Essays in Macroeconomics and Finance

Essays in Macroeconomics and Finance

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In the first paper I examine whether banks' rationally utilize security analysts' earnings forecasts to determine loan interest rates. I define rationality as correctly accounting for the precision of and bias in analysts' earnings forecasts. I derive conditions that should be satisfied if banks rationally utilize analysts' earnings forecasts and empirically test whether these conditions are satisfied with data on the terms of bank loans and analysts' earnings forecasts. My results support the assertion that banks rationally account for the deficiencies in analysts' earnings forecasts. Economically, the results imply that on average a one standard deviation increase in analysts' earnings forecasts unaccompanied by an increase in the forecasts' bias reduces bank loan borrowing costs by 6 percent.SPREAD does not influence the response of ^ to D.^2- in any of the specifications . ... significant positive association with ^ after controlling for REALQ, and that SPREAD has no statistically significant influence on the response of to D.^^-.

Title:Essays in Macroeconomics and Finance
Publisher:ProQuest - 2008


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