nep-mst New Economics Papers
on Market Microstructure
Issue of 2015‒10‒10
three papers chosen by
Thanos Verousis

  1. Semi-static completeness and robust pricing by informed investors By Beatrice Acciaio; Martin Larsson
  2. The Effect of Investor Attention on the Pricing of Seasoned Equity Offerings By Cristán Pinto
  3. The Ruble between the hammer and the anvil: Oil prices and economic sanctions By Dreger, Christian; Fidrmuc , Jarko; Kholodilin , Konstantin; Ulbricht , Dirk

  1. By: Beatrice Acciaio; Martin Larsson
    Abstract: We consider a continuous-time financial market that consists of securities available for dynamic trading, and securities only available for static trading. We work in a robust framework where a set of non-dominated models is given. The concept of semi-static completeness is introduced: it corresponds to having exact replication by means of semi-static strategies. We show that semi-static completeness is equivalent to an extremality property, and give a characterization of the induced filtration structure. Finally, we consider investors with additional information and, for specific types of extra information, we characterize the models that are semi-statically complete for the informed investors.
    Date: 2015–10
  2. By: Cristán Pinto (School of Business and Economics, Universidad del Desarrollo)
    Abstract: I examine the role of investor attention on seasoned equity offerings’ (SEOs) outcomes. I use an archive of Thomson Reuters’ news articles to proxy for investor attention. I find that the volumes of news articles prior to the offerings are positively associated with the offer price discounts of SEOs. Furthermore, the volumes of news articles are negatively associated with the cumulative abnormal returns three days around the SEOs. I conclude that the costs of equity increase with investor attention prior to SEOs. Overall, the evidence is consistent with the hypothesis that investor attention affects investors’ information processing in SEOs
    Keywords: Investor attention, seasoned equity offerings, news analytics, media coverage, investor sentiment
    Date: 2015–08
  3. By: Dreger, Christian (BOFIT); Fidrmuc , Jarko (BOFIT); Kholodilin , Konstantin (BOFIT); Ulbricht , Dirk (BOFIT)
    Abstract: The exchange rate fluctuations strongly affect the Russian economy, given its heavy dependence on foreign trade and investment. Since January 2014, the Ruble lost 50% of its value against the US Dollar. The fall of the currency started with the conflict between Russia and Ukraine. The impact of the conflict on Russia may have been amplified by sanctions imposed by Western countries. However, as Russia is heavily dependent on exports of natural re-sources, the oil price decline starting in Summer 2014 could be another factor behind the deterioration. By using high frequency data on nominal exchange and interest rates, oil prices, actual and unanticipated sanctions, we provide evidence on the driving forces of the Ruble exchange rate. The analysis is based on cointegrated VAR models, where fundamental long-run relationships are implicitly embedded. The results indicate that the bulk of the depreciation can be related to the decline of oil prices. In addition, unanticipated sanctions matter for the conditional volatility of the variables involved.
    Keywords: military conflict; sanctions; oil prices; Ruble depreciation
    JEL: C22 F31 F51
    Date: 2015–08–21

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