nep-fmk New Economics Papers
on Financial Markets
Issue of 2017‒07‒23
two papers chosen by

  1. Predicting Stock Market Movements with a Time-Varying Consumption-Aggregate Wealth Ratio By Tsangyao Chang; Rangan Gupta; Anandamayee Majumdar; Christian Pierdzioch
  2. Fintech and Financial Services; Initial Considerations By Dong He; Ross B Leckow; Vikram Haksar; Tommaso Mancini Griffoli; Nigel Jenkinson; Mikari Kashima; Tanai Khiaonarong; Celine Rochon; Hervé Tourpe

  1. By: Tsangyao Chang (Department of Finance, Feng Chia University, Taichung, Taiwan); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa); Anandamayee Majumdar (Center for Advanced Statistics and Econometrics, Soochow University, Suzhou, China); Christian Pierdzioch (Department of Economics, Helmut Schmidt University, Hamburg, Germany)
    Abstract: We develop a time-varying measure of cay (cayTVP) using time-varying cointegration, and then compare the predictive ability of cayTVP with cay and a Markov-switching cay (cayMS) for excess stock returns and volatility in the US over the period 1952:Q2-2015:Q3, using a k-th order nonparametric causality-in-quantiles test. We find that time-varying cointegration exists between consumption, asset wealth and labor income. In addition, while there is no evidence of predictability for excess returns volatility from cay, cayMS, or cayTVP, they tend to act as strong predictors of stock returns, with cayTVP being important during the bearish phases of the equity market.
    Keywords: consumption-aggregate wealth ratio, time-varying cointegration, stock returns, volatility, nonparametric causality-in-quantiles test
    JEL: C22 G10
    Date: 2017–07
  2. By: Dong He; Ross B Leckow; Vikram Haksar; Tommaso Mancini Griffoli; Nigel Jenkinson; Mikari Kashima; Tanai Khiaonarong; Celine Rochon; Hervé Tourpe
    Abstract: A new wave of technological innovations, often called “fintech,” is accelerating change in the financial sector. What impact might fintech have on financial services, and how should regulation respond? This paper sets out an economic framework for thinking through the channels by which fintech might provide solutions that respond to consumer needs for trust, security, privacy, and better services, change the competitive landscape, and affect regulation. It combines a broad discussion of trends across financial services with a focus on cross-border payments and especially the impact of distributed ledger technology. Overall, the paper finds that boundaries among different types of service providers are blurring; barriers to entry are changing; and improvements in cross-border payments are likely. It argues that regulatory authorities need to balance carefully efficiency and stability trade-offs in the face of rapid changes, and ensure that trust is maintained in an evolving financial system. It also highlights the importance of international cooperation.
    Keywords: Central banks;Financial sector;International cooperation;Fintech, cross border payments, market structure, financial regulation, financial stability, monetary policy, virtual currencies, digital currencies, competition, entry, intermediaries, concentration, market contestability, vertical integration, horizontal integration, product differentiation, network externalities, economies of scale, barriers to entry, sunk costs, fixed costs, information asymmetries, transaction costs, matching, innovation, adoption, cross-border payments, General, Government Policy and Regulation, Government Policy and Regulation
    Date: 2017–06–19

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