n?u=RePEc:bde:wpaper:1526&r=all

repec.nep.mac

n?u=RePEc:bde:wpaper:1526&r=all

the excess market returns, but crucially, the contribution of the volume of securitization

remains largely unchanged. A similar picture arises in the case of the inclusion of vix in

the VAR with dMBS. In the case of VAR estimation with dALLs, by the twelfth month,

about 9% of FEV in excess market returns are attributable to shocks to dALLs, 43% to

shocks to vix, 19% to shocks to price-dividend ratio and about 22% to shocks to excess

market returns.

Second, while the CP factor appears to be important for explaining the FEV in bond

excess returns, controlling for it does not affect the shape of the impulse responses nor the

FEV contribution of ABS shocks. By the twelfth month, the shocks to dABS account for

about 6% of FEV decompositions in bond excess returns while the CP factor account for

nearly 71% of variations.

Finally, controlling for total international demand for US financial assets appears to

be important in explaining the FEV in equity returns, however, in line with the results

with other controls, it does not affect affect the shape of impulse responses and the FEV

contribution of ABS shocks.

The empirical results, therefore, indicate that securitization impacts negatively, both,

the bond and the equity premium. Moreover, this explanatory power is not related to

the potential link between the changes in the volume of transactions in the securitization

market with the degree of risk perception/aversion of agents, intertemporal consumption

Euler conditions, or with the general economic or credit and equity returns outlook. As

a result, the channel through which this effect occurs may be more directly related to the

functioning of financial intermediation when the originate to distribute mode of operation

is more heavily employed.

Given that our results are stronger when the volume of asset-backed securities is used

instead of the one of mortgage backed securities, one must look at shadow banks and

securities and brokers dealers, which are more active in that niche of the market relative

to traditional commercial banks. Furthermore, shadow banks and broker dealers normally

hold a more diverse portfolio of assets that are not only concentrated on credit products

but also contain equity and fixed income products, making the potential portfolio effects

of the high activity in securitization markets more likely to be observed.

Adrian, Etula, and Muir (2014) and Adrian, Moench, and Shin (2010) look at the

link between the growth rate of asset holdings of securities and broker dealers and various

asset price measures, stressing the importance of financial intermediation and leverage

in determining asset prices. Moreover, Danielsson, Shin, and Zigrand (2012) shows that

leverage may be linked to re-valuation of bank capital. The balance sheet data of financial

entities at the FED however is only available at a quarterly frequency. We thus run three

sets of estimation of a quarterly frequency VAR (with 1 lag). The first includes the same

variables as in the benchmark case. The second includes the growth rate of securities and

brokers dealers asset holdings as an additional control variable and finally we control for

BANCO DE ESPAÑA 20 DOCUMENTO DE TRABAJO N.º 1526

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