nep-fmk New Economics Papers
on Financial Markets
Issue of 2017‒09‒17
four papers chosen by

  1. The total cost of investing in mutual funds By Giorgio Albareto; Giuseppe Cappelletti; Andrea Cardillo; Luca Zucchelli
  2. Volatility Spillovers and Systemic Risk Across Economies: Evidence from a Global Semi-Structural Model By Javier G. Gómez-Pineda
  3. The Effects of Data Transparency Policy Reforms on Emerging Market Sovereign Bond Spreads By Sangyup Choi; Yuko Hashimoto
  4. Random walks and market efficiency in Chinese and Indian equity markets By Oleg Malafeyev; Achal Awasthi; Kaustubh S. Kambekar

  1. By: Giorgio Albareto (Bank of Italy); Giuseppe Cappelletti (European Central Bank); Andrea Cardillo (Bank of Italy); Luca Zucchelli (Bank of Italy)
    Abstract: The total costs of investment in an open-end fund include those that are charged on the fund and those directly attributed to subscribers (subscription and redemption fees). Subscriptions of funds characterized by the presence of costs directly attributed to investors have increased significantly in recent years. The paper presents an estimate of the Total Shareholders Cost (TSC) made using the information provided by the investment management companies in the supervisory reports. The estimates obtained show that in the period 2006-2016 the TSC was on average 1.58 per cent of the total assets of funds (1.74 per cent at the end of 2016). Subtracting direct and indirect costs borne by investors, the return on open-end funds is reduced from 3.5 per cent on average to 2 per cent. Based on preliminary results, the presence of subscription and redemption fees reduces the elasticity of subscriptions and redemptions with respect to returns.
    Keywords: mutual funds, Total Expense Ratio, Total Shareholders Cost
    JEL: G11 G23 E60
    Date: 2017–09
  2. By: Javier G. Gómez-Pineda (Banco de la República de Colombia)
    Abstract: The paper presents some evidence on the overwhelming relevance of systemic risk and the lesser importance of US interest rates in the global transmission of shocks. This evidence suggests that the literature could benefit from incorporating global confidence variables into global frameworks in the study of the global transmission of shocks. As framework, we used a global semi-structural model (GSSM) augmented with common factors for country risk and country credit. We approximated country risk with historical stock volatility, a measure that is uniform and available across countries; in addition, we measured spillovers as the share of forecast error variance explained by different volatility factors. We found that systemic risk is the main volatility factor in all systemic economies, and also accounts for the bulk of spillovers into non systemic economies. Other volatility factors such as global credit, foreign interest rates and trade-related factors rarely accounted for shares of forecast error variance above one percent. Classification JEL: E58; E37; E43; Q43
    Keywords: Spillovers; Systemic risk; Systemic Economies; Global semi structural model
    Date: 2017–09
  3. By: Sangyup Choi (Yonsei University); Yuko Hashimoto (IMF)
    Abstract: We find that data transparency policy reforms, reflected in subscriptions to the IMF¡¯s Data Standards Initiatives (SDDS and GDDS), reduce the spreads of emerging market sovereign bonds. To overcome endogeneity issues regarding a country¡¯s decision to adopt such reforms, we first show that the reform decision is largely independent of its macroeconomic development. By using an event study, we find that subscriptions to the SDDS or GDDS leads to a 15 percent reduction in the spreads one year following such reforms. This finding is robust to various sensitivity tests, including careful consideration of the interdependence among the structural reforms.
    Keywords: data transparency, structural reforms, sovereign bond spreads, GDDS, SDDS, event study
    JEL: F30 G10 G20
    Date: 2017–09
  4. By: Oleg Malafeyev; Achal Awasthi; Kaustubh S. Kambekar
    Abstract: Hypothesis of Market Efficiency is an important concept for the investors across the globe holding diversified portfolios. With the world economy getting more integrated day by day, more people are investing in global emerging markets. This means that it is pertinent to understand the efficiency of these markets. This paper tests for market efficiency by studying the impact of global financial crisis of 2008 and the recent Chinese crisis of 2015 on stock market efficiency in emerging stock markets of China and India. The data for last 20 years was collected from both Bombay Stock Exchange (BSE200) and the Shanghai Stock Exchange Composite Index and divided into four sub-periods, i.e. before financial crisis period (period-I), during recession (period-II), after recession and before Chinese Crisis (periodIII) and from the start of Chinese crisis till date (period- IV). Daily returns for the SSE and BSE were examined and tested for randomness using a combination of auto correlation tests, runs tests and unit root tests (Augmented Dickey-Fuller) for the entire sample period and the four sub-periods. The evidence from all these tests supports that both the Indian and Chinese stock markets do not exhibit weak form of market efficiency. They do not follow random walk overall and in the first three periods (1996 till the 2015) implying that recession did not impact the markets to a great extent, although the efficiency in percentage terms seems to be increasing after the global financial crisis of 2008.
    Date: 2017–09

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