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on Financial Markets |
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Issue of 2010‒11‒06
nine papers chosen by |
| By: | Pérez García Francisco (UNIVERSITY OF VALENCIA VALENCIAN ECONOMIC RESEARCH INSTITUTE (Ivie)); Tortosa-Ausina Emili (INSTITUTO VALENCIANO DE INVESTIGACIONES ECONÓMICAS (Ivie) UNIVERSITY JAUME I); Arribas Fernández Iván (University of Valencia; Ivie) |
| Abstract: | Over the last two decades, the degree of international financial integration has increased substantially, becoming an important area of research for many financial economists. This working paper explores the determinants of the asymmetries in the international integration of banking systems. We consider an approach based on both network analysis and the concept of geographic neutrality. Our analysis focuses on the banking systems of 18 advanced economies between 1999 and 2005. Results indicate that banking integration should be assessed from the perspective of both inflows and outflows, given that they show different patterns for different countries. Using standard techniques, our results reinforce previous findings by the literature-especially the remarkable role of both geographic distance and trade integration. Nonparametric techniques reveal that the effect of the covariates on banking integration is not constant over the conditional distribution, which (in practical terms) implies that the sign of the relationship varies across countries. |
| Keywords: | Banking integration, geographic neutrality, network analysis, nonparametric regression. |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:fbb:wpaper:201049&r=fmk |
| By: | Luciana Barbosa; Sónia Costa |
| Abstract: | This paper aims to identify the determinants behind the different evolution of sovereign bond yields in euro area countries for the period of the current crisis. Up to the time of the collapse of Lehman Brothers, global risk premium was the main driver of spreads. Afterwards, the relevance of idiosyncratic factors increased. Although liquidity premiums played a larger role in the months following September 2008, as the financial crisis spilled over into a strongly deteriorating macroeconomic environment, the importance of country credit risk factors increased. In the first five months of 2010, heterogeneity in sovereign credit risk premiums and a further increase in global risk aversion were, to a large extent, the determining factors behind the evolution of spreads. |
| JEL: | E43 G12 G15 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ptu:wpaper:w201022&r=fmk |
| By: | Cici, Gjergji; Kempf, Alexander; Pütz, Alexander |
| Abstract: | Using 13F position valuations, we show that hedge fund advisors intentionally mismark their stock positions. We document manipulation even after eliminating issues inherent in the pricing of illiquid securities. Hedge fund advisors mark their positions up (down) following poor (good) performance of their equity holdings. Mismarking is more pronounced for advisors that are audited less frequently; are domiciled in offshore locations; self-report to a commercial database; and report more frequently to investors. Furthermore, equity mismarking is related to some of the reported return patterns documented in previous studies, such as a discontinuity in the distribution of returns around zero and smoothed returns. -- |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfrwps:1015&r=fmk |
| By: | Silvana Musti; Viviana Fanelli |
| Abstract: | In this paper we propose a model to evaluate the performance of a Constant Proportion Debt Obligation (CPDO) and assess its rating. We model credit spread evolution in a HJM framework and default events for CPDO are generated by using a reduced form approach. Implementing a numerical algorithm that simulates the strategy of a CPDO, we obtain a rating for CPDO by using Monte Carlo simulations. We find a rating inferior to the one assigned by rating agencies. Using our model for credit spread dynamics, the revealed default probability for CPDO could have been predicted. |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:ufg:qdsems:05-2010&r=fmk |
| By: | Frey, Stefan; Herbst, Patrick |
| Abstract: | We present evidence of the impact of buy-side analysts on the behavior and performance of fund managers. Using data provided by a large global asset manager, we relate buy-side analysts' recommendations to fund transactions on a daily basis. Our results show that buy-side analysts have a significant influence on trading decisions: Fund managers almost certainly follow recent recommendation revisions in their trades. Fund flows and sell-side recommendations matter as well, but to a lesser extent. Positive abnormal returns to buy-side analysts' revisions are also reflected in the performance of mutual fund trades: trades triggered by buy-side recommendations have higher returns than other trades. -- |
| Keywords: | buy-side analysts,analyst recommendations,mutual funds,investment decisions,investment performance |
| JEL: | G23 G11 G29 M41 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfrwps:1010&r=fmk |
| By: | Agarwal, Vikas; Bakshib, Gurdip; Huij, Joop |
| Abstract: | Hedge funds are fundamentally exposed to equity volatility, skewness, and kurtosis risks based on the systematic pattern and significant spread in alphas from the existing models that do not control for the higher-moment risks. The spread and pattern in alphas do not disappear with bootstrap simulation, Bayesian analysis to account for potential estimation error, adjustment for backfilling bias, and the inclusion of additional systematic factors. Significant cross-sectional variation in higher-moment exposures is observed across fund styles with equity-oriented styles displaying more extreme exposures. Investable higher-moment factors explain the time series behavior of returns of a large number of Managed Futures, Event Driven, and Long/Short Equity hedge funds. Average exposure sensitivities for higher-moment factors are statistically significant in an estimation that accounts for style fixed effects and fund random effects. -- |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfrwps:1007&r=fmk |
| By: | Finter, Philipp; Niessen-Ruenzi, Alexandra; Ruenzi, Stefan |
| Abstract: | This paper investigates whether investor sentiment can explain stock returns on the German stock market. Based on a principal component analysis, we construct a sentiment indicator that condenses information of several well-known sentiment proxies. We show that this indicator explains the return spread between sentiment stocks and stocks that are not sensitive to sentiment fluctuations. Specifically, stocks that are difficult to arbitrage and hard to value are sensitive to the indicator. However, we do not find much predictive power of sentiment for future stock returns. This is consistent with sentiment being of minor importance on the German stock market that is characterized by a low fraction of retail investors. -- |
| Keywords: | Investor Sentiment,Stock Returns,German Stock Market |
| JEL: | G12 G14 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfrwps:1003&r=fmk |
| By: | Artmann, Sabine; Finter, Philipp; Kempf, Alexander |
| Abstract: | This paper conducts a comprehensive asset pricing study based on a unique dataset for the German stock market. For the period 1963 to 2006 we show that two value characteristics (book-to-market equity, earnings-to-price) and momentum explain the cross-section of stock returns. Corresponding factor portfolios have significant premiums across various doublesorted characteristic-based test assets. In a horse race of competing asset pricing models the Fama-French 3-factor model does a poor job in explaining average stock returns, whereas the Carhart 4-factor model performs well. However, both models are inferior to a 4-factor model containing an earnings-to-price factor instead of a size factor. -- |
| Keywords: | asset pricing,characteristics,risk factors,multifactor models,Germany |
| JEL: | G12 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfrwps:1001&r=fmk |
| By: | B. Dupoyet; H. R. Fiebig; D. P. Musgrove |
| Abstract: | We explore a simple lattice field model intended to describe statistical properties of high frequency financial markets. The model is relevant in the cross-disciplinary area of econophysics. Its signature feature is the emergence of a self-organized critical state. This implies scale invariance of the model, without tuning parameters. Prominent results of our simulation are time series of gains, prices, volatility, and gains frequency distributions, which all compare favorably to features of historical market data. Applying a standard GARCH(1,1) fit to the lattice model gives results that are almost indistinguishable from historical NASDAQ data. |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1010.4831&r=fmk |