nep-rmg New Economics Papers
on Risk Management
Issue of 2005‒01‒23
three papers chosen by
Stan Miles
York University

  1. Can we insure against political uncertainty? Evidence from the U.S. Stock Market By Mattozzi, Andrea
  2. Speculative Trading and Stock Prices: An Analysis of Chinese A-B Share Premia By Jianping Mei; Jose Scheinkman; Wei Xiong
  3. Do Currency Markets Absorb News Quickly? By Martin D.D. Evans; Richard K. Lyons

  1. By: Mattozzi, Andrea
    Abstract: We show that existing stocks that are currently traded in the U.S. stock market can be used to hedge political uncertainty. Focusing on the 2000 U.S. Presidential election, we construct two "presidential portfolios" composed of selected stocks anticipated to fare differently under a Bush versus a Gore presidency. To construct these portfolios we use data on campaign contributions by publicly traded corporations and identify the major contributors on each side. Using daily observations for the six months before the election took place, we show that the excess returns of these portfolios with respect to overall market movements are significantly related to changes in electoral polls.
    Keywords: political uncertainty, financial markets
    Date: 2004–10
  2. By: Jianping Mei; Jose Scheinkman; Wei Xiong
    Date: 2005–01–17
  3. By: Martin D.D. Evans; Richard K. Lyons
    Abstract: This paper addresses whether macro news arrivals affect currency markets over time. The null from macro exchange-rate theory is that they do not: macro news is impounded in ex-change rates instantaneously. We test this by examining the effects of news on subsequent trades by end-user participants (such as hedge funds, mutual funds, and non-financial corporations). News arrivals induce subsequent changes in trading in all of the major end-user segments. These induced changes remain significant for days. Induced trades also have persistent effects on prices. Currency markets are not responding to news instantaneously.
    JEL: F3 F4 G1
    Date: 2005–01

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