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on Financial Markets |
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Issue of 2014‒08‒20
four papers chosen by |
| By: | Sofiane Aboura (CEREG - Centre de Recherche sur la gestion et la Finance - DRM UMR 7088 - Université Paris IX - Paris Dauphine); Julien Chevallier (EconomiX - CNRS : UMR7166 - Université Paris X - Paris Ouest Nanterre La Défense) |
| Abstract: | This article adopts the asymmetric DCC with one exogenous variable (ADCCX) model developed by Vargas (2008), by updating the concept of 'volatility surprise' to capture cross-market relationships. Current methods for measuring spillovers do not focus on volatility interactions, and neglect cross-effects between the conditional variances. This paper aims to fill this gap. The dataset includes four aggregate indices representing equities, bonds, foreign exchange rates and commodities from 1983 to 2013. The results provide strong evidence of spillover effects coming from the 'volatility surprise' component across markets. Against the background of the recent financial crisis, the aim is to contribute to the literature on the interdependencies of financial markets, both in conditional means and (co)variances. In addition, asset management implications are derived. |
| Keywords: | Cross-market relationships; Volatility surprise; Volatility spillover; ADCCX; Asset management |
| Date: | 2014–07–27 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01052488&r=fmk |
| By: | Jörg Bibow |
| Abstract: | The euro crisis remains unresolved even as financial markets may seem calm for now. The current euro regime is inherently flawed. Recent reforms have failed to turn the dysfunctional euro regime into a viable one. The investigation is informed by the “cartalist” critique of traditional “optimum currency area” theory (Goodhart 1998). Various proposals to rescue the euro are assessed and found lacking. A Euro Treasury scheme operating on a strict rule and specifically designed not to be a transfer union is proposed here as condition sine qua non for healing the euro’s potentially fatal birth defects. The Euro Treasury proposed here is the missing element that renders sense to the current fiscal regime that is unworkable without it. The proposed Euro Treasury scheme would end the currently unfolding euro calamity by switching policy from a public thrift campaign that can only impoverish Europe to a public investment campaign designed to secure Europe’s future. No mutualization of existing national public debts is involved. Instead, the Euro Treasury is established as a means to pool eurozone public investment spending and have it funded by proper eurozone treasury securities. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fmg:fmgsps:sp227&r=fmk |
| By: | Anmar Pretorius and Alain Kabundi |
| Abstract: | This paper investigates empirically the integration of bond markets of emerging market economies into the global bond markets from 2003 to 2012. The paper employs factor analysis based on the Arbitrage Pricing Theory to extract global factors from a panel of 38 bond yields of advanced and emerging market economies.The results reveal that bond yields in advanced economies, which constitute the driving forces behind the global bond market, do not dominate in explaining the variation of emerging market bond yields. Instead, the dynamics in emerging market bond yields can also be attributed to movements in the equity markets in both advanced and emerging market economies as well as emerging market currencies. In addition, the degree of emerging market integration changes over time and across countries. |
| Keywords: | Bond Yields, Financial Integration, Arbitrage Pricing Theory, Dynamic Factor Model, Rolling Regression |
| JEL: | F15 F36 G12 G15 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:rza:wpaper:436&r=fmk |
| By: | Ilyes Abid; Khaled Guesmi; Olfa Kaabia; Duc Khuong Nguyen |
| Abstract: | In this paper we test for the existence of equity market contagion originating from the United States to OECD markets over the period from 01/01/1990 to 01/11/2010 characterized by several episodes of financial crises. Our empirical analysis relies on the use of an ICAPM model which has three sources of systematic risks (global, regional and currency risk factors) and allows for time-varying market integration. This model also offers the possibility to disentangle simple correlation due to fundamentals and contagion which we define as the excess correlation that is not explained by fundamental factors. Our results show provide strong evidence of contagion effects originating in US equity markets to the OECD equity markets from four regions: European Monetary Union (EMU), Asia-Pacific (AP), Non-European Monetary Union (NEMU) and North America (NA). |
| Keywords: | Global financial crisis, financial contagion, OECD countries, ICAPM, GJR-DCC-GARCH |
| JEL: | F30 F36 G12 G15 G20 |
| Date: | 2014–07–24 |
| URL: | http://d.repec.org/n?u=RePEc:ipg:wpaper:2014-451&r=fmk |