The impact of the European sovereign debt crisis on the recovering from the financial crisis: Equity returns of the banking sector

This paper analyses, through a dynamic panel data model, the impact of the Financial and the European Debt crisis on the equity returns of the banking system. The model is also extended to specifically investigate the impact on countries who received rescue packages. The sample under analysis considers eleven countries from January 2006 to June 2013. The main conclusion is that there was in fact a structural change in banks’ excess returns due to the outbreak of the European Debt Crisis, when stock markets were still recovering from the Financial Crisis of 2008.

Long-run performance of sovereign rating changes

This paper examines the impact of Sovereign rating changes on the aggregate stock and bond market returns both in emerging and developed countries. Rating downgrades in emerging markets are associated with significant negative wealth effects both in the stock and bond markets. Moreover, the effects of rating downgrades persist up to six-months after the event. In contrast, upgrades in emerging markets convey no information. Rating changes in developed markets have no significant impact on either stock and bond market returns. Rating agencies act pro-cyclically, downgrading countries in bad times and, consequently, contributing to the instability in emerging markets.

The determinants of mutual fund performance: A cross-country study

We use a new data set to study the determinants of the performance of open–end actively managed equity mutual funds in 27 countries. We find that mutual funds underperform the market overall. The results show important differences in the determinants of fund performance in the USA and elsewhere in the world. The US evidence of diminishing returns to scale is not a universal truth as the performance of funds located outside the USA and funds that invest overseas is not negatively affected by scale. Our findings suggest that the adverse scale effects in the USA are related to liquidity constraints faced by funds that, by virtue of their style, have to invest in small and domestic stocks. Country characteristics also explain fund performance. Funds located in countries with liquid stock markets and strong legal institutions display better performance.

Ciclos económicos en economías abiertas y menos desarrolladas: el papel de los "shocks" en los términos de intercambio.The business cycle in open and less developed economies: the rol of terms-of-trade shocks.

Nuestra preocupación reside en estudiar empíricamente el mecanismo de transmisión internacional de ciclos económicos a economías pequeñas y menos desarrolladas (LDC), evaluando el impacto de los shocks en los términos de intercambio en países dónde existen imperfecciones en el mercado crediticio que imponen severas restricciones en el financiamiento de la inversión doméstica y al crecimiento económico. Primero, analizamos si la cuenta corriente responde de manera asimétrica a movimientos de largo plazo en los términos de intercambio. La hipótesis es que “en los buenos tiempos” cuando se produce una mejora permanente en términos de intercambio (y con ello el nivel de ingreso) los individuos no elevan su consumo en un monto acorde con la mejora de su ingreso (permanente) sino que ahorran una fracción del aumento en su dotación para hacer frente a una reversión en la mejora en los términos de intercambios (aunque ésta sea transitoria) en el futuro. En consecuencia, la cuenta corriente (diferencia entre ingreso y absorción) responde de manera positiva a un shock permanente en los términos de intercambio, ya que el individuo ahorra de manera cautelosa –debido a que sabe que no le prestarán para suavizar consumo - aún suponiendo que en el futuro tendrá una reversión transitoria de su ingreso. Segundo, estudiamos la relación dinámica entre los términos de intercambio y la tasa de interés en la economía pequeña abierta y con imperfecciones en el mercado crediticio (información asimétrica). La hipótesis es que la economía doméstica tiene que soportar una prima de riesgo que eleva el costo de la inversión y retarda el crecimiento (Gertler y Rogoff; 1990). Esta prima de riesgo depende, además, en forma negativa del nivel del colateral que tenga la economía. El colateral es la dotación de recursos naturales, por ejemplo, que la economía posee a los fines garantizar el cumplimiento de las obligaciones contraídas (en el modelo presentado las actividades dónde se invierten son independientes del colateral). La hipótesis establecida indica que los cambios en los términos de intercambio generan un aumento del colateral de la economía y una reducción del riesgo país: aumentos en los términos de intercambio reducen la prima de riesgo de la economía que opera en mercados de capitales con asimetrías de información, y como consecuencia aumentarían los ingresos de capitales. De esta forma, se estaría encontrando una explicación a la denominada “Paradoja de Lucas”. Finalmente, el proyecto estudia la conexión entre dos variables “clave” en la economía de los países emergentes: la relación entre los términos de intercambio y el tipo de cambio real. Argumentamos que los efectos de las mejoras de los términos de intercambio sobre los flujos de capitales externos tienden a ser sobreestimadas si no se consideran los efectos “secundarios” de éstas sobre el tipo de cambio real de la economía pequeña menos desarrollada. En este proyecto se controlan estadísticamente esta relación. La estrategia empírica elegida resulta en aplicar a un panel (constituido por dieciocho países de Latinoamérica) el método generalizado de momentos (GMM) a dos modelos de regresión estadística a los fines de abordar de manera eficiente el problema de la endogeneidad de la variable dependiente que actúa como regresor rezagado. La estrategia de estimación elegida enfatiza el análisis de la relación dinámica de las variables económicas incluidas en el análisis. The paper analyzes the general problem related to the transmission of economic cycles to Small Open Economies. The analysis focuses on terms-of-trade shocks, which are considered one of the major sources of income volatility in developing economies. Specifically, we tackle the problem related to the impact of terms-of-trade shocks in Less Developed SOEs. ‘Less Developed SOEs’ are understood as those countries who have borrowing constraints. First, we put to a test the hypothesis of asymmetric response of current account to terms-of-trade shocks (the impact of the shock on current account differs depending whether it is positive or negative), which originates from considering binding restrictions in international capital markets (Agénor and Aizenman; 2004). Second, we investigate about the main determinants of External Capital Flows (ECF) directed to Developing Countries. We put to a test the Gertler and Rogoff (1990) hypothesis that a “risky rate” arises in that markets because the economy has not sufficient amount of wealth to “collateralize” the capital she needs to borrow to take advantage of the investment opportunities she has and additionally because the lender does not have the chance of observing what the borrowed does with the funds (that is information asymmetry arises because the lender can check the realized output of investment but he can not observe if he really invest in the project or secretly lend abroad). Finally, Following Prasad, E. S., Rajan and R. Subramanian, A (2007) we measure the relationship between external capital flows and domestic currency overvaluation. We run a panel GMM estimation for a set of 18 Latin American Countries during the period 1973-2008.

The Timing of Asset Trade and Optimal Policy in Dynamic Open Economies

Using a standard open economy DSGE model, it is shown that the timing of asset trade relative to policy decisions has a potentially important impact on the welfare evaluation of monetary policy at the individual country level. If asset trade in the initial period takes place before the announcement of policy, a national policymaker can choose a policy rule which reduces the work effort of households in the policymaker’s country in the knowledge that consumption is fully insured by optimally chosen international portfolio positions. But if asset trade takes place after the policy announcement, this insurance is absent and households in the policymaker’s country bear the full consumption consequences of the chosen policy rule. The welfare incentives faced by national policymakers are very different between the two cases. Numerical examples confirm that asset market timing has a significant impact on the optimal policy rule.

Entry regulation and intersectoral reallocation

We study how restrictions on firm entry affect intersectoral factor reallocation when openeconomies experience global economic shocks. In our theoretical framework, countries trade freelyin a range of differentiated sectors that are subject to country-specific and global shocks. Entryrestrictions are modeled as an upper bound on the introduction of new differentiated goods followingshocks. Prices and quantities adjust to clear international goods markets, and wages adjustto clear national labor markets. We show that in general equilibrium, countries with tighter entryrestrictions see less factor reallocation compared to the frictionless benchmark. In our empiricalwork, we compare sectoral employment reallocation across countries in the 1980s and 1990s withproxies for frictionless benchmark reallocation. Our results indicate that the gap between actualand frictionless reallocation is greater in countries where it takes longer to start a firm.

On the impact of leverage constraints on asset prices and trading volume

Researchers have used stylized facts on asset prices and trading volumein stock markets (in particular, the mean reversion of asset returnsand the correlations between trading volume, price changes and pricelevels) to support theories where agents are not rational expected utilitymaximizers. This paper shows that this empirical evidence is in factconsistent with a standard infite horizon perfect information expectedutility economy where some agents face leverage constraints similar tothose found in todays financial markets. In addition, and in sharpcontrast to the theories above, we explain some qualitative differencesthat are observed in the price-volume relation on stock and on futuresmarkets. We consider a continuous-time economy where agents maximize theintegral of their discounted utility from consumption under both budgetand leverage con-straints. Building on the work by Vila and Zariphopoulou(1997), we find a closed form solution, up to a negative constant, for theequilibrium prices and demands in the region of the state space where theconstraint is non-binding. We show that, at the equilibrium, stock holdingsvolatility as well as its ratio to stock price volatility are increasingfunctions of the stock price and interpret this finding in terms of theprice-volume relation.

Reporting intellectual capital in Spain

This study reports on the analysis of annual reports from 14- listed companies in Spainover a five-year period, from 1998 to 2002. Companies in the sample are selected on thebasis of their knowledge-based assets and incentives to report on Intellectual Capital.The empirical analysis is twofold:1) Firstly, we analyse the value of intellectual capital using a value-based approach,through the difference between market and book value over the period considered. Results show that there is a general decrease in the 'hidden value' of these companies, probably due to the general trend in stock markets.2) Secondly, we carry out a content-based analysis of the complete annual reports of the companies over the five year period. Preliminary findings seem to suggest that although the level of disclosure has increased over time, this is mainly in the form of narrative. Overall, the level of disclosure of intellectual capital remains low.

Market Index Biases and Minimum Risk Indices

Markets, in the real world, are not efficient zero-sum games where hypotheses of the CAPM are fulfilled. Then, it is easy to conclude the market portfolio is not located on Markowitz"s efficient frontier, and passive investments (and indexing) are not optimal but biased. In this paper, we define and analyze biases suffered by passive investors: the sample, construction, efficiency and active biases and tracking error are presented. We propose Minimum Risk Indices (MRI) as an alternative to deal with to market index biases, and to provide investors with portfolios closer to the efficient frontier, that is, more optimal investment possibilities. MRI (using a Parametric Value-at-Risk Minimization approach) are calculated for three stock markets achieving interesting results. Our indices are less risky and more profitable than current Market Indices in the Argentinean and Spanish markets, facing that way the Efficient Market Hypothesis. Two innovations must be outlined: an error dimension has been included in the backtesting and the Sharpe"s Ratio has been used to select the"best" MRI

Kalenterianomaliat pohjoismaisilla sähkömarkkinoilla

Osakemarkkinoilta on jo useiden vuosien ajan julkaistu lukuisia tutkimuksia, joissa on esitetty havaintoja ajallisesta säännönmukaisuudesta osakkeiden hinnoissa, joita ei pystytä selittämään markkinakohtaisilla fundamenteilla. Nämä niin kutsutut kalenterianomaliat esiintyvät tyypillisesti ajallisissa käännepisteissä, kuten vuoden, kuukauden tai viikon vaihtuessa seuraavaksi. Myös erilaisten katkosten, kuten juhlapyhien, kaupankäyntirutiineissa on havaittu aiheuttavan anomalioita. Tutkimuksen tavoitteena oli tutkia osakemarkkinoilla havaittujen kalenterianomalioiden esiintymistä pohjoismaisilla sähkömarkkinoilla. Tutkitut anomaliat olivat viikonpäivä- kuukausi-, kuunvaihde- ja juhlapyhäanomalia. Näiden lisäksi tutkittiin tuottojen käyttäytymistä optioiden erääntymispäivien läheisyydessä. Yksittäisten tuotteiden sijasta tarkastelut suoritettiin sesonki- ja kvartaalituotteista muodostetuilla vuosituotteilla. Testauksessa käytettiin pienimmän neliösumman menetelmää, huomioidenheteroskedastisuuden, autokorrelaation ja multikollineaarisuuden vaikutukset. Pelkkien kalenterimuuttujien lisäksi testit suoritettiin regressiomalleilla, joissa lisäselittäjinä käytettiin spot-hintaa, päästöoikeuden hintaa ja/tai sade-ennusteita. Tarkastelujakso koostui vuosista 1998-2006.

Market Index Biases and Minimum Risk Indices

Markets, in the real world, are not efficient zero-sum games where hypotheses of the CAPM are fulfilled. Then, it is easy to conclude the market portfolio is not located on Markowitz"s efficient frontier, and passive investments (and indexing) are not optimal but biased. In this paper, we define and analyze biases suffered by passive investors: the sample, construction, efficiency and active biases and tracking error are presented. We propose Minimum Risk Indices (MRI) as an alternative to deal with to market index biases, and to provide investors with portfolios closer to the efficient frontier, that is, more optimal investment possibilities. MRI (using a Parametric Value-at-Risk Minimization approach) are calculated for three stock markets achieving interesting results. Our indices are less risky and more profitable than current Market Indices in the Argentinean and Spanish markets, facing that way the Efficient Market Hypothesis. Two innovations must be outlined: an error dimension has been included in the backtesting and the Sharpe"s Ratio has been used to select the"best" MRI

Nimeke Päijäthämäläisten varallisuuskäyttäytyminen: poikkeaako se muitten suomalaisten varallisuuskäyttäytymisestä?

Tavoitteena oli löytää eroja varakkaiden päijäthämäläisten ja muiden suomalaisten varallisuuskäyttäytymisessä. Tämä toteutettiin tekemällä kirjekysely päijäthämäläisille, jotka 2001 saivat ansiotuloja yli 80.000 euroa. Tutkimusta verrattiin Tilastokeskuksen 1998 tekemän, Suomea koskevan tutkimuksen, ylimmän tulodesiilin tuloksiin. Kyselyyn vastasi 38 %. Kysely yhteismitallistettiin Tilastokeskuksen tutkimuksen kanssa. Varallisuuskäyttäytymistä tutkittiin taustamuuttujittain ja etsittiin selittäviä teorioita. Päijät-Hämeessä on asuntoihin ja pörssiosakkeisiin sijoitettu vähemmän ja vapaa-ajan asuntoihin, kulkuvälineisiin ja eläkevakuutuksiin enemmän kuin Suomessa. Varallisuuskehitystä selittävät ammattiasema ja ikä. Toimiminen johtavassa asemassa tai yrittäjänä mahdollistaa vaurastumisen. Behavioral portfolio –teoria selittää sijoittajien toimintaa. Sijoituspalvelukehityksen tulisi huomioida portfolion muodostuvan yksittäisten sijoitusten muodostamana kokonaisuutena, eikä yhtenä salkkuna, jota hallitaan riskituotto –suhteella.

Tunnusluku- ja tuottohistoria-pohjaisten sijoitusstrategioiden toimivuus ja sykliriippuvuus suomalaisilla osakemarkkinoilla

Tutkielman tavoitteena oli analysoida tunnuslukuihin ja tuottohistoriaan perustuvien sijoitusstrategioiden toimivuutta ja sykliriippuvuutta HEX:iin listatuista yrityksistä koostuvalla aineistolla. Tutkitut sijoitusstrategiat perustuivat arvostuskertoimien, betan ja menneiden tuottojen käyttöön analysointivälineinä käytettyjen kvintiiliportfolioiden muodostamiskriteereinä. Kontribuutiota tutkimukseen pyrittiin luomaan tarkastelemalla ensimmäistä kertaa suhdannesyklin vaikutuksia edellä mainittujen sijoitusstrategioiden toimivuuteen tutkimusaineistolla, joka kattoi useita suhdannesyklejä (pisimmillään vuodet 1991 - 2002). Suhdannesyklien käänteiden määrittämiseen käytettiin ostopäälliköiden indeksiä (PMI-indeksi), jonka on todettu toimivan hyvin esimerkiksi pörssikurssien kehitystä ennakoivana indikaattorina. Tulokset osoittivat P/E-, P/B-, EV/EBIT-, EV/EBITDA-, beta- ja momentumanomalioiden esiintyneen myös suomalaisilla osakemarkkinoilla vuosina 1991 – 2002. Tutkimuksessa saatiin näyttöä myös tuottohistoriaan pohjautuvien momentum-strategian ja winner-loser –strategian toimivuudesta. Näistä etenkin jälkimmäinen oli voimakkaasti sykliriippuvaista. Näiden tulosten mukaan suomalaiset osakemarkkinat eivät olisi käytetyillä tarkasteluperiodilla olleet edes heikosti tehokkaat, ts. osakemarkkinoiden keskimääräinen tuottotaso olisi ollut mahdollista ylittää pelkkään kurssihistoriaan perustuvien sijoitusstrategioiden avulla.