nep-fmk New Economics Papers
on Financial Markets
Issue of 2015‒12‒12
three papers chosen by
  1. A Comparision of Three Network Portfolio Selection Methods -- Evidence from the Dow Jones By Hannah Cheng Juan Zhan; William Rea; Alethea Rea
  2. Competition, reach for yield, and money market funds By La Spada, Gabriele
  3. Global Oil Market and the U.S. Stock Returns By Maryam Ahmad; Matteo Manera; Mehdi Sadeghzadeh
  1. By: Hannah Cheng Juan Zhan; William Rea; Alethea Rea
    Abstract: We compare three network portfolio selection methods; hierarchical clustering trees, minimum spanning trees and neighbor-Nets, with random and industry group selection methods on twelve years of data from the 30 Dow Jones Industrial Average stocks from 2001 to 2013 for very small private investor sized portfolios. We find that the three network methods perform on par with randomly selected portfolios.
    Date: 2015–12
    URL: http://d.repec.org/n?u=RePEc:arx:papers:1512.01905&r=fmk
  2. By: La Spada, Gabriele (Federal Reserve Bank of New York)
    Abstract: Do asset managers reach for yield because of competitive pressures in a low-rate environment? I propose a tournament model of money market funds (MMFs) to study this issue. When funds care about relative performance, an increase in the risk premium leads funds with lower default costs to increase risk-taking, while funds with higher default costs decrease risk-taking. Without changes in the premium, lower risk-free rates reduce the risk-taking of all funds. I show that these predictions are consistent with MMF risk-taking during the 2002-08 period and that rank-based performance is indeed a key determinant of money flows to MMFs.
    Keywords: reach for yield; money market funds
    JEL: G00 G20 G23
    Date: 2015–12–08
    URL: http://d.repec.org/n?u=RePEc:fip:fednsr:753&r=fmk
  3. By: Maryam Ahmad (Lombardy Advanced School of Economic Research (LASER)); Matteo Manera (University of Milan-Bicocca and Fondazione Eni Enrico Mattei (FEEM)); Mehdi Sadeghzadeh (Bocconi University)
    Abstract: This paper provides an analysis of the link between the oil market and the U.S. stock market returns at the aggregate as well as industry levels. We empirically model oil price changes as driven by speculative demand shocks along with consumption demand and supply shocks in the oil market. We also take into account in our model all the factors that affect stock market price movements over and above the oil market, in order to quantify the pure effect of oil price shocks on returns. The results show that stock returns respond to oil price shocks differently, depending on the causes behind the shocks. Impulse response analysis suggests that consumption demand shocks are the most relevant drivers of the stock market return, relative to other oil market driven shocks. Industry level analysis is performed to control for the heterogeneity of the responses of returns to oil price changes. The results show that both cost side and demand side effects of oil price shocks matter for the responses of industries to oil price shocks. However, the main driver of the variation in industries’ returns is the shock to aggregate stock market.
    Keywords: Oil Market, Oil Price, Stock Market
    JEL: G1 G12 Q41
    Date: 2015–10
    URL: http://d.repec.org/n?u=RePEc:fem:femwpa:2015.91&r=fmk
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