Monetary policy, exchange rates and stock prices in the Middle East region

A structural vector autoregressive model is employed to investigate the impact of monetary policy and real exchange rate shocks on the stock market performance of Kuwait, Oman, Saudi Arabia, Egypt and Jordan. In order to identify the structural shocks both short run and long run restrictions are applied. Unlike previous literature the contemporaneous interdependence between the financial variables are left unrestricted to give a more accurate depiction of the relationships. The heterogeneity of the results reflect the different monetary policy frameworks and stock market characteristics of these countries. Mainly, monetary policy and the real exchange rate shocks have a significant short run impact on the stock prices of the countries that apply a relatively more independent monetary policy and flexible exchange rates.

Volatility and VaR Forecasting in the Madrid Stock Exchange

This paper provides an empirical study to assess the forecasting performance of a wide range of models for predicting volatility and VaR in the Madrid Stock Exchange. The models performance was measured by using different loss functions and criteria. The results show that FIAPARCH processes capture and forecast more accurately the dynamics of IBEX-35 returns volatility. It is also observed that assuming a heavy-tailed distribution does not improve models ability for predicting volatility. However, when the aim is forecasting VaR, we find evidence of that the Student’s t FIAPARCH outperforms the models it nests the lower the target quantile.

Impact of the Financial Crisis on the Performance of European Acquisitions

This study looks at the impact of the recent financial crisis on the short-term performance of European acquisitions. We use institutional theory and transaction cost economic theory to study whether bidders derive lower or higher returns from acquisitions announced after 2008. We investigate shareholders’ stock price reaction to 2245 deals which occurred during 2004–12 across 22 European Union countries. Our results from both univariate and multivariate analysis show that the deals announced in the post-crisis period, corresponding to the period of economic recession, generate higher returns to shareholders as compared to acquisitions announced in the pre-crisis period. We also test the relevance of the Economic and Monetary Union (EMU), that is, the Eurozone, to this value accrual during the recessionary period. We observe that non-EMU transactions obtain significantly higher gains vis-à-vis EMU transactions in the post-crisis years. Overall, announcement returns of European acquisitions have been affected by the financial crisis and the global recession; and companies that target countries with different currency regimes are likely to generate better returns from their acquisitions.