Intermediary Asset Pricing during the National Banking Era

Colin Weiss

No 1302, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Financial intermediary balance sheets matter for asset returns even when these intermediaries do not directly participate in the relevant asset markets. During the National Banking Era, liquidity conditions for the New York Clearinghouse (NYCH) banks forecast excess returns for stocks, bonds, and currencies. The NYCH banks had little to no direct participation in these markets; their main link to these markets was through securities financing. Liquidity conditions affect asset prices through the credit growth of the NYCH banks, which shapes marginal investors' discount rates. I use institutional features of this era to provide evidence in favor of this mechanism.

Keywords: Liquidity management; Margin loans; Intermediary asset pricing; National banks (search for similar items in EconPapers)
JEL-codes: E51 G12 G21 N21 (search for similar items in EconPapers)
Date: 2020-09-18
New Economics Papers: this item is included in nep-acc, nep-ban, nep-his and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1302

DOI: 10.17016/IFDP.2020.1302

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