nep-fmk New Economics Papers
on Financial Markets
Issue of 2011‒05‒30
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Market risk premium used in 56 countries in 2011: A survey with 6,014 answers By Fernandez, Pablo; Aguirreamalloa, Javier; Corres, Luis
  2. US market risk premium used in 2011 by professors, analysts and companies: A survey with 5.731 answers By Fernandez, Pablo; Aguirreamalloa, Javier; Corres, Luis
  3. Market risk premium used in 2010 by professors: A survey with 1,500 answers By Fernandez, Pablo; del Campo, Javier
  4. Market risk premium used in 2010 by analysts and companies: A survey with 2.400 answers By Fernandez, Pablo; del Campo, Javier
  5. On the volatility-volume relationship in energy futures markets using intraday data By Julien Chevallier; Benoît Sévi
  6. A Note on institutional hierarchy and volatility in financial markets By Alfarano, Simone; Milakovic, Mishael; Raddant, Matthias

  1. By: Fernandez, Pablo (IESE Business School); Aguirreamalloa, Javier (IESE Business School); Corres, Luis (IESE Business School)
    Abstract: This paper contains the statistics of the Equity Premium or Market Risk Premium (MRP) used in 2011 for 56 countries. We got answers for 85 countries, but we only report the results for 56 countries with more than 6 answers. Most previous surveys have been interested in the Expected MRP, but this survey asks about the Required MRP. The paper also contains the references used to justify the MRP, comments from persons that do not use MRP, and comments from persons that do use MRP.
    Keywords: equity premium; required equity premium; expected equity premium; historical equity premium;
    JEL: G12 G31 M21
    Date: 2011–05–03
    URL: http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0920&r=fmk
  2. By: Fernandez, Pablo (IESE Business School); Aguirreamalloa, Javier (IESE Business School); Corres, Luis (IESE Business School)
    Abstract: The average Market Risk Premium (MRP) used in 2011 by professors for the USA (5.7%) is higher than the one used by analysts (5.0%) and companies (5.6%). The standard deviation of the MRP used in 2011 by analysts (1.1%) is lower than the ones of companies (2.0%) and professors (1.6%). Most previous surveys have been interested in the Expected MRP, but this survey asks about the Required MRP. The paper also contains the references used to justify the MRP, comments from 58 persons that do not use MRP, and comments of 110 that do use MRP. The comments illustrate the various interpretations of the required MRP and its usefulness. Professors, analysts and companies that cite Ibbotson as their reference use MRP for USA between 2% and 14.5%, and the ones that cite Damodaran as their reference use MRP between 2% and 10.8%.
    Keywords: equity premium; required equity premium; expected equity premium; historical equity premium;
    JEL: G12 G31 M21
    Date: 2011–05–01
    URL: http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0918&r=fmk
  3. By: Fernandez, Pablo (IESE Business School); del Campo, Javier (IESE Business School)
    Abstract: The average Market Risk Premium (MRP) used in 2010 by professors in the United States (6.0%) was higher than the one used by their colleagues in Europe (5.3%). We also report statistics for 33 countries: the average MRP used in 2010 ranges from 3.6% (Denmark) to 10.9% (Mexico). 29% of the professors decreased the MRP in 2010, 16% increased it and 55% used the same MRP. The dispersion of the MRP used was high: the average range of MRP used by professors for the same country was 7.4% and the average standard deviation was 2.4%. Most previous surveys have been interested in the Expected MRP, but this survey asks about the Required MRP. The paper also contains the references that professors use to justify their MRP, and comments from 85 professors that illustrate the various interpretations of what is the required MRP.
    Keywords: equity premium puzzle; required equity premium; expected equity premium; historical equity premium;
    JEL: G12 G31 M21
    Date: 2011–03–05
    URL: http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0911&r=fmk
  4. By: Fernandez, Pablo (IESE Business School); del Campo, Javier (IESE Business School)
    Abstract: The average MRP used by analysts in the United States and Canada (5.1%) was similar to the one used by their colleagues in Europe (5.0%), and United Kingdom (5.2%). But the average MRP used by companies in the United States and Canada (5.3%) was smaller than the one used by companies in Europe (5.7%), and United Kingdom (5.6%). The dispersion of the MRP used was high, but lower than that of the MRP used by professors: the average range of MRP used by analysts (companies) for the same country was 5.7% (4.1%) and the average standard deviation was 1.7% (1.2%). These statistics were 7.4% and 2.4% for the professors. Most previous surveys have been interested in the Expected MRP, but this survey asks about the Required MRP. The paper also contains the references that analysts and companies use to justify their MRP, and comments from 89 respondents that illustrate the various interpretations of what is the required MRP.
    Keywords: market risk premium; required equity premium; expected equity premium; historical equity premium;
    JEL: G12 G31 M21
    Date: 2011–03–07
    URL: http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0912&r=fmk
  5. By: Julien Chevallier; Benoît Sévi
    Abstract: This paper investigates the relationship between trading volume and price volatility in the crude oil and natural gas futures markets when using high-frequency data. By regressing various realized volatility measures (with/without jumps) on trading volume and trading frequency, our results feature a contemporaneous and largely positive relationship. Furthermore, we test whether the volatility-volume relationship is symmetric for energy futures by considering positive and negative realized semivariance. We show that (i) an asymmetric volatility-volume relationship indeed exists, (ii) trading volume and trading frequency significantly affect negative and positive realized semivariance, and (iii) the information content of negative realized semivariance is higher than for positive realized semivariance.
    Keywords: Trading Volume; Price Volatility; Crude Oil Futures; Natural Gas Futures; High-Frequency Data; Realized Volatility; Bipower Variation; Median Realized Volatility; Realised Semivariance; Jump
    JEL: C15 C32 C53 G1 Q4
    Date: 2011
    URL: http://d.repec.org/n?u=RePEc:drm:wpaper:2011-16&r=fmk
  6. By: Alfarano, Simone; Milakovic, Mishael; Raddant, Matthias
    Abstract: From a statistical point of view, the prevalence of non-Gaussian distributions in nancial returns and their volatilities shows that the Central Limit Theorem (CLT) often does not apply in nancial markets. In this paper we take the position that the independence assumption of the CLT is violated by herding tendencies among market participants, and investigate whether a generic probabilistic herding model can reproduce non-Gaussian statistics in systems with a large number of agents. It is well-known that the presence of a herding mechanism in the model is not sucient for non-Gaussian properties, which crucially depend on the details of the communication network among agents. The main contribution of this paper is to show that certain hierarchical networks, which portray the institutional structure of fund investment, warrant non-Gaussian properties for any system size and even lead to an increase in system-wide volatility. Viewed from this perspective, the mere existence of nancial institutions with socially interacting managers contributes considerably to nancial volatility.
    Keywords: Herding; financial volatility; networks; core-perifery
    JEL: C46 E19 D85 G10
    Date: 2011
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:30902&r=fmk

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