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on Financial Markets |
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Issue of 2008‒05‒24
six papers chosen by |
| By: | Lundgren, Tommy (Umeå School of Business); Olsson, Rickard (Umeå School of Business) |
| Abstract: | Based on a formal model of how investments in corporate social responsibility act upon .rm value through goodwill, we derive the hypothesis that under uncertainty, bad news are detrimental to good-will, and subsequently have a negative impact on value. We examine by event study methodology whether bad news in the form of environmental (EV) incidents a¤ect .rm value negatively as measured by abnormal returns using a global data set. An EV incident is a company incident allegedly in violation of international norms on environmen-tal issues. We analyze 142 EV incidents 2003-2006. The incidents are generally associated with negative cumulative abnormal returns, but which are not statistically signi.cant, except for incidents for .rms in the EURO zone. The results are robust with respect to a number of variations in test methodology. |
| Keywords: | No; keywords |
| Date: | 2008–01–30 |
| URL: | http://d.repec.org/n?u=RePEc:hhb:sicgwp:2008_001&r=fmk |
| By: | Silvia Muzzioli |
| Abstract: | Option based volatility forecasts can be divided into “model dependent” forecast, such as implied volatility, that is obtained by inverting the Black and Scholes formula, and “model free” forecasts, such as model free volatility, proposed by Britten-Jones and Neuberger (2000), that do not rely on a particular option pricing model. The aim of this paper is to investigate the unbiasedness and efficiency in predicting future realized volatility of the two option based volatility forecasts: implied volatility and model free volatility. The comparison is pursued by using intradaily data on the Dax-index options market. Our results suggest that Black-Scholes volatility subsumes all the information contained in historical volatility and is a better predictor than model free volatility. |
| Keywords: | Implied Volatility; Model free volatility; Volatility Forecasting |
| JEL: | G13 G14 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:mod:wcefin:08051&r=fmk |
| By: | Topi, Jukka (Bank of Finland Research) |
| Abstract: | In this paper, I develop a model that addresses the links between banks’ liquidity outlook and their incentives to take credit risk. Assuming that both bank-specific liquidity shocks and credit losses are necessary to provoke bank runs, the model predicts that a bank’s incentives to mitigate its credit risk by screening decrease if the probability of a bank-specific liquidity shock declines. This suggests that the benign liquidity outlook prevailing prior to the subprime crisis may have contributed to the lack of screening by banks that has been an important causal factor in the crisis. |
| Keywords: | liquidity; credit risk screening; bank runs |
| JEL: | G12 G21 G28 |
| Date: | 2008–05–14 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofrdp:2008_012&r=fmk |
| By: | Loriana Pelizzon (Department of Economics, University Of Venice Cà Foscari); Monica Billio (Department of Economics, University Of Venice Cà Foscari); Mila Getmansky (Department of Finance and Operations Management Isenberg School of Management University of Massachusetts) |
| Abstract: | We study the effect of financial crises on hedge fund risk. Using a regime-switching beta model, we separate systematic and idiosyncratic components of hedge fund exposure. The systematic exposure to various risk factors is conditional on market volatility conditions. We find that in the high-volatility regime (when the market is rolling-down and is likely to be in a crisis state) most strategies are negatively and significantly exposed to the Large-Small and Credit Spread risk factors. This suggests that liquidity risk and credit risk are potentially common factors for different hedge fund strategies in the down-state of the market, when volatility is high and returns are very low. We further explore the possibility that all hedge fund strategies exhibit a high volatility regime of the idiosyncratic risk, which could be attributed to contagion among hedge fund strategies. In our sample this event happened only during the Long-Term Capital Management (LTCM) crisis of 1998. Other crises including the recent subprime mortgage crisis affected hedge funds only through systematic risk factors, and did not cause contagion among hedge funds. |
| Keywords: | Hedge Fund, Risk Management, High frequency data |
| JEL: | G12 G29 C51 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2008_10&r=fmk |
| By: | Loriana Pelizzon (Department of Economics, University Of Venice Cà Foscari); Monica Billio (Department of Economics, University Of Venice Cà Foscari); Mila Getmansky (Department of Finance and Operations Management Isenberg School of Management University of Massachusetts) |
| Abstract: | This paper examines four different daily datasets of hedge fund return indexes: MSCI, FTSE, Dow Jones and HFRX, all based on investable hedge funds, and three different monthly datasets of hedge fund return indexes: CSFB, CISDM and HFR which comprise both investable and non-investable hedge funds. Our study, based on standard statistical analysis, non-parametric analysis of the distribution and non-parametric regressions with respect to the S&P500 index shows that key data biases and disparate index construction methodologies lead to different statistical properties of hedge fund databases. One key variable that highly affects the statistical properties of hedge fund index returns is the “investability” of hedge funds |
| Keywords: | Hedge Fund, Risk Management, High frequency data |
| JEL: | G12 G29 C51 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2008_11&r=fmk |
| By: | Loriana Pelizzon (Department of Economics, University Of Venice Cà Foscari); Roberto Casarin (Department of Economics, University Of Brescia); Andrea Piva (GRETA Associati) |
| Abstract: | Have Italian mutual funds been able to generate “extra-return”? Were some of them able to persistently beat the competitors? In this paper we address these questions and provide a detailed and systematic performance and return persistence analysis of the Italian equity mutual funds. We show that, in general, fund managers have not been able to score extra-performances and only few managers had stock picking ability or market timing ability. This evidence is consistent with the market efficiency hypothesis. Moreover, concerning performance persistence, first, we cannot trace out the hot-hand phenomenon on raw returns. The no persistence effect is fairly robust to: the performance measure, the temporal lag and the different methodology employed for testing persistence. Second, there has not been long-run persistence on risk-adjusted returns (we find a weak evidence of the reversal effect). Finally, the past performance displays weak evidence of the hot-hand effect on risk-adjusted returns on four-month using cross-section tests. However, as soon as we analyse yearly intervals any evidence of persistence disappears. |
| Keywords: | Mutual funds, Performance evaluation |
| JEL: | G23 G21 G10 G12 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2008_12&r=fmk |