Three essays in empirical finance: Exchange rates, loan portfolio reallocation, and cross-market equity mispricing

Guo, Yuanli 2025. Three essays in empirical finance: Exchange rates, loan portfolio reallocation, and cross-market equity mispricing. PhD Thesis, Cardiff University. Item availability restricted.

	PDF (Thesis) - Accepted Post-Print Version Restricted to Repository staff only until 22 April 2027 due to copyright restrictions. Download (20MB)
	PDF (Cardiff University Electronic Publication Form) - Supplemental Material Restricted to Repository staff only Download (204kB)

Abstract

This thesis comprises three self-contained essays. The first chapter revisits the Uncovered Interest Parity (UIP) puzzle. While risk premia and expectation errors have long been the leading explanations, this chapter examines whether liquidity based mechanisms, proxied by deviations from Covered Interest Parity (CIP) help explain exchange rate dynamics. A time-varying parameter vector autoregression with stochastic volatility (TVP-VAR) is estimated for G10 currencies (1999–2023). The results show that convenience-yield shocks generate short-run UIP deviations and influence real exchange rates. These findings highlight time-varying liquidity effects and their policy implications for monetary transmission and financial stability. The second chapter examines how a severe natural disaster affects banks’ loan portfolio composition, focusing on Hurricane Sandy as a quasi-natural experiment. Using U.S. bank-level data (2011-2013), a Difference-in-Differences framework com pares affected and unaffected banks. The results show that banks’ loan portfolio composition changed significantly following the disaster, with persistent effects. In dependent banks are more severely impacted, while banks affiliated with holding companies are more resilient. The findings demonstrate that natural disasters alter banks’ loan portfolio allocation, highlighting how disaster shocks can reshape portfo lio composition and balance sheet liquidity, with implications for regulatory policy and stress testing. Finally, the third chapter investigates whether cross-market credit spread dif ferentials help explain American Depositary Receipts (ADRs) pricing disparity by linking bond and equity markets for the same firm. Six major UK cross-listed firms are studied. Using a matched firm-level dataset and two-way fixed-effects panel regressions, the results show that wider credit spread differentials are associated with significantly greater ADR mispricing. These findings suggest bond-market segmenta tion helps explain equity mispricing and highlight how cross-market frictions affect arbitrage, capital allocation, and international financial integration.

Item Type:	Thesis (PhD)
Date Type:	Completion
Status:	Unpublished
Schools:	Schools > Business (Including Economics)
Date of First Compliant Deposit:	23 April 2026
Last Modified:	23 Apr 2026 11:00
URI:	https://orca.cardiff.ac.uk/id/eprint/186589

Actions (repository staff only)

Edit Item