Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/205227
Authors: 
Ai, Hengjie
Li, Jun E.
Li, Kai
Schlag, Christian
Year of Publication: 
2019
Series/Report no.: 
SAFE Working Paper 264
Abstract: 
A common prediction of macroeconomic models of credit market frictions is that the tightness of financial constraints is countercyclical. As a result, theory implies a negative collateralizability premium; that is, capital that can be used as collateral to relax financial constraints provides insurance against aggregate shocks and commands a lower risk compensation compared with non-collateralizable assets. We show that a longshort portfolio constructed using a novel measure of asset collateralizability generates an average excess return of around 8% per year. We develop a general equilibrium model with heterogeneous firms and financial constraints to quantitatively account for the collateralizability premium.
Subjects: 
Cross-Section of Returns
Financial Frictions
Collateral Constraint
JEL: 
E2
E3
G12
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
791.76 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.