ABSTRACTThe Fintech sector is traditionally viewed as a convergence of finance and technology. This study examines its characteristics by analysing Fintech stock returns relative to traditional sector portfolios using stepwise regression. Our findings show that Fintech stocks align more closely with the business services sector than with the financial or technology sectors, challenging conventional classification. Additionally, while Fintech indexes initially generated positive alpha, this advantage diminished as the sector matured. These results offer new insights into sector benchmarking and portfolio diversification.

ABSTRACTThis study explores the size effect in financial markets, focusing on how mergers, acquisitions, and other corporate transactions influence the returns of small versus large stocks. Employing a comprehensive data set of US‐listed companies from 1992 to 2021, which includes 51,780 events, this research improves upon previous methodologies by integrating detailed timing information on deal announcements and completions with stock size and return data. Our analysis shows that small stocks are often the targets of transactions that significantly enhance their returns, not limited to takeovers. We find that pre‐announcement returns are consistently higher for small stocks, likely due to less analyst coverage, resulting in largely unanticipated deal news. The study deepens our understanding of the size effect, suggesting that deal‐related dynamics are essential for analyzing performance variations across different stock sizes and contributing to discussions on market efficiency and the valuation effects of corporate actions.

Abstract Borrower‐based macroprudential policies—such as caps on loan‐to‐value (LTV) ratios and debt‐service‐to‐income (DSTI) limits—contain the build‐up of systemic risk by reducing the probability and conditional impact of a crisis. While LTV/DSTI limits can increase inequality at introduction, they can dampen the increase in inequality under adverse macroeconomic conditions. The relative size of these opposing effects is an empirical question. We conduct counterfactual simulations under different macroeconomic and macroprudential policy scenarios using granular income and wealth data from the Households Finance and Consumption Survey for Ireland, Italy, Netherlands and Portugal. Simulation results show that borrower‐based measures are associated with a moderate increase in wealth inequality, while the impact on income inequality is negligible.

Abstract In this study, we examine the influence of a preopening call market (CM) session on the subsequent continuous double auction (CDA) trading phase within a combined market structure (CMDA). We propose that the introduction of a CM phase before the CDA could potentially mitigate price volatility during the CDA by facilitating the disclosure of agents' private information through the preopening pricing phase. Our findings reveal a positive relationship between the preopening price and the prices traded during the subsequent phase, alongside a decreased deviation of prices from their fundamental value when high‐quality information is available. These results suggest that a well‐defined preopening phase has the potential to improve market efficiency.

Abstract Based on monthly data covering the period from 1987 to 2021, we analyse whether cross‐sectional moments of stock market returns may provide information about the future position of the German business cycle. We apply in‐sample forecasting regressions with and without leading indicators as control variables, pseudo‐out‐of‐sample exercises, autoregressive distributed lag models, and impulse‐response functions estimated by local projections. We find in‐sample predictive power of the first and third cross‐section moments for the future growth of industrial production, even if one controls for well‐established leading indicators for the German business cycle. Out‐of‐sample tests show that these variables reduce the relative mean squared error compared with benchmark models. We do not find a long‐run relation between the moment series and industrial production. The dynamic response of industrial production to a shock on the cross‐section moments is in line with the other results.

Abstract Three highly cited studies with over 6000 citations collectively report a negative relationship between the market value of the firm and leverage. Such empirical findings clearly contradict the hypothesis of leverage adding value to the firm and an optimal capital structure that maximizes firm value—these findings have yet to be resolved. Employing a sample of 3,768 firms consisting of 39,015 observations, a stochastic frontier analysis was used to assess the relationship of leverage among other capital structure factors with firm value. It was found that in general the use of leverage promotes firm value, consistent with the trade‐off theory and that the inverse relationship between leverage and firm value was a temporary occurrence and is likely attributable to firms employing tax loss carrybacks in response to the 1986 Tax Reform Act. The estimates of technical efficiency indicate that many firms can do more to increase their value, the sample as a whole improves efficiency (value) over the sample period. The findings reconcile the reports of leverage decreasing firm value as reported in Baker and Wurgler, Fama and French, and Habib and Ljungqvist. The empirical findings suggest prior observation was a due to a decline in the value of the tax shield generated by leverage after the Tax Reform Act of 1986. Specifically, tax carrybacks extended the pre‐Tax Reform Act of 1986 tax shield value to 1991 and after 1991 the tax shield value declined.