New Economics Papers
on Financial Markets
Issue of 2012‒01‒25
eight papers chosen by

  1. What drives the herding behavior of individual investors? By Maxime Merli; Tristan Roger
  2. International Shock Transmission after the Lehman Brothers Collapse. Evidence from Syndicated Lending By de Haas, Ralph; van Horen, Neeltje
  3. The Carry Trade Risk Factor on U.S. Stock Returns By Jairo Andrés Rendón
  4. Evaluation of European Mutual funds Performance By Romana Bangash
  5. International Reserves and the Composition of Equity Capital Inflows By Xingwang Qian; Andreas Steiner
  6. Value relevance of financial reporting on the Warsaw Stock Exchange By Monika Kubik-Kwiatkowska
  7. An Analysis of Intraday Patterns and Liquidity on the Istanbul Stock Exchange By Köksal, Bülent
  8. Indonesian Stock Market Crisis Observation with Spectral and Composite Index By Situngkir, Hokky

  1. By: Maxime Merli (LARGE - Laboratoire de recherche en gestion et économie - Université de Strasbourg); Tristan Roger (CERAG - Centre d'études et de recherches appliquées à la gestion - CNRS : UMR5820 - Université Pierre Mendès-France - Grenoble II)
    Abstract: This article intends to provide answers concerning what drives individual investor herding behavior. Our empirical study uses transaction records of 87,373 French individual investors for the period 1999-2006. In a Örst part, we show - using both the traditional Lakonishok et al. (1992) and the more recent Frey et al. (2007) measures - that herding is prevalent and strong among French individual investors. We then show that herding is persistent: stocks on which investors concentrate their trades at time t are more likely to be the stocks on which investors herd at time t+1. In a second part, we focus on the motivations of individual herding behavior. We introduce an investor speciÖc measure of herding which allows us to track the persistence in herding of individual investors. Our results highlight that this behavior is ináuenced by investor-speciÖc characteristics. We also reveal the fact that individual herding behavior is strongly and negatively linked with investorsíown past performance.
    Keywords: Herding behavior; investor
    Date: 2011
  2. By: de Haas, Ralph; van Horen, Neeltje
    Abstract: After Lehman Brothers filed for bankruptcy in September 2008, cross-border bank lending contracted sharply. To explain the severity and variation in this contraction, we analyze detailed data on cross-border syndicated lending by 75 banks to 59 countries. We find that banks that had to write down sub-prime assets, refinance large amounts of long-term debt, and experienced sharp declines in their market-to-book ratio, transmitted these shocks across borders by curtailing their lending abroad. While shocked banks differentiated between countries in much the same way as less constrained banks, they restricted their lending more to small borrowers.
    Keywords: Cross-border lending; bank-funding shocks; crisis transmission
    JEL: E51 F36 G21
    Date: 2012–01–17
  3. By: Jairo Andrés Rendón
    Abstract: Este artículo desarrolla un modelo de valoración de activos en tiempo continuo para la economía global. En el artículo demuestro que un mercado financiero integrado, los retornos de los activos domésticos tienen un componente que compensa a los inversionistas por la exposición a riesgo extranjero y demuestro que, este riesgo extranjero puede ser capturado por el retorno del carry trade. Usando un modelo de valoración de activos multi-factorial pruebo por la presencia del riesgo global como un componente que afecta el retorno de las acciones norte americanas. El modelo se estima adicionando el retorno del carry trade a los tres factores de Fama y French y se presenta evidencia empírica a favor del carry trade como un factor adicional que explica el retorno de las acciones norte americanas.
    Date: 2011–11–15
  4. By: Romana Bangash (CERAG - Centre d'études et de recherches appliquées à la gestion - CNRS : UMR5820 - Université Pierre Mendès-France - Grenoble II)
    Abstract: Our primary objective is to suggest some winning styles of investment for investors and proposing some good benchmarking techniques to managers. In other words, we can say that which stock picking skill of manager can better earn before-fee excess return? We applied Carhart's four factor model on 122 Equity Mutual funds domestically invested in France from 1990 to 2009. Our results indicate that measuring risk with use of the established pricing models is indeed problematic because it is suitable to some markets but not for all and more analytical and empirical work is needed to develop universally adapted risk factors.
    Keywords: Equity Mutual funds; four factors model; management fee.
    Date: 2011
  5. By: Xingwang Qian; Andreas Steiner (Universitaet Osnabrueck)
    Abstract: We study the effect of central banks’ international reserve hoardings on the composition of equity capital inflows, namely the ratio of portfolio equity investment (PEI) to foreign direct investment (FDI). Foreign investors’ decisions regarding the location and the type of equity capital investment might be influenced by a country’s level of international reserves. In a simple theoretical model, we show that higher reserves, thanks to their ability to lower exchange rate risk, reduce the risk premium of portfolio equity inflows. Hence, higher reserves are expected to increase the inflow of portfolio equity investment relative to FDI. We test this hypothesis for a sample of emerging markets during the period 1980-2007 using static and dynamic panel data methods. The results suggest that higher levels of reserves are associated with a larger ratio of PEI inflows relative to FDI. This result points to a collateral benefit of reserves that has been neglected so far: Reserves contribute to deeper domestic financial markets and facilitate domestic firms’ access to foreign financing.
    Keywords: International Reserves, Capital Inflows, Equity Capital
    JEL: F3 F4
    Date: 2012–01–12
  6. By: Monika Kubik-Kwiatkowska (Warsaw School of Economics)
    Abstract: The paper is associated with value relevance research, investigating whether information from financial reports is reflected in the value of listed companies. The study includes annual reports of 440 companies listed on the Warsaw Stock Exchange in the years from 2000 to 2010. Models describing the relationship between information from financial reports and a measure of stock prices are based, in part, on a factor analysis. Validation of models on the test sample confirmed their effectiveness. The results show that the value relevance models may be one of the tools in building investment strategies.File-Format: Application/pdf
    Keywords: value relevance, company valuation, principal component analysis, capital markets
    Date: 2012–01–12
  7. By: Köksal, Bülent
    Abstract: We analyze different dimensions of liquidity on the Istanbul Stock Exchange (ISE) by using detailed order and transaction data for all ISE stocks. We estimate the limit order book on the ISE at each point in time and examine the intraday behavior of spreads, depths, returns and volume. We find that the spreads follow an L-shaped pattern whereas returns, number of trades and volume follow a U-shaped pattern. Means of these liquidity variables are significantly different for different time intervals in a given day. Another result is that traders use spreads and depths simultaneously to implement their strategies, i.e., wide spreads are accompanied by low depths and vice versa. We also find that spreads are higher on average for more risky stocks and for more active stocks. Measure of information flow as signaled by trades of unusual size causes the spreads to increase. Finally there are day-of-week effects on spreads, returns and share volume.
    Keywords: Intraday Patterns; Spreads; Returns; Depths; Transaction Volume; Market Liquidity; Limit Order Market; Istanbul Stock Exchange
    JEL: G15 G20
    Date: 2012–01
  8. By: Situngkir, Hokky
    Abstract: The paper discusses the employment of the index composed from the dynamical tree of correlations among stock prices both with the popularly used standard (conventional) composite one. The spectral index focus on the dynamics of the correlation coefficients among stock prices while composite index is the dynamical aggregate of the whole stocks traded in the market. Some advantages is conjectured by incorporating both indexes to the historical data of Indonesian Stock Market data. Both are shown potentially useful for detecting the crisis as well as the general stock-prices relations on fundamental issues, generally social, economic, and political situations on which the Indonesian stock market is influenced.
    Keywords: composite index; spectral data; crisis; social economic and political issues
    JEL: D53 R53 G15 O16 E44 C4 P16
    Date: 2012–01–14

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