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on Financial Markets |
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Issue of 2017‒07‒16
three papers chosen by |
| By: | Miguel Antón (IESE BUSINESS SCHOOL); Sergio Mayordomo (Banco de España); María Rodríguez-Moreno (Banco de España) |
| Abstract: | We show that sovereign CDS that have common dealers tend to be more correlated, especially when the dealers display similar quoting activity in those contracts over time. This commonality in dealers’ activity is a powerful driver of CDS comovements, over and above fundamental similarities between countries, including default, liquidity, and macro factors. We posit that the mechanism causing the excess correlation is the buying pressure faced by CDS dealers for credit enhancements and regulatory capital reliefs. An instrumental variable analysis confirms that our findings are indeed rooted in a causal relationship. |
| Keywords: | sovereign CDS, comovements, commonalities, dealers |
| JEL: | G12 G14 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1723&r=fmk |
| By: | Sane, Renuka (National Institute of Public Finance and Policy) |
| Abstract: | In this paper, we study the impact on investor behaviour of fraud revelation. We ask if investors with direct exposure to stock market fraud (treated investors) are more likely to decrease their participation in the stock market than investors with no direct exposure to fraud (control investors)? Using daily investor account holdings data from the National Stock Depository Limited (NSDL), the largest depository in India, we find that treated investors cash out almost 10.6 percentage points of their overall portfolio relative to control investors post the crisis. The cashing out is largely restricted to the bad stock. Over the period of a month, there is no difference in the trading behaviour of the treated and control investors. These results are contrary to those found in mature economies. |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:npf:wpaper:17/198&r=fmk |
| By: | Shin-ichi Fukuda (Faculty of Economics, The University of Tokyo); Mariko Tanaka (Faculty of Economics, Musashino University) |
| Abstract: | The purpose of this paper is to explore to what extent spillovers from Asian financial market shocks have risen during the past two decades. In the first part, we examine spillover effects in stock markets. Estimating the GVAR (Global Vector Autoregressive) model, we find that spillover effects from emerging Asia became large in the post GFC (Global Financial Crisis) period. However, we also find that most of the spillover effects were from shocks in manufacturing sector rather than from those in financial sector. This implies that the spillover effects increased in the post GFC period because of increased manufacturing sector's shocks in emerging Asia. In the second part, we examine spillover effects across different foreign exchange rates. As in the stock markets, spillover effects from emerging Asia became large in the foreign exchange markets in the post GFC period. In particular, our high frequency data analysis suggests that an exchange rate policy change by the PBC (the People's Bank of China) had positive spillover effects on the most of the advanced currencies in the post GFC period. The empirical results imply that the impact of Chinese shocks has been rising in the global financial markets. |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2017cf1050&r=fmk |