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on Financial Markets |
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Issue of 2018‒05‒21
five papers chosen by |
| By: | George O. Aragon; Rajnish Mehra; Sunil Wahal |
| Abstract: | The VIX index is not traded on the spot market. Hence, in contrast to other futures markets, the VIX futures contract and spot index are not linked by a no-arbitrage condition. We examine (a) whether predictability in the VIX index carries over to the futures market, and (b) whether there is independent time series predictability in VIX futures prices. The answer to both questions is no. Samuelson (1965) was right: VIX futures prices properly anticipate predictability in volatility, and are themselves unpredictable. |
| JEL: | G1 G12 G13 G14 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24575&r=fmk |
| By: | Nebosja Dimic; Vitaly Orlov; |
| Abstract: | Does internationalization affect firm valuation? To answer this question, literature mainly considers firms from around the world internationalizing by issuing equity in the USA, whereas the current study focuses on US firms that internationalize by issuing debt in overseas markets. This paper provides evidence on theories of internationalization and capital structure, finding that overseas corporate debt offerings have a positive short-term effect on US firms' valuations. The effect varies in firm characteristics, timing, and the location of the issue. Additionally, firms with a strong need for external funds and growth prospects accelerate their offshore public debt market entry. |
| Keywords: | Internationalization, Debt Structure, Segmentation, Tobins's q |
| JEL: | G15 G32 F36 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:usg:sfwpfi:2018:03&r=fmk |
| By: | Theodoros Chatzivasileiadis (Institute for Environmental Studies, Vrije Universiteit, Amsterdam); Richard S.J. Tol (Department of Economics, University of Sussex, Brighton, UK; Department of Spatial Economics, Vrije Universiteit, Amsterdam; Institute for Environmental Studies, Vrije Universiteit, Amsterdam; Tinbergen Institute, Amsterdam; CESifo, Munich); Francisco Estrada (Institute for Environmental Studies, Vrije Universiteit, Amsterdam; Centro de Ciencias de la Atmósfera, Universidad Nacional Autónoma de México, Ciudad Universitaria, Mexico); Marjan W. Hofkes (Institute for Environmental Studies, Vrije Universiteit, Amsterdam; Department of Economics, Vrije Universiteit, Amsterdam) |
| Abstract: | Climate change already has widespread impacts on society, including the performance of stock markets. Previous studies have focused on how financial markets react to natural disasters such as extreme weather events and provided empirical evidence and mechanistic processes on how this information is assimilated by the investors. Market efficiency theory indicates that investors and financial institutions rely on all available information when managing their portfolios, and change their position as new information arises. Based on empirical analysis, here we show for the first time that investors closely follow the discussion generated by the Intergovernmental Panel on Climate Change (IPCC) and its Working Groups and we quantify the U.S. stock market’s reactions to the publication of their reports. Our results show that the market recognises the importance of the IPCC findings, although there seems to be a reduction in the stock market’s reaction with every passing IPCC report. This highlights the effectiveness of scientific bodies in communicating knowledge to different sectors of society, and the importance of maintaining these institutions as honest brokers of scientific information. |
| Keywords: | IPCC; stock market; event study |
| JEL: | G14 Q54 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:sus:susewp:1118&r=fmk |
| By: | Kazeem Isah (Centre for Econometric and Allied Research, University of Ibadan); Ibrahim D. Raheem (School of Economics, University of Kent, Canterbury, UK) |
| Abstract: | This paper is motivated by the news that the surge in cryptocurrencies is an important candidate to in explaining the plummeting stock markets. To validate this believe, we construct a predictive model in which cryptocurrencies are identified as the predictors of US stock returns. The inherent statistical properties of cryptocurrencies such as persistence, endogeneity, and conditional heteroscedasticity are being accounted for in the Westerlund and Narayan (2015) estimator. Three salient results emanated from our estimations. First, we validated the importance of cryptocurrencies in predicting US stock prices; second, the cryptocurrencies predictive model outperforms the conventional time-series models such as Autoregressive Integrated Moving Average (ARIMA) model and the Autoregressive Fractionally Integrated Moving Average (ARFIMA); third, our results are robust to different method of forecast performance evaluation measures and different sub-sample periods. These results have important policy implications for the investors and policymakers. |
| Keywords: | Stock Prices, Cryptocurrency, Digital Asset Prices, Predictive Model, Forecast Evaluation |
| JEL: | C52 C53 G11 G14 G17 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:cui:wpaper:0056&r=fmk |
| By: | Frank Graef; Pascal Vogt; Volker Vonhoff; Florian Weigert |
| Abstract: | We investigate the determinants and performance implications of cash holdings for a large sample of actively-managed equity funds domiciled in the European Union (EU). In line with recent evidence from the US, we observe that cash holdings are strongly influenced by a fund's fee structure, past flows and flow volatility, and a fund's investment strategy. EU Funds with cash holdings in excess of the level predicted by fund attributes (i.e., high abnormal cash funds) outperform their low abnormal cash peers by risk-adjusted 0.96% per annum. |
| Keywords: | Cash holding, mutual funds, performance evaluation |
| JEL: | G10 G11 G15 G23 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:usg:sfwpfi:2018:07&r=fmk |