Rocking the Euro boat: scheduled market announcements' effects on Euro implied volatility

The purpose of this thesis is to investigate scheduled market announcements’ effects on Euro implied volatility. Timeline selected for this study ranges from 2005 to 2009. The method chosen is so-called event study approach, in which five days prior to a news announcement stand for a pre-event period, and five days after the announcement form a post-event period. Statistical research method employed is Mann-Whitney-Wilcoxon test, which examines two evenly-sized distributions’ equality, in this case the distributions being the pre- and post-event periods. Observations are based on daily data of US dollar nominated Euro at-the-money call options. Research results partially back up previous literature’s view of uncertainty increasing prior to the news announcement. After the exact contents of the news is public, uncertainty levels measured by implied volatility tend to lower.

Interdependence of International Stock Markets, European Government Bond Market and Gold Market

This thesis examines the interdependence of international stock markets (the USA, Europe, Japan, emerging markets, and frontier markets), European government bond market, and gold market during the 21st century. Special focus is on the dynamics of the correlations between the markets, as well as on, spillovers in mean returns and volatility. The mean return spillovers are examined on the basis of the bivariate VAR(1) model, whereas the bivariate BEKK-GARCH(1, 1) model is employed for the analysis of the volatility spillovers. In order to analyze the spillover effects in different market conditions, the full sample period from 2000 to 2013 is divided into the pre-crisis period (2000–2006) and the crisis period (2007–2013). The results indicate an increasing interdependence especially within international stock markets during the periods of financial turbulence, and are thus consistent with the existing literature. Hence, bond and gold markets provide the best diversification benefits for equity investors, particularly during the periods of market turmoil.

Employee layoff announcements and shareholder wealth: empirical evidence from Finland 2008-2013

This thesis investigates the short-term stock price reaction to layoff announcements in Finland. It also studies whether the characteristics of the firm or the layoff announcement have an impact on the stock market reaction. Standard event study methodology was utilized to examine the stock price reactions to layoffs and to test the created hypotheses. The event pool consisted of 102 publicly disclosed layoff announcements that were announced during the time period from June 2008 to December 2013. The empirical results show that the stock market reaction is strongly positive in the pre-event period of -10 to -1 with CAAR of 2,69%. The reaction is however slightly negative on the event date with AAR of -0,57%. Based on the results the conclusion is that either the managers are timing the markets or the layoffs are seen as efficiency improving acts and the market becomes aware of such actions pre-event. Additionally different characteristic hypotheses are tested to find out whether they would explain the reaction. The characteristics are: the reason stated by the management, business cycle, industry group, prior performance, leverage-ratio, the size of the company, the size of the layoff and the duration of the layoff.

Cognitive Development of Very Low Birth Weight Children from Infancy to Pre-school Age

The survival of preterm born infants has increased but the prevalence of long-term morbidities has still remained high. Preterm born children are at an increased risk for various developmental impairments including both severe neurological deficits as well as deficits in cognitive development. According to the literature the developmental outcome perspective differs between countries, centers, and eras. Definitions of preterm infant vary between studies, and the follow-up has been carried out with diverse methods making the comparison less reliable. It is essential to offer parents upto-date information about the outcome of preterm infants born in the same area. A centralized follow-up of children at risk makes it possible to monitor the consequences of changes in the treatment practices of hospitals on developmental outcome. This thesis is part of a larger regional, prospective multidisciplinary follow-up project entitled “Development and Functioning of Very Low Birth Weight Infants from Infancy to School Age” (PIeniPAinoisten RIskilasten käyttäytyminen ja toimintakyky imeväisiästä kouluikään, PIPARI). The thesis consists of four original studies that present data of very low birth weight (VLBW) infants born between 2001 and 2006, who are followed up from the neonatal period until the age of five years. The main outcome measure was cognitive development and secondary outcomes were significant neurological deficits (cerebral palsy, CP, deafness, and blindness). In Study I, the early crying and fussing behavior of preterm infants was studied using parental diaries, and the relation of crying behavior and cognitive and motor development at the age of two years was assessed. In Study II, the developmental outcome (cognitive, CP, deafness, and blindness) at the age of two years was studied in relation to demographic, antenatal, neonatal, and brain imaging data. Development was studied in relationship to a full-term born control group born in the same hospital. In Study III, the stability of cognitive development was studied in VLBW and full-term groups by comparing the outcomes at the ages of two and five years. Finally, in Study IV the precursors of reading skills (phonological processing, rapid automatized naming, and letter knowledge) were assessed for VLBW and full-term children at the age of five years. Pre-reading skills were studied in relation to demographic, antenatal, neonatal, and brain imaging data. The main findings of the thesis were that VLBW infants who fussed or cried more in the infancy were not at greater risk for problems in their cognitive development. However, crying was associated with poorer motor development. The developmental outcome of the present population was better that has been reported earlier and this improvement covered also cognitive development. However, the difference to fullterm born peers was still significant. Major brain pathology and intestinal perforation were independent significant risk factors for adverse outcome, also when several individual risk factors were controlled for. Cognitive development at the age of two years was strongly related with development at the age of five years, stressing the importance of the early assessment, and the possibility for early interventions. Finally, VLBW children had poorer pre-reading skills compared with their full-term born peers, but the IQ was an important mediator even when children with mental retardation were excluded from the analysis. The findings suggest that counseling parents about the developmental perspectives of their preterm infant should be based on data covering the same birth hospital. Neonatal brain imaging data and neonatal morbidity are important predictors for developmental outcome. The findings of the present study stress the importance of both short-term (two years) and long-term (five years) follow-ups for the individual, and for improving the quality of care.

Liquidity and Asset Pricing in the French Stock Market

This thesis investigates pricing of liquidity in the French stock market. The study covers 835 ordinary shares traded in the period of 1996-2014 on Paris Euronext. The author utilizes the Liquidity-Adjusted Capital Asset Pricing Model (LCAPM) recently developed by Acharya and Pedersen (2005) to test whether liquidity level and risks significantly affect stock returns. Three different liquidity measures – Amihud, FHT, and PQS – are incorporated into the model to find any difference between the results they could provide. It appears that the findings largely depend on the liquidity measure used. In general the results exhibit more evidence for insignificant influence of liquidity level and risks as well as market risk on stock returns. The similar conclusion was reported earlier by Lee (2011) for several regions, including France. This finding of the thesis, however, is not consistent across all the liquidity measures. Nevertheless, the difference in the results between these measures provides new insight to the existing literature on this topic. The Amihud-based findings might indicate that market resiliency is not priced in the French stock market. At the same time the contradicting results from FHT and PQS provide some foundation for the hypothesis that one of two leftover liquidity dimensions – market depth or breadth – could significantly affect stock returns. Therefore, the thesis’ findings suggest a conjecture that different liquidity dimensions have different impacts on stock returns.

Testing Accrual-Based Model for Detecting Earnings Management: Comparison of Finland and France

The aim of this study is to test the accrual-based model suggested by Dechow et al. (1995) in order to detect and compare earnings management practices in Finnish and French companies. Also the impact of financial crisis of 2008 on earnings management behavior in these countries is tested by dividing the whole time period of 2003-2012 into two sub-periods: pre-crisis (2003-2008) and post-crisis (2009-2012). Results support the idea that companies in both countries have significant earnings management practices. During the post-crisis period companies in Finland show income inflating practices, while in France the opposite tendency is noticed (income deflating) during the same period. Results of the assumption that managers in highly concentrated companies are engaged in income enhancing practices vary in two countries. While in Finland managers are trying to show better performance for bonuses or other contractual compensation motivations, in France they avoid paying dividends or high taxes.