nep-cfn 2015-03-22 papers

on Corporate Finance

Issue of 2015‒03‒22
two papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

The effect of index futures trading on volatility: Three markets for Chinese stocks By Martin T. Bohl, Jeanne Diesteldorf, Pierre L. Siklos
The kiss of information theory that captures systemic risk By Peter Martey Addo; Philippe De Peretti; Hayette Gatfaoui; Jakob Runge

The effect of index futures trading on volatility: Three markets for Chinese stocks

By:	Martin T. Bohl, Jeanne Diesteldorf, Pierre L. Siklos (Wilfrid Laurier University)
Abstract:	This paper examines whether the introduction of Chinese stock index futures had an impact on the volatility of the underlying spot market. To this end, we estimate several Generalized Auto-Regressive Conditional Heteroscedasticity (GARCH) models and compare our findings for mainland China with Chinese index futures traded in Singapore and Hong Kong. Our results indicate that Chinese index futures decrease spot market volatility in all three spot markets considered. In contrast, we do not obtain the same results for the companion index futures markets in Hong Kong and Singapore. China’s stock market is relatively young and largely dominated by private retail investors. Nevertheless, our evidence is favorable to the stabilization hypothesis usually confirmed in mature markets.
Keywords:	Chinese Stock Markets, Index Futures, Volatility Spillovers
JEL:	G10 G14 G15 G18
Date:	2015–02–01
URL:	http://d.repec.org/n?u=RePEc:wlu:lcerpa:0087&r=cfn

The kiss of information theory that captures systemic risk

By:	Peter Martey Addo (Centre d'Economie de la Sorbonne); Philippe De Peretti (Centre d'Economie de la Sorbonne); Hayette Gatfaoui (NEOMA Business School - Campus de Rouen); Jakob Runge (Postdam Institute for Climate Impact Research and Humboldt University Berlin)
Abstract:	We provide a new approach to understanding systemic risk by analysing complex linkages in finance and insurance sectors. The analysis is achieved by using a recently proposed method for quantifying causal coupling strength, which identifies the existence of causal dependencies between two components of a multivariate time series and assesses the strength of their association by defining a meaningful coupling strength. The measure of association is general, causal and lag-specific, reflecting a well interpretable notion of coupling strength and is pratically computable. A comprehensive analysis of the feasibility of this approach is provided via simulated and real data
Keywords:	Systemic risk, causal dependencies, financial institutions, linkages, Sovereign debt
JEL:	C40 C32 C51 G12 G29
Date:	2014–10
URL:	http://d.repec.org/n?u=RePEc:mse:cesdoc:14069r&r=cfn

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