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on Financial Markets |
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Issue of 2015‒02‒05
three papers chosen by |
| By: | Sebastien Lleo; William T. Ziemba |
| Abstract: | In this paper, we extend the literature on crash prediction models in three main respects. First, we relate explicitly crash prediction measures and asset pricing models. Second, we present a simple, effective statistical significance test for crash prediction models. Finally, we propose a definition and a measure of robustness for crash prediction models. We apply the statistical test and measure the robustness of selected model specifications of the Price-Earnings (P/E) ratio and Bond Stock Earning Yield Differential (BSEYD) measures. This analysis suggests that the BSEYD, the logarithmic BSEYD model, and to a lesser extent the P/E ratio, are statistically significant robust predictors of equity market crashes. |
| Keywords: | stock market crashes; bond-stock earnings yield mode; Fed model; priceearnings-ratio |
| JEL: | J1 |
| Date: | 2014–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:59290&r=fmk |
| By: | Guillermo Baquero (ESMT European School of Management and Technology); Marno Verbeek (Rotterdam School Of Management, Erasmus University) |
| Abstract: | The importance they attach to performance metrics and fund characteristics in making investment and divestment decisions negatively affects hedge fund investors’ performance. Investor flows are highly sensitive to performance streaks, even after controlling for more traditional measures of performance, return smoothing, return volatility, share restrictions, and other characteristics. Although streaks contain valuable information about subsequent fund performance, simple allocation rules based on econometric forecasting models beat investor allocations by an economically and statistically significant margin. This suggests that hedge fund investors’ allocation decisions may reflect an overreaction to certain types of information. |
| Keywords: | Hedge funds, money flows, extrapolative expectations, law of small numbers, performance streaks, relative weights, smart money |
| Date: | 2015–01–23 |
| URL: | http://d.repec.org/n?u=RePEc:esm:wpaper:esmt-15-01&r=fmk |
| By: | Ben Rejeb, Aymen; Boughrara, Adel |
| Abstract: | The purpose of this paper is to examine the volatility relationship that exists between emerging and developed markets in normal times and in times of financial crises. The Vector Autoregressive methodology and the Bai and Perron (2003a,b)’s technique are used. The paper results lead to very interesting conclusions. First, it has been found that volatility spillovers are effective across financial markets. Second, it has been proven that geographical proximity is of great importance in amplifying the volatility transmission. Finally, it has been shown that financial liberalization contributes significantly in amplifying the international transmission of volatility and the risk of contagion. |
| Keywords: | stock market volatility; volatility spillover; financial liberalization; financial crises; emerging stock markets |
| JEL: | G1 |
| Date: | 2014–11–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:61519&r=fmk |