research presented in the post, we disclose that fact in a statement prepared by the author and appended to the author information at the end of the post. If the author has no such interests to disclose, no statement is provided. Note, however, that we do indicate in all cases if a data vendor or other party has a right to review a post.

Archives