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on Financial Markets |
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Issue of 2009‒03‒28
eight papers chosen by |
| By: | Groh, Alexander P. (IESE Business School) |
| Abstract: | Why is there such a strong private equity market in the United States or the United Kingdom? Why is activity relatively low in several other economically important countries? And why is it zero or close to zero in many emerging regions? Spatial variations of private equity activity result from numerous factors. In this paper I summarize the literature contributions on the determinants of national private equity activity and comment on the consequences for the development of the private equity asset class in emerging markets. |
| Keywords: | Private Equity; Emerging Markets; |
| JEL: | G24 O16 R12 |
| Date: | 2009–02–03 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0779&r=fmk |
| By: | Li, GuangJie (Cardiff Business School) |
| Abstract: | We study how stock return's predictability and model uncertainty affect a rational buy-and-hold investor's decision to allocate her wealth for different lengths of investment horizons in the UK market. We consider the FTSE All-Share Index as the risky asset, and the UK Treasury bill as the riskless asset in forming the investor's portfolio. We identify the most powerful predictors of the stock return by accounting for model uncertainty. We find that though stock return predictability is weak, it can still affect the investor's optimal portfolio decision over different investment horizons. |
| Keywords: | Bayesian Model Averaging; SUR model; stock return predictability; portfolio choice |
| JEL: | C39 G11 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2009/4&r=fmk |
| By: | Asai, M.; McAleer, M.; Medeiros, M.C. (Erasmus Econometric Institute) |
| Abstract: | A wide variety of conditional and stochastic variance models has been used to estimate latent volatility (or risk). In both the conditional and stochastic volatility literature, there has been some confusion between the definitions of asymmetry and leverage. In this paper, we first show the relationship among conditional, stochastic, integrated and realized volatilities. Then we develop a new asymmetric volatility model, which takes account of small and large, and positive and negative, shocks. Using the new specification, we examine alternative volatility models that have recently been developed and estimated in order to understand the differences and similarities in the definitions of asymmetry and leverage. We extend the new specification to realized volatility by taking account of measurement errors. As an empirical example, we apply the new model to the realized volatility of Standard and Poor’s 500 Composite Index using Efficient Importance Sampling to show the new specification of asymmetry significantly improves the goodness of fit. |
| Date: | 2008–11–24 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:eureir:1765013904&r=fmk |
| By: | Wiphatthanananthakul, C.; McAleer, M. (Erasmus Econometric Institute) |
| Abstract: | In 1993, the Chicago Board Options Exchange (CBOE) introduced the Volatility Index, VIX, based on S&P100 options (OEX), which quickly became the benchmark for stock volatility. As VIX is based on real-time option prices, it reflects investors’ consensual view of future expected stock market volatility. In 2003, CBOE made two key enhancements to the VIX methodology. The New VIX is based on an up-to-the-minute market estimation of expected volatility that is calculated by using real-time S&P500 Index (SPX) option bid/ask quotes and a wider range of strike prices rather than just at-the-money series with the market’s expectation of 30-day volatility and using nearby and second-nearby options. The new VIX methodology may appear to be based on a complicated formula to calculate expected volatility. In this paper, with the use of SET50 Index Options data, we simplify the apparently complicated expected volatility formula to a simple relationship, which has a higher negative correlation between the VIX for Thailand (TVIX) and SET50 Index Options. |
| Date: | 2008–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:eureir:1765013992&r=fmk |
| By: | Takashi Shibata (Associate Professor, Tokyo metropolitan University (E-mail: tshibata@tmu.ac.jp)); Tetsuya Yamada (Associate Director, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: tetsuya.yamada@boj.or.jp)) |
| Abstract: | We develop a dynamic credit risk model for the case that banks compete to collect their loans from a firm falling in danger of bankruptcy. We apply a game-theoretic real options approach to investigate bankfs optimal strategies. Our model reveals that the bank with the larger loan amount, namely the main bank, provides an additional loan to support the deteriorating firm when the other bank collects its loan. This suggests that there exists rational forbearance lending by the main bank. Comparative statics show that as the liquidation value is lower, the optimal exit timing for the non-main bank comes at an earlier stage of business downturn and the optimal liquidation timing by the main bank is delayed further. As the interest rate of the loan is lower, the optimal exit timing for the non-main bank comes earlier. These analyses are consistent with the forbearance lending and exposure concentration of main banks observed in Japan. |
| Keywords: | Credit risk, Relationship lending, Real option, Game theory, Concentration risk |
| JEL: | G21 G32 G33 D81 D92 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:ime:imedps:09-e-07&r=fmk |
| By: | Yener Altunbaş (Bangor Business School, Bangor University, Bangor, Gwynedd, LL57 2DG, United Kingdom.); Alper Kara (Loughborough University Business School, LE113TU, United Kingdom.); David Marqués-Ibáñez (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | Following the introduction of the euro, the markets for large debt financing experienced a historical expansion. We investigate the financial factors behind the issuance of syndicated loans for an extensive sample of euro area non-financial corporations. For the first time we compare these factors to those of its major competitor: the corporate bond market. We find that large firms, with greater financial leverage, more (verifiable) profits and higher liquidation values tend to prefer syndicated loans. In contrast, firms with larger levels of short-term debt and those perceived by markets as having more growth opportunities favour financing through corporate bonds. JEL Classification: D40, F30, G21. |
| Keywords: | syndicated loans, corporate bonds, debt choice, the euro. |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:200901028&r=fmk |
| By: | Bianchi, Francesco (Princeton University); Mumtaz, Haroon (Bank of England); Surico, Paolo (Bank of England) |
| Abstract: | This paper models the evolution of monetary policy, the term structure of interest rates and the UK economy across policy regimes. We model the interaction between the macroeconomy and the term structure using a time-varying VAR model augmented with the factors from the yield curve. Our results suggest that the level, slope and curvature factors display substantial time variation, with the level factor moving closely with measures of inflation expectations. Our estimates indicate a large decline in the volatility of both yield curve and macroeconomic variables around 1992, when the United Kingdom first adopted an inflation-targeting regime. During the inflation-targeting regime, monetary policy shocks have been more muted and inflation expectations have been lower than in the pre-1992 era. The link between the macroeconomy and the yield curve has also changed over time, with fluctuations in the level factor becoming less important for inflation after the Bank of England independence in 1997. Policy rates appear to have responded more systematically to inflation and unemployment in the current regime. We use our time-varying macro-finance model to revisit the evidence on the expectations hypothesis. |
| Keywords: | Term structure; time-varying VAR; Bayesian estimation |
| JEL: | E50 E58 |
| Date: | 2009–03–20 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0363&r=fmk |
| By: | Johann Burgstaller; Johann Scharler |
| Abstract: | This paper examines the pass-through from the market interest to the rate charged on bank loans using aggregate data for the U.K. Thereby, we explicitly disentangle credit supply and demand and allow the interest rate charged on loans to depend on the volume of loans. We find that, although banks adjust the lending rate to some extent, they largely accommodate shifts in demand. Overall, our results are consistent with the idea that banks provide insurance against liquidity shocks. |
| Keywords: | Interest Rate Pass-Through, Relationship Banking |
| JEL: | E43 G21 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2009_02&r=fmk |