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on Financial Markets |
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Issue of 2008‒12‒21
four papers chosen by |
| By: | Maximilian J. B. Hall (Dept of Economics, Loughborough University) |
| Abstract: | On 8 October 2008 the UK Government announced a far-reaching plan to restore financial stability, protect depositors and re-invigorate the flow of credit to businesses and individuals in the UK. The £400 billion bailout plan embraced three elements: a massive expansion in emergency liquidity support from the Bank of England; recapitalisation of UK banks and building societies using taxpayers' money; and the provision of a Government guarantee of new short- and medium-term debt issuance made by UK-incorporated banks and building societies. This action proved necessary in the wake of continuing and substantial weaknesses in many banks' share prices despite the temporary ban on short-selling imposed by the Financial Services Authority. It followed two revisions to domestic deposit protection arrangements, and the adoption of a piecemeal approach to failure resolution which saw the eventual nationalisation of Northern Rock in February 2008, the nationalisation of Bradford and Bingley in September 2008 and the brokering of takeover rescues of Alliance and Leicester and HBOS by Banco Santander and Lloyds TSB respectively in July and September 2008, and of the Cheshire and Derbyshire Building Societies by the Nationwide Building Society in September 2008. This metamorphosis in approach to failure resolution by the UK authorities in response to the sub-prime crisis and the credit crunch – nationalisation by default to (part) nationalisation as the preferred course of action - is duly analysed in this article, as well as their proposals for banking reforms which still have to be agreed by Parliament. |
| Keywords: | UK banks; banking regulation and supervision; failure resolution; central banking; deposit protection. |
| JEL: | E53 E58 G21 G28 |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:lbo:lbowps:2008_14&r=fmk |
| By: | Jens Carsten Jackwerth (Universität Konstanz); James E. Hodder; Olga Kolokolova |
| Abstract: | Numerous hedge funds stop reporting to commercial databases each year. An issue for hedgefund performance estimation is: what delisting return to attribute to such funds? This would be particularly problematic if delisting returns are typically very different from continuing funds’ returns. In this paper, we use estimated portfolio holdings for funds-of-funds with reported returns to back out maximum likelihood estimates for hedge-fund delisting returns. The estimated mean delisting return for all exiting funds is small, although statistically significantly different from the average observed returns for all reporting hedge funds. These findings are robust to relaxing several underlying assumptions. |
| Date: | 2008–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:knz:cofedp:0809&r=fmk |
| By: | Foucault, Thierry; Themar, David; Sraer, David |
| Abstract: | In this paper, the authors test the hypothesis that individual investors contribute to the idiosyncratic volatility of stock returns because they act as noise traders. |
| Keywords: | Idiosyncratic volatility; Retail investors; Noise trading |
| JEL: | G11 G12 G14 |
| Date: | 2008–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:heccah:0899&r=fmk |
| By: | Giorgio Canarella (California State University, Los Angeles, and University of Nevada, Las Vegas); Stephen M. Miller (University of Nevada, Las Vegas, and University of Connecticut); Stephen K. Pollard (California State University, Los Angeles) |
| Abstract: | This paper explores the dynamic linkages that portray different facets of the joint probability distribution of stock market returns in NAFTA (i.e., Canada, Mexico, and the US). Our examination of interactions of the NAFTA stock markets considers three issues. First, we examine the long-run relationship between the three markets, using cointegration techniques. Second, we evaluate the dynamic relationships between the three markets, using impulse-response analysis. Finally, we explore the volatility transmission process between the three markets, using a variety of multivariate GARCH models. Our results also exhibit significant volatility transmission between the second moments of the NAFTA stock markets, albeit not homogenous. The magnitude and trend of the conditional correlations indicate that in the last few years, the Mexican stock market exhibited a tendency toward increased integration with the US market. Finally, we do note that evidence exists that the Peso and Asian financial crises as well as the stock-market crash in the US affect the return and volatility time-series relationships. |
| Keywords: | NAFTA stock markets, cointegration, impulse response, volatility transmission |
| JEL: | G10 C30 C50 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2008-49&r=fmk |