Anatomy and lessons of the global financial crisis. Is US consumption financed by Chinese savings?

Savings and investments in the American money market by emerging countries, primarily China, financed the excessive consumption of the United States in the early 2000s, which indirectly led to a global financial crisis. The crisis started from the real estate mortgage market. Such balance disrupting processes began on the American financial market which contradicted all previously known equilibrium theories of every school of economics. Economics has yet to come up with models or empirical theories for this new disequilibrium. This is why the outbreak of the crisis could not be prevented or at least predicted. The question is, to what extent can existing market theories, calculation methods and the latest financial products be held responsible for the new situation. This paper studies the influence of the efficient market and modern portfolio theory, as well as Li’s copula function on the American investment market. Naturally, the issues of moral risks and greed, credit ratings and shareholder control, limited liability and market regulations are aspects, which cannot be ignored. In summary, the author outlines the potential alternative measures that could be applied to prevent a new crisis, defines the new directions of economic research and draws the conclusion for the Hungarian economic policy.

Análise da sobre-reação e sub-reação nos ativos de primeira e segunda linha do mercado acionário brasileiro

The Behavioral Finance develop as it is perceived anomalies in these markets efficient. This fields of study can be grouped into three major groups: heuristic bias, tying the shape and inefficient markets. The present study focuses on issues concerning the heuristics of representativeness and anchoring. This study aimed to identify the then under-reaction and over-reaction, as well as the existence of symmetry in the active first and second line of the Brazilian stock market. For this, it will be use the Fuzzy Logic and the indicators that classify groups studied from the Discriminant Analysis. The highest present, indicator in the period studied, was the Liabilities / Equity, demonstrating the importance of the moment to discriminate the assets to be considered "winners" and "losers." Note that in the MLCX biases over-reaction is concentrated in the period of financial crisis, and in the remaining periods of statistically significant biases, are obtained by sub-reactions. The latter would be in times of moderate levels of uncertainty. In the Small Caps the behavioral responses in 2005 and 2007 occur in reverse to those observed in the Mid-Large Cap. Now in times of crisis would have a marked conservatism while near the end of trading on the Bovespa speaker, accompanied by an increase of negotiations, there is an overreaction by investors. The other heuristics in SMLL occurred at the end of the period studied, this being a under-reaction and the other a over-reaction and the second occurring in a period of financial-economic more positive than the first. As regards the under / over-reactivity in both types, there is detected a predominance of either, which probably be different in the context in MLCX without crisis. For the period in which such phenomena occur in a statistically significant to note that, in most cases, such phenomena occur during the periods for MLCX while in SMLL not only biases are less present as there is no concentration of these at any time . Given the above, it is believed that while detecting the presence of bias behavior at certain times, these do not tend to appear to a specific type or heuristics and while there were some indications of a seasonal pattern in Mid- Large Caps, the same behavior does not seem to be repeated in Small Caps. The tests would then suggest that momentary failures in the Efficient Market Hypothesis when tested in semistrong form as stated by Behavioral Finance. This result confirms the theory by stating that not only rationality, but also human irrationality, is limited because it would act rationally in many circumstances

Análise da sobre-reação e sub-reação nos ativos de primeira e segunda linha do mercado acionário brasileiro

The Behavioral Finance develop as it is perceived anomalies in these markets efficient. This fields of study can be grouped into three major groups: heuristic bias, tying the shape and inefficient markets. The present study focuses on issues concerning the heuristics of representativeness and anchoring. This study aimed to identify the then under-reaction and over-reaction, as well as the existence of symmetry in the active first and second line of the Brazilian stock market. For this, it will be use the Fuzzy Logic and the indicators that classify groups studied from the Discriminant Analysis. The highest present, indicator in the period studied, was the Liabilities / Equity, demonstrating the importance of the moment to discriminate the assets to be considered "winners" and "losers." Note that in the MLCX biases over-reaction is concentrated in the period of financial crisis, and in the remaining periods of statistically significant biases, are obtained by sub-reactions. The latter would be in times of moderate levels of uncertainty. In the Small Caps the behavioral responses in 2005 and 2007 occur in reverse to those observed in the Mid-Large Cap. Now in times of crisis would have a marked conservatism while near the end of trading on the Bovespa speaker, accompanied by an increase of negotiations, there is an overreaction by investors. The other heuristics in SMLL occurred at the end of the period studied, this being a under-reaction and the other a over-reaction and the second occurring in a period of financial-economic more positive than the first. As regards the under / over-reactivity in both types, there is detected a predominance of either, which probably be different in the context in MLCX without crisis. For the period in which such phenomena occur in a statistically significant to note that, in most cases, such phenomena occur during the periods for MLCX while in SMLL not only biases are less present as there is no concentration of these at any time . Given the above, it is believed that while detecting the presence of bias behavior at certain times, these do not tend to appear to a specific type or heuristics and while there were some indications of a seasonal pattern in Mid- Large Caps, the same behavior does not seem to be repeated in Small Caps. The tests would then suggest that momentary failures in the Efficient Market Hypothesis when tested in semistrong form as stated by Behavioral Finance. This result confirms the theory by stating that not only rationality, but also human irrationality, is limited because it would act rationally in many circumstances

la influencia de la felicidad en las decisiones de inversión de activos de largo plazo para una muestra de siete gerentes financieros en la ciudad de Bogotá en el año 2016.

El presente artículo contribuye con la investigación de las Finanzas Corporativas del Comportamiento, rama de las finanzas corporativas que considera que el individuo que toma decisiones financieras no es completamente racional y que por hecho existen sesgos psicológicos que influyen en sus decisiones. Este documento se enfoca, desde el punto de vista conceptual y también mediante el análisis de un estudio de campo, en la influencia de la felicidad en las decisiones de inversión en activos de largo plazo para un grupo de siete gerentes ubicados en la ciudad de Bogotá en el año 2016. En el documento se abarca el concepto general de las finanzas corporativas del comportamiento, se define la felicidad y se presentan sub-variables determinantes para la felicidad del individuo como lo son: salud, balance vida/trabajo, educación y habilidades, conexiones sociales y medio ambiente. Finalmente se presenta cómo éstas afectan a los gerentes financieros en sus decisiones de acuerdo a la investigación realizada.

How long is the memory of the US stock market?

The Efficient Market Hypothesis (EMH), one of the most important hypothesis in financial economics, argues that return rates have no memory (correlation) which implies that agents cannot make abnormal profits in financial markets, due to the possibility of arbitrage operations. With return rates for the US stock market, we corroborate the fact that with a linear approach, return rates do not show evidence of correlation. However, linear approaches might not be complete or global, since return rates could suffer from nonlinearities. Using detrended cross-correlation analysis and its correlation coefficient, a methodology which analyzes long-range behavior between series, we show that the long-range correlation of return rates only ends in the 149th lag, which corresponds to about seven months. Does this result undermine the EMH?

Stochastic modelling of financial time series with memory and multifractal scaling

Financial processes may possess long memory and their probability densities may display heavy tails. Many models have been developed to deal with this tail behaviour, which reflects the jumps in the sample paths. On the other hand, the presence of long memory, which contradicts the efficient market hypothesis, is still an issue for further debates. These difficulties present challenges with the problems of memory detection and modelling the co-presence of long memory and heavy tails. This PhD project aims to respond to these challenges. The first part aims to detect memory in a large number of financial time series on stock prices and exchange rates using their scaling properties. Since financial time series often exhibit stochastic trends, a common form of nonstationarity, strong trends in the data can lead to false detection of memory. We will take advantage of a technique known as multifractal detrended fluctuation analysis (MF-DFA) that can systematically eliminate trends of different orders. This method is based on the identification of scaling of the q-th-order moments and is a generalisation of the standard detrended fluctuation analysis (DFA) which uses only the second moment; that is, q = 2. We also consider the rescaled range R/S analysis and the periodogram method to detect memory in financial time series and compare their results with the MF-DFA. An interesting finding is that short memory is detected for stock prices of the American Stock Exchange (AMEX) and long memory is found present in the time series of two exchange rates, namely the French franc and the Deutsche mark. Electricity price series of the five states of Australia are also found to possess long memory. For these electricity price series, heavy tails are also pronounced in their probability densities. The second part of the thesis develops models to represent short-memory and longmemory financial processes as detected in Part I. These models take the form of continuous-time AR(∞) -type equations whose kernel is the Laplace transform of a finite Borel measure. By imposing appropriate conditions on this measure, short memory or long memory in the dynamics of the solution will result. A specific form of the models, which has a good MA(∞) -type representation, is presented for the short memory case. Parameter estimation of this type of models is performed via least squares, and the models are applied to the stock prices in the AMEX, which have been established in Part I to possess short memory. By selecting the kernel in the continuous-time AR(∞) -type equations to have the form of Riemann-Liouville fractional derivative, we obtain a fractional stochastic differential equation driven by Brownian motion. This type of equations is used to represent financial processes with long memory, whose dynamics is described by the fractional derivative in the equation. These models are estimated via quasi-likelihood, namely via a continuoustime version of the Gauss-Whittle method. The models are applied to the exchange rates and the electricity prices of Part I with the aim of confirming their possible long-range dependence established by MF-DFA. The third part of the thesis provides an application of the results established in Parts I and II to characterise and classify financial markets. We will pay attention to the New York Stock Exchange (NYSE), the American Stock Exchange (AMEX), the NASDAQ Stock Exchange (NASDAQ) and the Toronto Stock Exchange (TSX). The parameters from MF-DFA and those of the short-memory AR(∞) -type models will be employed in this classification. We propose the Fisher discriminant algorithm to find a classifier in the two and three-dimensional spaces of data sets and then provide cross-validation to verify discriminant accuracies. This classification is useful for understanding and predicting the behaviour of different processes within the same market. The fourth part of the thesis investigates the heavy-tailed behaviour of financial processes which may also possess long memory. We consider fractional stochastic differential equations driven by stable noise to model financial processes such as electricity prices. The long memory of electricity prices is represented by a fractional derivative, while the stable noise input models their non-Gaussianity via the tails of their probability density. A method using the empirical densities and MF-DFA will be provided to estimate all the parameters of the model and simulate sample paths of the equation. The method is then applied to analyse daily spot prices for five states of Australia. Comparison with the results obtained from the R/S analysis, periodogram method and MF-DFA are provided. The results from fractional SDEs agree with those from MF-DFA, which are based on multifractal scaling, while those from the periodograms, which are based on the second order, seem to underestimate the long memory dynamics of the process. This highlights the need and usefulness of fractal methods in modelling non-Gaussian financial processes with long memory.

A note on trader Sharpe Ratios

Traders in the financial world are assessed by the amount of money they make and, increasingly, by the amount of money they make per unit of risk taken, a measure known as the Sharpe Ratio. Little is known about the average Sharpe Ratio among traders, but the Efficient Market Hypothesis suggests that traders, like asset managers, should not outperform the broad market. Here we report the findings of a study conducted in the City of London which shows that a population of experienced traders attain Sharpe Ratios significantly higher than the broad market. To explain this anomaly we examine a surrogate marker of prenatal androgen exposure, the second-to-fourth finger length ratio (2D:4D), which has previously been identified as predicting a trader's long term profitability. We find that it predicts the amount of risk taken by traders but not their Sharpe Ratios. We do, however, find that the traders' Sharpe Ratios increase markedly with the number of years they have traded, a result suggesting that learning plays a role in increasing the returns of traders. Our findings present anomalous data for the Efficient Markets Hypothesis.

The rise of government in Early Childhood Education and Care following the Child Care Act 1972 : the lasting legacy of the 1990s in setting the reform agenda for ECEC in Australia

Less than twenty years on from the proclamation of the Child Care Act 1972, and introduction of funding for not-for-profit child care centres, a series of market-driven public policies paved the way for the emergence of Australia’s current ECEC quasi-market. Seeking to respond to increasing demand for work-related child care in the 1990s, and to manage associated costs, a succession of Australian Governments turned to market theory and New Public Management (NPM) principles to inform ECEC policy. Reflecting on an era of high policy activity within ECEC, this paper examines a series of policy events and texts that set the course for the reform agenda that was to ensue in ECEC.

Portfolio selection using artificial intelligence

The application of artificial intelligence in finance is relatively new area of research. This project employed artificial neural networks (ANNs) that use both fundamental and technical inputs to predict future prices of widely held Australian stocks and use these predicted prices for stock portfolio selection over a long investment horizon. The research involved the creation and testing of a large number of possible network configurations and draws conclusions about ANN architectures and their overall suitability for the purpose of stock portfolio selection.

Essays on momentum investing strategies

The momentum investment strategy, which buys recent winner stocks and sells recent loser stocks, earns returns that are simply too good to be explained by traditional finance theories. This thesis extends our understanding of the sources of momentum profits. The research shows that part of the seemingly anomalous returns can be explained by the market's reaction to public news, is affected by how delisting returns are calculated, and is biased by ignoring the time-varying risk of the trading strategy.

Yhteisön ja yhteiskunnan ehdoilla : Seurakuntien ja kuntien yhteistyö vuorovaikutuksen näkökulmasta

In this research, the cooperation between Finnish municipalities and Evangelical Lutheran parishes is studied from the standpoint of institutional interaction. The most essential theoretical background for the study is the differentiation thesis of the secularization theory. Cooperation from the viewpoints of both organizations is examined using the functional approach. Furthermore, the market theory and other theories are applied in order to place the studied phenomenon in the wider context of the theories of the sociology of religion. Sacralization in modern society and its relationship with the differentiation thesis of the secularization theory are in the theoretical foci. In addition, along with a descriptive examination of cooperation, the normative sides of the phenomenon are discussed. The survey was conducted among all municipalities and parishes in continental Finland. The questionnaires were sent to all municipal managers of youth work and afternoon activities and to all managers of child, youth and social work in the parishes. The response rate for the municipalities was 73.9 % and for the parishes 69.5 %. In addition, two qualitative data were utilized. The aim of the study is to scrutinize what kind of limitations of differentiation can be caused by the interaction between the secular and the religious. In order to solve the problem, an empirical study of sacralization in the modern context is required. For this purpose, the survey was carried out to determine the effects of the religious on the secular and the impact of the secular on the religious. In the articles of the study the following relationships are discussed: the positions of municipalities and parishes in relation to the state and civil society; cooperation in relation to differentiation; sacralization in relation to the differentiation thesis and cooperation in relation to pluralism. The results of the study highlighted the significance of the cooperation, which was contrary to the secularization theory connected to religious sacralization. The acceptance of the appearance of religion in cooperation and parishes support for municipal function was high in municipalities. Religious cooperation was more active than secular cooperation within all fields. This was also true between fields: religiously orientated child work was more active than the societally orientated social work of the church. Religious cooperation in modern fields of activity underlined sacralization. However, the acceptance of sacralization was weaker in cities than rural areas. Positive relationships between the welfare function of municipalities and the religious function of parishes emphasized the incompleteness of differentiation and the importance of sacralization. The relationship of the function of municipalities with parishes was neither negative nor neutral. Thus, in the most active fields, that is, child work and the traditional social work of the church, the orientation of parishes in cooperation supported the functions of both organizations. In more passive fields, that is, youth work and the societal social work of the church, parishes were orientated towards supporting the municipal function. The orientation of municipalities to religion underlined the perception that religious function is necessary for cooperation. However, the official character of cooperation supported accommodation to the requirements of societal pluralism. According to the results, sacralization can be effective also at the institutional level. The religious effect of voluntary cooperation means that religious sacralization can also readjust to modern society. At the same time, the results of the study stressed the importance of institutional autonomy. Thus, the public sector has a central role in successful cooperation. The conditions of cooperation are weakened if there is no official support of cooperation or adjustment to the individual rights of modern society. The results called into question the one-directional assumptions in the secularization paradigm and the modernization theory in the background. In these assumptions, religion that represents the traditional is seen to give way to the modern, especially at the institutional level. Lack of an interactional view was identified as a central weakness of the secularization paradigm. In the theoretical approach created in the study, an interactional view between religious and secular institutions was made possible by limiting the core of the differentiation thesis to autonomy. The counter forces of differentiation are despecialization and sacralization. These changes in the secularization theory bring about new interactivity on the institutional level. In addition to the interactional approach, that is, the secularization and sacralization theory created as a synthesis of the study, interaction between the religious and the secular is discussed from the standpoint of multiple modernities. The spiritual welfare role of religion is seen as a potential supporter of secular institutions. Religion is set theoretically amongst other ideologies and agents, which can create communal bonds in modern society. Key words: cooperation, municipalities, parishes, sacralization, secularization, modernization, multiple modernities, differentiation, interaction, democracy, secularism, pluralism, civil society

Finnish Short-Term Stock Returns

Functioning capital markets are a crucial part of a competitive economy since they provide the mechanisms to allocate resources. In order to be well functioning a capital market has to be efficient. Market efficiency is defined as a market where prices at any time fully reflect all available information. Basically, this means that abnormal returns cannot be predicted since they are dependent on future, presently unknown, information. The debate of market efficiency has been going on for several decades. Most academics today would probably agree that financial markets are reasonably efficient since virtually nobody has been able to achieve continuous abnormal positive returns. However, it is clear that a set of return anomalies exists, although they are apparently to small to enable substantial economic profit. Moreover, these anomalies can often be attributed to market design. The motivation for this work is to expand the knowledge of short-term trading patterns and to offer some explanations for these patterns. In the first essay the return pattern during the day is examined. On average stock prices move during two time periods of the day, namely, immediately after the opening and around the formal close of the market. Since stock prices, on average, move upwards these abnormal returns are generally positive and cause the distinct U-shape of intraday returns. In the second essay the results in the first essay are examined further. The return pattern around the former close is shown to partly be the result of manipulative action by market participants. In the third essay the focus is shifted towards trading patterns of the underlying stocks on days when index options and index futures on the stocks expire. Generally no expiration day effect was found. However, some indication of an expiration day effect was found when a large amount of open in- or at-the-money contracts existed. Also, the effects were likelier to be found for shares with high index-weight but fairly low trading volume. Last, in the forth essay the attention is turned to the behaviour of different tax clienteles around the dividend ex-day. Two groups of investors showed abnormal trading behaviour. Domestic non-financial investors, especially domestic companies, showed a dividend capturing behaviour, i.e. buying cum-dividend and selling ex-dividend shares. The opposite behaviour was found for foreign investors and domestic financial institutions. The effect was more notable for high yield, high volume stocks.

Análise comparativa dos modelos de cálculo dos retornos anormais utilizando o evento recompra de ações na Bovespa

Este trabalho tem por objetivo verificar se há diferença quanto ao nível de significância estatística no cálculo do retorno anormal realizado através de quatro modelos estatísticos utilizados em estudos de eventos, tendo como objeto de estudo empresas no mercado de ações no Brasil durante o período de março de 2003 até julho de 2010 na Bovespa. Considerando a importância do cálculo do retorno anormal nos estudos de eventos, bem como possíveis variações de resultados decorrentes da escolha do modelo de cálculo, este estudo utiliza um tema bastante conhecido, qual seja, o anúncio de recompra de ações feito pela própria companhia emissora dos títulos. A metodologia utilizada nesta pesquisa foi quantitativa, utilizando o estudo de corte transversal. Os resultados apontam que há diferença entre os níveis de significância encontrados. Ao analisar o gráfico dos modelos calculados no período da janela do evento, verificou-se que as empresas que recompraram ações a fizeram quando os papéis estavam com retorno anormal acumulado negativo e, após a recompra, os papéis tiveram retornos anormais acumulados positivos. Recalculou-se os dois modelos que utilizam o Ibovespa em sua fórmula de cálculo, através de um Ibovespa sem ponderação e conclui-se que os resultados apontam na direção de se evitar o uso de índices ponderados de mercado, preferindo a utilização de carteiras compostas apenas com uma ação para cada empresa componente da carteira de controle. Após este recálculo, verificou-se que o modelo que era menos próximo dos demais graficamente era o modelo de retorno ajustado ao mercado ponderado. Por fim, as evidências empíricas indicam que o mercado de capitais brasileiro ajusta tempestivamente os papéis das empresas que realizaram recompra de ações, em linha com o que prescreve a hipótese do mercado eficiente na sua forma semiforte.

Mudança no Critério de Contabilização de Instrumentos Financeiros pelo IASB: estudo de evento sobre os títulos soberanos da Grécia,

A alteração feita pelo IASB em 2008 na classificação dos instrumentos financeiros para reduzir as perdas bancárias com a crise do subprime e de títulos soberanos dos países-membros da União Europeia, após um pedido protocolado pela Comissão da União Europeia, motivou esta pesquisa. A referida alteração ensejou a mudança do critério de avaliação, que passou de valor justo para valor amortizado, para os instrumentos reclassificados, muito embora alguns bancos não tenham aderido à reclassificação, mantendo a orientação original que determinava a avaliação pelo valor justo. Através de Estudo de Evento testou-se a Hipótese de Eficiência de Mercado - HEM, analisando 33 instituições bancárias detentoras de títulos soberanos gregos. Embora a alteração tenha colaborado para que essas instituições bancárias protelassem essas perdas no resultado, não afetou os fluxos de caixa futuros. E como evidenciam os resultados da pesquisa, o mercado foi equitativo com essas instituições, penalizando-as com base no grau de exposição aos títulos gregos, independentemente do critério utilizado, corroborando a HEM: o valor de um ativo é o valor presente dos fluxos de caixa futuros e não dos lucros. Uma consequência importante foi que os governos, através da terceira revisão do Acordo de Capital de Basileia, adotaram medidas para regulamentar com mais rigor as instituições financeiras, no intuito que essas instituições, futuramente, possam suportar melhor os efeitos de uma crise financeira.

Analyses on Gold and US Dollar in Vietnam's Transitional Economy

This paper looks into economic insights offerred by considerations of two important financial markets in Vietnam, gold and USD. In general, the paper focuses on time series properties, mainly returns at different frequencies, and test the weak-form efficient market hypothesis. All the test rejects the efficiency of both gold and foreign exchange markets. All time series exhibit strong serial correlations. ARMA-GARCH specifications appear to have performed well with different time series. In all cases the changing volatility phenomenon is strongly supported through empirical data. An additional test is performed on the daily USD return to try to capture the impacts of Asian financial crisis and daily price limits applicable. No substantial impacts of the Asian crisis and the central bank-devised limits are found to influence the risk level of daily USD return.