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on Financial Markets |
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Issue of 2013‒07‒15
four papers chosen by |
| By: | Gregor Wergen |
| Abstract: | We study the statistics of record-breaking events in daily stock prices of 366 stocks from the Standard and Poors 500 stock index. Both the record events in the daily stock prices themselves and the records in the daily returns are discussed. In both cases we try to describe the record statistics of the stock data with simple theoretical models. The daily returns are compared to i.i.d. RV's and the stock prices are modeled using a biased random walk, for which the record statistics are known. These models agree partly with the behavior of the stock data, but we also identify several interesting deviations. Most importantly, the number of records in the stocks appears to be systematically decreased in comparison with the random walk model. Considering the autoregressive AR(1) process, we can predict the record statistics of the daily stock prices more accurately. We also compare the stock data with simulations of the record statistics of the more complicated GARCH(1,1) model, which, in combination with the AR(1) model, gives the best agreement with the observational data. To better understand our findings, we discuss the survival and first-passage times of stock prices on certain intervals and analyze the correlations between the individual record events. After recapitulating some recent results for the record statistics of ensembles of N stocks, we also present some new observations for the weekly distributions of record events. |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1307.2048&r=fmk |
| By: | Gerdesmeier, Dieter; Reimers, Hans-Eggert; Roffia, Barbara |
| Abstract: | Are specific developments in stock prices in line with fundamentals or do they reflect a rising bubble? And if the latter result applies, how is it possible to detect a bubble in real time? The answer to this question is of utmost relevance for a number of areas, not least for either financial market participants or for central banks aiming at pursuing a policy of 'leaning against the wind'. In this study, we make use of a sample of 17 OECD industrialised countries and the euro area over the sample period 1969 Q1 - 2008 Q3 and carry out univariate and multivariate panel tests to find evidence of bubbles in the stock market of those countries over the past four decades. -- |
| JEL: | E37 E44 E51 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:hswwdp:012013&r=fmk |
| By: | Ladislav Kristoufek; Miloslav Vosvrda |
| Abstract: | We utilize long-term memory, fractal dimension and approximate entropy as input variables for the Efficiency Index [Kristoufek & Vosvrda (2013), Physica A 392]. This way, we are able to comment on stock market efficiency after controlling for different types of inefficiencies. Applying the methodology on 38 stock market indices across the world, we find that the most efficient markets are situated in the Eurozone (the Netherlands, France and Germany) and the least efficient ones in the Latin America (Venezuela and Chile). |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1307.3060&r=fmk |
| By: | Michael McAleer (Econometric Institute Erasmus School of Economics Erasmus University Rotterdam and Tinbergen Institute The Netherlands and Department of Quantitative Economics Complutense University of Madrid Spain and Institute of Economic Research Kyoto University Japan); Kim Radalj (Department of Economics, University of Western Australia) |
| Abstract: | Economists and financial analysts have begun to recognise the importance of the actions of other agents in the decision-making process. Herding is the deliberate mimicking of the decisions of other agents. Examples of mimicry range from the choice of restaurant, fashion and financial market participants, to academic research. Herding may conjure negative images of irrational agents sheepishly following the actions of others, but such actions can be rational under asymmetric information and uncertainty. This paper uses futures position data in nine different markets of the Commodity Futures Trading Commission (CFTC) to provide a direct test of herding behaviour, namely the extent to which small traders mimic the positions of large speculators. Evidence consistent with herding among small traders is found for the Canadian dollar, British pound, gold, S&P 500 and Nikkei 225 futures. Consistent with survey-based results on technical analysis, the positions are significantly correlated with both current and past market returns. Using various time-varying volatility models to accommodate conditional heteroskedasticity, the empirical results are found to be robust to alternative models and methods of estimation. When a test of causality-in-variance is used to analyse if volatility among small traders spills over into spot markets, it is found that spillovers occur only with Nikkei 225 futures. The policy implications of the findings are also discussed. |
| Keywords: | Herding, speculation, hedging, noise traders, currency and commodity markets, futures and spot markets, time-varying volatility, causality-in-variance, spillovers. |
| JEL: | D82 D84 G12 G14 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:kyo:wpaper:873&r=fmk |