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on Financial Markets |
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Issue of 2011‒09‒22
four papers chosen by |
| By: | Geert Bekaert (Columbia University, 3022 Broadway, New York, NY 10027, USA.); Michael Ehrmann (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt, Germany.); Marcel Fratzscher (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt, Germany.); Arnaud Mehl (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt, Germany.) |
| Abstract: | Using the 2007-2009 financial crisis as a laboratory, we analyze the transmission of crises to country-industry equity portfolios in 55 countries. We use an asset pricing framework with global and local factors to predict crisis returns, defining unexplained increases in factor loadings as indicative of contagion. We find evidence of systematic contagion from US markets and from the global financial sector, but the effects are very small. By contrast, there has been systematic and substantial contagion from domestic equity markets to individual domestic equity portfolios, with its severity inversely related to the quality of countries’ economic fundamentals and policies. Consequently, we reject the globalization hypothesis that links the transmission of the crisis to the extent of global exposure. Instead, we confirm the old “wake-up call” hypothesis, with markets and investors focusing substantially more on idiosyncratic, country-specific characteristics during the crisis. JEL Classification: F3, G14, G15. |
| Keywords: | Contagion, financial crisis, equity markets, global transmission, market integration, country risk, factor model, financial policies, FX reserves, current account. |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20111381&r=fmk |
| By: | Moser, Christoph; Rose, Andrew K |
| Abstract: | The effects of Regional Trade Agreements (RTAs) are disputed. In this paper, we assess these effects using capital market data and an event-study approach, using a daily data set covering a thousand announcements spanning over eighty economies and a hundred RTAs over twenty recent years. We measure the effects of news concerning RTAs on the returns of national stock markets, adjusted for international stock market movements. We then link these excess returns to features of the RTA members and the agreements themselves. We find evidence of the natural trading partner hypothesis; stock markets rise more when RTAs are signed between countries that already engage in high volumes of trade. Stock markets also rise more when poorer countries sign RTAs. |
| Keywords: | assets; data; empirical; event study; income; low; natural; panel; producers |
| JEL: | F10 F13 G14 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8566&r=fmk |
| By: | Anirban Chakraborti (MAS - Mathématiques Appliquées aux Systèmes - EA 4037 - Ecole Centrale Paris); Ioane Muni Toke (MAS - Mathématiques Appliquées aux Systèmes - EA 4037 - Ecole Centrale Paris); Marco Patriarca (IFISC - Instituto de Fisica Interdisciplinaire y Sistemas Complejos - Instituto de Fisica Interdisciplinaire y Sistemas Complejos); Frédéric Abergel (MAS - Mathématiques Appliquées aux Systèmes - EA 4037 - Ecole Centrale Paris) |
| Abstract: | This article aims at reviewing recent empirical and theoretical developments usually grouped under the term Econophysics. Since its name was coined in 1995 by merging the words "Economics" and "Physics", this new interdisciplinary field has grown in various directions: theoretical macroeconomics (wealth distributions), microstructure of financial markets (order book modeling), econometrics of financial bubbles and crashes. We give a brief introduction in the first part and begin with discussing interactions between Physics, Mathematics, Economics and Finance that led to the emergence of Econophysics in the second part. Then the third part is dedicated to empirical studies revealing statistical properties of financial time series. We begin the presentation with the widely acknowledged "stylized facts" describing the distribution of the returns of financial assets: fat-tails, volatility clustering, etc. Then we show that some of these properties are directly linked to the way "time" is taken into account, and present some new remarks on this account. We continue with the statistical properties observed on order books in financial markets. For the sake of illustrations in this review, (nearly) all the stated facts are reproduced using our own high-frequency financial database. Contributions to the study of correlations of assets such as random matrix theory and graph theory are finally presented in this part. The fourth part of our review deals with models in Econophysics through the point of view of agent-based modeling. Using previous work originally presented in the fields of behavioural finance and market microstructure theory, econophysicists have developed agent-based models of orderdriven markets that are extensively reviewed here. We then turn to models of wealth distribution where an agent-based approach also prevails: kinetic theory models, and continue with game theory models and review the now classic minority games. We end this review by providing an outlook on possible directions of research. |
| Date: | 2011–06–24 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-00621058&r=fmk |
| By: | Anirban Chakraborti (MAS - Mathématiques Appliquées aux Systèmes - EA 4037 - Ecole Centrale Paris); Ioane Muni Toke (MAS - Mathématiques Appliquées aux Systèmes - EA 4037 - Ecole Centrale Paris); Marco Patriarca (IFISC - Instituto de Fisica Interdisciplinaire y Sistemas Complejos - Instituto de Fisica Interdisciplinaire y Sistemas Complejos); Frédéric Abergel (MAS - Mathématiques Appliquées aux Systèmes - EA 4037 - Ecole Centrale Paris) |
| Abstract: | This article is the second part of a review of recent empirical and theoretical developments usually grouped under the heading Econophysics. In the first part, we reviewed the statistical properties of financial time series, the statistics exhibited in order books and discussed some studies of correlations of asset prices and returns. This second part deals with models in Econophysics from the point of view of agent-based modeling. Of the large number of multiagent- based models, we have identified three representative areas. First, using previous work originally presented in the fields of behavioral finance and market microstructure theory, econophysicists have developed agent-based models of order-driven markets that we discuss extensively here. Second, kinetic theory models designed to explain certain empirical facts concerning wealth distribution are reviewed. Third, we briefly summarize game theory models by reviewing the now classic minority game and related problems. |
| Date: | 2011–06–24 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-00621059&r=fmk |