nep-fmk New Economics Papers
on Financial Markets
Issue of 2017‒02‒19
three papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Survey of volatility and spillovers on financial markets By Evžen Kočenda
  2. Assignment of Stock Market Coverage By Briana Chang; Harrison Hong
  3. Oil and stock markets before and after financial crises : a local Gaussian correlation approach By Georgios Bampinas; Theodore Panagiotidis

  1. By: Evžen Kočenda (Institute of Economic Studies, Charles University, Prague)
    Abstract: In this survey article, we present a rich extent of literature on volatility and its propagation on financial markets via spillovers. We document how new approaches or improved existing methodologies lead to results that offer richer insights than those derived from standard econometric techniques. Moreover, the implications of the results can be related to a wide set of markets as the surveyed articles cover emerging and developed European markets as well as the United States.
    Keywords: volatility; volatility spillovers; financial markets
    JEL: C10 E44 F31 G15
    Date: 2017–02
  2. By: Briana Chang; Harrison Hong
    Abstract: Price efficiency plays an important role in financial markets. Firms influence it, particularly when they issue public equity. They can hire a reputable underwriter with a star analyst to generate public signals about profits, thereby reducing uncertainty and increasing valuations. We develop an assignment model of this labor market. The value of a match between firms, that differ in multiple dimensions, and agents, that differ in precision, is endogenously generated from a stock-market equilibrium. We characterize the multidimensional-to-one assignment and obtain predictions. Extensions allow firms to value efficiency for other reasons and apply to other labor markets like media-or-investor relations.
    JEL: G10 G12 G3
    Date: 2017–01
  3. By: Georgios Bampinas; Theodore Panagiotidis
    Abstract: The effect of financial shocks on the cross-market linkages between oil prices, both spot and future, and stock markets is examined for four crises: the Mexican crisis of 1994, the Asian crisis of 1997, the bubble of 2000 and the global financial crisis of 2007–09. By employing the local Gaussian correlation approach introduced in Tjøstheim and Hufthammer (2013), which captures asymmetries and the intrinsic nonlinearity of the relationship, we find that the two markets were regionalised for most of the 1990s and the early 2000s. Flight from stocks to oil occur in all crisis episodes under extreme market conditions, except the recent global financial crisis. During the latter, evidence of higher correlation between the two markets throughout the spectrum emerges and this is more pronounced in the state of financial distress (in the left tail). The view that stock and oil markets behave like ’a market of one’ after the financialisation of commodities is further supported by the presence of contagion between US stock markets and all the benchmark crude oil markets. Finally, our empirical results provide evidence of nonlinear and asymmetric dependence between oil and stock markets during all financial crisis periods
    Keywords: stocks, crude oil, nonlinear dependence, financial crisis, contagion, local Gaussian correlation
    JEL: G01 G10 F3
    Date: 2017–02–06

This nep-fmk issue is ©2017 by Kwang Soo Cheong. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.