New Economics Papers
on Financial Markets
Issue of 2011‒10‒15
three papers chosen by

  1. Are Stock and Housing Returns Complements or Substitutes?: Evidence from OECD Countries By Guglielmo Maria Caporale; Ricardo M. Souza
  2. Stock Price Response to Earnings Announcements: Evidence from the Nigerian Stock Market By Afego, Pyemo
  3. Loss-Based Risk Measures By Rama Cont; Romain Deguest; Xuedong He

  1. By: Guglielmo Maria Caporale; Ricardo M. Souza
    Abstract: In this paper we use a representative consumer model to analyse the equilibrium relation between the transitory deviations from the common trend among consumption, aggregate wealth, and labour income, cay, and focus on the implications for both stock returns and housing returns. The evidence based on data for 15 OECD countries shows that when agents expect future stock returns to be higher, they will temporarily allow consumption to rise. Regarding housing returns, if housing assets are seen as complements to stocks, then investors react in the same way, but if they are instead treated as substitutes consumption will be temporarily reduced.
    Keywords: consumption, wealth, stock returns, housing returns, OECD countries
    JEL: E21 E44 D12
    Date: 2011
  2. By: Afego, Pyemo
    Abstract: This paper examines the stock market reaction to annual earnings information releases using data on the Nigerian Stock Exchange. Using the event study method, the speed of reaction of the market to annual earnings information releases for a sample of 16 firms listed on the exchange is tested. Significant abnormal price reactions around earnings announcements suggest the earnings announcements contain value-relevant information. We find that the magnitude of the cumulative abnormal returns is dominated by significant reactions 20 days before the earnings release date which suggests that a portion of the market reaction may be due to private acquisition and, possibly, abuse of information by insiders. The persistent downward drift of the cumulative abnormal returns, 20 days after the announcement, is inconsistent with the efficient markets hypothesis, and therefore suggests that the Nigerian stock market does not efficiently adjust to earnings information for the sample firms within the study period.
    Keywords: earnings announcements; abnormal returns; event studies; emerging markets; Nigeria
    JEL: G14 G10
    Date: 2011–03–15
  3. By: Rama Cont (LPMA - Laboratoire de Probabilités et Modèles Aléatoires - CNRS : UMR7599 - Université Pierre et Marie Curie - Paris VI - Université Paris Diderot - Paris 7, Center for Financial Engineering, Columbia University - Columbia University); Romain Deguest (EDHEC RIsk Institute - École des hautes études commerciales du Nord (EDHEC)); Xuedong He (Center for Financial Engineering, Columbia University - Columbia University)
    Abstract: Starting from the requirement that risk measures of financial portfolios should be based on their losses, not their gains, we define the notion of loss-based risk measure and study the properties of this class of risk measures. We characterize loss-based risk measures by a representation theorem and give examples of such risk measures. We then discuss the statistical robustness of estimators of loss-based risk measures: we provide a general criterion for qualitative robustness of risk estimators and compare this criterion with sensitivity analysis of estimators based on influence functions. Finally, we provide examples of statistically robust estimators for loss-based risk measures.
    Keywords: risk measure, coherent risk measure, Fenchel-Legendre transform, Choquet capacity
    Date: 2011

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