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on Financial Markets |
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Issue of 2015‒07‒18
two papers chosen by |
| By: | Djordje Stratimirovic; Darko Sarvan; Vladimir Miljkovic; Suzana Blesic |
| Abstract: | In this paper we have analyzed scaling properties and cyclical behavior of the three types of stock market indexes (SMI) time series: data belonging to stock markets of developed economies, emerging economies, and of the underdeveloped or transitional economies. We have used two techniques of data analysis to obtain and verify our findings: the wavelet spectral analysis to study SMI returns data, and the Hurst exponent formalism to study local behavior around market cycles and trends. We have found cyclical behavior in all SMI data sets that we have analyzed. Moreover, the positions and the boundaries of cyclical intervals that we have found seam to be common for all markets in our dataset. We list and illustrate the presence of nine such periods in our SMI data. We also report on the possibilities to differentiate between the level of growth of the analyzed markets by way of statistical analysis of the properties of wavelet spectra that characterize particular peak behaviors. Our results show that measures like the relative WT energy content and the relative WT amplitude for the peaks in the small scales region could be used for partial differentiation between market economies. Finally, we propose a way to quantify the level of development of a stock market, based on the Hurst scaling exponent approach. From the local scaling exponents calculated for our nine peak regions we have defined what we named the Development Index ($H_{DI}$), which proved, at least in the case of our dataset, to be suitable to rank the SMI series that we have analyzed in three distinct groups. Further verification of this method remains open for future research. |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1507.03378&r=fmk |
| By: | Sören Radde; Cristina Checherita-Westphal; Wei Cui; |
| Abstract: | Banks in the euro area typically hold a large amount of government debt in their bond portfolios, which are valued both for their low credit risk and high liquidity. During the sovereign debt crisis, these characteristics of government debt were severely impaired in stressed euro area countries. In order to understand the transmission channels of stress from government debt markets to the real economy, we augment a standard dynamic macroeconomic model with a banking sector and a market for government debt characterized by search frictions. A sovereign solvency shock modelled as a haircut on government bonds is introduced to study the interaction of sovereign credit and liquidity risk. As banks react to this shock by rebalancing towards highly liquid short-run assets, such as central bank deposits, demand for government bonds collapses, which endogenously worsens their market liquidity. Thus, a sovereign liquidity risk channel from government bond markets to the real sector emerges. Endogenous government bond liquidity negatively affects the funding conditions of the fiscal sector, tightens financing constraints in the banking sector and lowers investment and output. The model is able to match a number of stylised facts regarding the behaviour of sovereign debt markets during the euro area sovereign debt crisis, such as depressed turnover rates and rising bid-ask spreads. |
| Keywords: | liquidity frictions; search; sovereign risk channel; sovereign-bank nexus |
| JEL: | G12 E41 E44 E63 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2015-032&r=fmk |