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Economic order --- Stock exchanges --- Mathematical models --- -Bulls and bears --- Commercial corners --- Corners, Commercial --- Equity markets --- Exchanges, Securities --- Exchanges, Stock --- Securities exchanges --- Stock-exchange --- Stock markets --- Capital market --- Efficient market theory --- Speculation --- Conferences - Meetings --- -Mathematical models --- Bulls and bears --- Economische orde --- Stock exchanges - Mathematical models - Congresses.

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June 2000 - To improve on the low level and low efficiency of Brazil's financial intermediation (and hence economic growth), Brazil needs reforms leading to a more efficient judicial sector, better enforcement of contracts, stronger rights for creditors, stronger accounting standards and practices, and a legal and regulatory framework that facilitates the exchange of information about borrowers. Reforms to improve both the level and the efficiency of financial intermediation in Brazil should be high on Brazilian policymakers' agendas, because of the financial sector's importance to economic growth. This means that Brazil must also improve the legal and regulatory environment in which its financial institutions operate. Brazil is weak in important components of such an environment: the rights of secured and unsecured creditors, the enforcement of contracts, and the sharing of credit information among intermediaries. Recent reforms, such as the extension of alienacao fiduciaria to housing, the introduction of cedula de credito bancario, the legal separation of principal and interest, and improvements in credit information systems, are useful steps in strengthening the framework. But more is needed. Reforms that will significantly increase the level and efficiency of financial intermediation and have a positive impact on economic growth include: A more efficient judicial sector and better enforcement of contracts; Stronger rights for secured and unsecured creditors; Stronger accounting standards and practices, to improve the quality of information available about borrowers; The development of a legal and regulatory framework that facilitates the exchange among financial institutions of both negative and positive information about borrowers. This paper - a product of the Financial Sector Strategy and Policy Department - is part of a larger effort in the department to better understand the link between financial development and economic growth, with application to Brazil. The author may be contacted at tbeck@worldbank.org.

Accounting --- Accounting Standards --- Banks and Banking Reform --- Bond Markets --- Borrowers --- Contract --- Contract Enforcement --- Credit Information --- Credit Information Systems --- Debt Markets --- Economic Theory and Research --- Emerging Markets --- Enforceability --- Enforceability Of Contracts --- Enforcement Of Contracts --- Finance and Financial Sector Development --- Financial Development --- Financial Institutions --- Financial Literacy --- Interest --- Liabilities --- Macroeconomics and Economic Growth --- Private Bond --- Private Sector Development --- Regulatory Framework --- Stock --- Stock Markets --- Unsecured Creditors

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This paper examines the performance of emerging market bank stocks around the time of rating changes by major international agencies. The data suggest that downgrades on average have followed periods of negative cumulative abnormal returns for banks, although upgrades have not followed periods of positive returns. More important, stock prices either do not respond to rating changes or respond in the opposite direction to what would be expected if announcements conveyed value-relevant information. The paper concludes that there are limits to the extent that supervisors in emerging markets can rely on market participants to monitor the safety and soundness of banks.

Banks and Banking --- Finance: General --- Investments: Stocks --- Macroeconomics --- Investments: Bonds --- International Financial Markets --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- General Financial Markets: General (includes Measurement and Data) --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Price Level --- Inflation --- Deflation --- Finance --- Banking --- Investment & securities --- Emerging and frontier financial markets --- Stock markets --- Stocks --- Asset prices --- Financial markets --- Financial institutions --- Prices --- Bond ratings --- Banks and banking --- Financial services industry --- Stock exchanges --- Bonds --- United States

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This paper argues that the stock market is an important channel of monetary policy. Monetary policy affects real economic activity because inflation levies a property tax on stocks in addition to an income tax on dividend payments. Inflation thus taxes stocks more heavily than it does bonds. Households alter their required rate of return as inflation changes, and firms adjust production in order to satisfy their shareholders’ demands. As the stock market channel grows in importance, the appropriate intermediate target for the central bank is the price level, with price stability being the ultimate goal.

Finance: General --- Inflation --- Investments: Stocks --- Macroeconomics --- Money and Monetary Policy --- Monetary Policy --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Price Level --- Deflation --- General Financial Markets: General (includes Measurement and Data) --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Investment & securities --- Finance --- Monetary economics --- Stocks --- Stock markets --- Monetary base --- Asset prices --- Financial institutions --- Financial markets --- Prices --- Money --- Stock exchanges --- Money supply --- United States

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This paper models the idiosyncratic or asset-specific return of an asset as the return on a portfolio that is long in that asset and short in other assets in the same class, thereby removing the common components of returns. This is the type of “hedged” position that is held by relative-value investors. Weekly returns data for seven different asset classes suggest that idiosyncratic risk is: higher at times of large return outcomes for the asset class as a whole; positively autocorrelated; and correlated across different asset classes. The implications for risk management are discussed.

Banks and Banking --- Finance: General --- Investments: Stocks --- Portfolio Choice --- Investment Decisions --- International Financial Markets --- General Financial Markets: General (includes Measurement and Data) --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Finance --- Investment & securities --- Financial services law & regulation --- Stock markets --- Stocks --- Market risk --- Securities markets --- Emerging and frontier financial markets --- Financial markets --- Financial institutions --- Financial regulation and supervision --- Stock exchanges --- Financial risk management --- Capital market --- Financial services industry --- United States