nep-fmk New Economics Papers
on Financial Markets
Issue of 2023‒04‒03
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The self-exciting nature of the bid-ask spread dynamics By Ruihua Ruan; Emmanuel Bacry; Jean-Fran\c{c}ois Muzy
  2. A Comparative Predicting Stock Prices using Heston and Geometric Brownian Motion Models By H. T. Shehzad; M. A. Anwar; M. Razzaq
  3. What happens to EMEs when US yields go up? By Julián Caballero; Christian Upper
  4. Factor Exposure Heterogeneity in Green and Brown Stocks By David Ardia; Keven Bluteau; Gabriel Lortie-Cloutier; Thien-Duy Tran

  1. By: Ruihua Ruan; Emmanuel Bacry; Jean-Fran\c{c}ois Muzy
    Abstract: The bid-ask spread, which is defined by the difference between the best selling price and the best buying price in a Limit Order Book at a given time, is a crucial factor in the analysis of financial securities. In this study, we propose a "State-dependent Spread Hawkes model" (SDSH) that accounts for various spread jump sizes and incorporates the impact of the current spread state on its intensity functions. We apply this model to the high-frequency data from the Cac40 Euronext market and capture several statistical properties, such as the spread distributions, inter-event time distributions, and spread autocorrelation functions.
    Date: 2023–03
    URL: http://d.repec.org/n?u=RePEc:arx:papers:2303.02038&r=fmk
  2. By: H. T. Shehzad; M. A. Anwar; M. Razzaq
    Abstract: This paper presents a novel approach to predicting stock prices using technical analysis. By utilizing Ito's lemma and Euler-Maruyama methods, the researchers develop Heston and Geometric Brownian Motion models that take into account volatility, interest rate, and historical stock prices to generate predictions. The results of the study demonstrate that these models are effective in accurately predicting stock prices and outperform commonly used statistical indicators. The authors conclude that this technical analysis-based method offers a promising solution for stock market prediction.
    Date: 2023–02
    URL: http://d.repec.org/n?u=RePEc:arx:papers:2302.07796&r=fmk
  3. By: Julián Caballero; Christian Upper
    Abstract: This paper explores why some episodes of US yield increases result in investor retrenchment from emerging markets and others do not. To answer this, we identify episodes of sharp increases in US 10-year Treasury yields and explore under which conditions these are associated with negative outcomes in emerging markets. We focus on four outcome variables: local currency yields, exchange rates, equity prices, and portfolio fund flows. We find that increases in US yields are more likely to be associated with adverse outcomes in emerging markets when they reflect (i) a rise in the US term premium, (ii) coincide with dollar appreciation, and (iii) rising inflation expectations in the US and in EMEs. The effects of these variables are highly non-linear and economically significant as well as robust to a variety of sensitivity checks.
    Keywords: monetary policy, international spillovers, term premium, US dollar
    JEL: F30 F36 F42 F65
    Date: 2023–03
    URL: http://d.repec.org/n?u=RePEc:bis:biswps:1081&r=fmk
  4. By: David Ardia; Keven Bluteau; Gabriel Lortie-Cloutier; Thien-Duy Tran
    Abstract: We explore the factor exposure heterogeneity in green and brown stocks using the peer-exposure ratio. By creating peer groups of S&P 500 index firms over 2014-2020 based on their greenhouse gas emission levels, we find that, on average, the largest factor exposure heterogeneities are observed for the value factor in green stocks and the momentum factor in brown stocks. Moreover, investing in brown stocks allows managers to distinguish themselves more in terms of factor exposure than green stocks, except in the value factor. Compared to earlier periods, investment managers now have more opportunities to differentiate themselves in their factor exposures.
    Date: 2023–02
    URL: http://d.repec.org/n?u=RePEc:arx:papers:2302.11729&r=fmk

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