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on Financial Markets |
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Issue of 2024‒03‒11
seven papers chosen by |
| By: | Ignas Gasparavi\v{c}ius; Andrius Grigutis |
| Abstract: | This survey article is dedicated to the life of the famous American economist H. Markowitz (1927--2023). We do revisit the main statements of the portfolio selection theory in terms of mathematical completeness including all the necessary auxiliary details. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2402.10253&r=fmk |
| By: | Loubergé, Henri (Université de Genève); Dionne, Georges (HEC Montreal, Canada Research Chair in Risk Management) |
| Abstract: | The chapter reviews the evolution in risk and insurance economics over the past 50 years, first recalling the situation in 1973, then presenting the developments and new approaches that have flourished since then. We argue that these developments were only possible because steady advances were made in the economics of risk and uncertainty and in financial theory. Insurance economics has grown in importance to become a central theme in modern economics, providing not only practical examples and original data to illustrate new theories, but also inspiring new ideas that are relevant to the overall economy. |
| Keywords: | Insurance economics; optimal insurance protection; optimal self-protection; insurance pricing; insurance demand; economics of risk and uncertainty; financial economics; risk management; asymmetric information; insurance markets; climate finance |
| JEL: | A33 B15 D10 D20 D80 D82 G22 G32 G52 L22 |
| Date: | 2024–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:ris:crcrmw:2024_001&r=fmk |
| By: | Heckmann, Lotta; Memmel, Christoph |
| Abstract: | We analyse the ftnancial forecasts small and medium-sized German banks provided in several waves of a quantitative survey, called LIRES, and compare them with the results the banks actually realized. Based on this unique data set, we ftnd that the predictions are relevant, especially concerning the net interest income for the next year, and persistent, but neither unbiased nor rational. We also ftnd slight evidence for a positive relationship between planning and performance, i.e. banks whose predictions are more accurate tend to have a higher return on assets. Looking at the forecasts made just before the end of the low-interest rate environment, we observe that the explanatory power of predictions went down. |
| Keywords: | Forecasts, Banks, Quantitative Survey (LIRES) |
| JEL: | G21 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:283008&r=fmk |
| By: | Xiaorui Zuo; Yao-Tsung Chen; Wolfgang Karl H\"ardle |
| Abstract: | In the burgeoning realm of cryptocurrency, social media platforms like Twitter have become pivotal in influencing market trends and investor sentiments. In our study, we leverage GPT-4 and a fine-tuned transformer-based BERT model for a multimodal sentiment analysis, focusing on the impact of emoji sentiment on cryptocurrency markets. By translating emojis into quantifiable sentiment data, we correlate these insights with key market indicators like BTC Price and the VCRIX index. This approach may be fed into the development of trading strategies aimed at utilizing social media elements to identify and forecast market trends. Crucially, our findings suggest that strategies based on emoji sentiment can facilitate the avoidance of significant market downturns and contribute to the stabilization of returns. This research underscores the practical benefits of integrating advanced AI-driven analyses into financial strategies, offering a nuanced perspective on the interplay between digital communication and market dynamics in an academic context. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2402.10481&r=fmk |
| By: | Victor Budau; Herve Tourpe |
| Abstract: | This working paper inaugurates the "Technology Fundamentals for Digital Finance" series, concentrating on the technical aspects of financial Digital Assets. The series aims to facilitate the use of a clear terminology in a nascent platform-oriented paradigm of financial infrastructures, by laying the groundwork for technical discussions on digital asset standards. The paper introduces a conceptual model named ASAP (Access, Service, Asset, Platform) for Digital Asset Platforms (DAP), leveraging insights from IT industry practices and experiments by central banks. The ASAP model is illustrated through examples and use cases of tokenized assets, to demonstrate the possible usage and merits of modeling Digital Asset Platforms with four layers. Just as the utilization of a seven-layer model (often refered to as TCP/IP) has been fundamental to the interoperability of the internet, it is anticipated that the four-layer ASAP model for Digital Asset Platforms will similarly promote cross-platform interoperability, including across various jurisdictions, paving the way for a more cohesive digital asset ecosystem. |
| Keywords: | digital asset; platform; conceptual model; service; tokenization; tokenized asset; interoperability; technical standards; platform-enabled finance; fintech; CBDC; unbundling; open banking |
| Date: | 2024–02–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2024/019&r=fmk |
| By: | Schilling, Linda |
| Abstract: | Policy makers have developed different forms of policy intervention for stopping, or preventing runs on financial firms. This paper provides a general framework to characterize the types of policy intervention that indeed lower the run-propensity of investors versus those that cause adverse investor behavior, which increases the run-propensity. I employ a general global game to analyze and compare a large set of regulatory policies. I show that common policies such as Emergency Liquidity Assistance, and redemption (withdrawal) fees either exhibit features that lower firm stability ex ante, or have offsetting features rendering the policy ineffective. |
| Keywords: | financial regulation, bank runs, global games, policy effectiveness, bank resolution, withdrawal fees, emergency liquidity assistance, lender of last resort policies, money market mutual fund gates, suspension of convertibility |
| JEL: | D81 D82 G21 G28 G33 G38 |
| Date: | 2024–02–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:120041&r=fmk |
| By: | Gan Jin; Md Rafiul Karim; Günther G. Schulze (Department of International Economic Policy, University of Freiburg) |
| Abstract: | We are the first to analyze the effect of terror on stock markets by terror ideology. Surprisingly, we find that Islamist terror attacks created significant negative abnormal returns in American and European markets, but the stock market effects of other terror attacks were almost nil. For our sample of all 124 terrorist attacks in the US and Europe in the period 1994 to 2018 that caused at least five fatalities or ten injured people, we show that Islamist terror attacks are given significantly more air time (also after controlling for attack characteristics and the media pressure of competing news stories). This, however, explains only part of the differential effect of Islamist attacks on the stock markets. |
| Keywords: | Terror, stock market, event studies, Islamist terror, media |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:fre:wpaper:45&r=fmk |