Return of Equity Issues in the Spanish Stock Market from the Investor’s Perspective, during the 1997-2012 Period

Is it profitable for an investor, from a risk-return perspective, to acquire a stake in a quoted company when a capital increase is announced? This paper analyses the return obtained from the investment in equity issues with cash contribution and pre-emptive rights, aimed at funding corporate activities: acquisitions, investments in new facilities and/or strengthening the balance sheet of the companies undertaking the equity issue. During the 16 years covered by the study, the results show a negative average excess risk-adjusted return of almost 5%, from the moment that the equity offer is announced until the completion of the preferential subscription period. To obtain this excess return, the difference between the nominal Internal Rate of Return (IRR) and the expected return, using the CAPM, is computed for each equity issue. The intention behind this method is to eliminate the effects of time and any other possible effect on the stock price during the period of the analysis.The results from this article are consistent with the Pecking Order theory for the Spanish Stock Market also six months after the preferential subscription period. However, there is a positive return after three months.

The sensitivity of US banks' stock returns to interest and exchange rate changes

Purpose – The purpose of this paper is to investigate the impact of foreign exchange and interest rate changes on US banks’ stock returns. Design/methodology/approach – The approach employs an EGARCH model to account for the ARCH effects in daily returns. Most prior studies have used standard OLS estimation methods with the result that the presence of ARCH effects would have affected estimation efficiency. For comparative purposes, the standard OLS estimation method is also used to measure sensitivity. Findings – The findings are as follows: under the conditional t-distributional assumption, the EGARCH model generated a much better fit to the data although the goodness-of-fit of the model is not entirely satisfactory; the market index return accounts for most of the variation in stock returns at both the individual bank and portfolio levels; and the degree of sensitivity of the stock returns to interest rate and FX rate changes is not very pronounced despite the use of high frequency data. Earlier results had indicated that daily data provided greater evidence of exposure sensitivity. Practical implications – Assuming that banks do not hedge perfectly, these findings have important financial implications as they suggest that the hedging policies of the banks are not reflected in their stock prices. Alternatively, it is possible that different GARCH-type models might be more appropriate when modelling high frequency returns. Originality/value – The paper contributes to existing knowledge in the area by showing that ARCH effects do impact on measures of sensitivity.

Time resolved bit error rate analysis of a fast switching tunable laser for use in optically switched networks

We investigate the use of different direct detection modulation formats in a wavelength switched optical network. We find the minimum time it takes a tunable sampled grating distributed Bragg reflector laser to recover after switching from one wavelength channel to another for different modulation formats. The recovery time is investigated utilizing a field programmable gate array which operates as a time resolved bit error rate detector. The detector offers 93 ps resolution operating at 10.7 Gb/s and allows for all the data received to contribute to the measurement, allowing low bit error rates to be measured at high speed. The recovery times for 10.7 Gb/s non-return-to-zero on–off keyed modulation, 10.7 Gb/s differentially phase shift keyed signal and 21.4 Gb/s differentially quadrature phase shift keyed formats can be as low as 4 ns, 7 ns and 40 ns, respectively. The time resolved phase noise associated with laser settling is simultaneously measured for 21.4 Gb/s differentially quadrature phase shift keyed data and it shows that the phase noise coupled with frequency error is the primary limitation on transmitting immediately after a laser switching event.

RZ-DPSK transmission at 80 Gbit/s channel rate using in-line semiconductor optical amplifiers

We numerically demonstrate the feasibility of return-to-zero differential phase-shift keying transmission at 8.0 Gbit/s channel rate using cascaded in-line semiconductor optical amplifiers.

RZ-DPSK transmission at 80 Gbit/s channel rate using in-line semiconductor optical amplifiers

We numerically demonstrate the feasibility of return-to-zero differential phase-shift keying transmission at 80 Gbit/s channel rate using cascaded in-line semiconductor optical amplifiers.

RZ-DPSK transmission at 80 Gbit/s channel rate using in-line semiconductor optical amplifiers

We numerically demonstrate the feasibility of return-to-zero differential phase-shift keying transmission at 80 Gbit/s channel rate using cascaded in-line semiconductor optical amplifiers.

Bit-error rate performance of 20 Gbit/s WDM RZ-DPSK non-slope matched submarine transmission systems

Applying direct error counting, we assess the performance of 20 Gbit/s wavelength-division multiplexing return-to-zero differential phase-shift keying (RZ-DPSK) transmission at 0.4 bit/(s Hz) spectral efficiency for application on installed non-zero dispersion-shifted fibre based transoceanic submarine systems. The impact of the pulse duty cycle on the system performance is investigated and the reliability of the existing theoretical approaches to the BER estimation for the RZ-DPSK format is discussed.

RZ-DPSK transmission at 80 Gbit/s channel rate using in-line semiconductor optical amplifiers

We numerically demonstrate the feasibility of return-to-zero differential phase-shift keying transmission at 8.0 Gbit/s channel rate using cascaded in-line semiconductor optical amplifiers.

RZ-DPSK transmission at 80 Gbit/s channel rate using in-line semiconductor optical amplifiers

We numerically demonstrate the feasibility of return-to-zero differential phase-shift keying transmission at 80 Gbit/s channel rate using cascaded in-line semiconductor optical amplifiers.

Dynamic models of exchange rate dependence using option prices and historical returns

Models for the conditional joint distribution of the U.S. Dollar/Japanese Yen and Euro/Japanese Yen exchange rates, from November 2001 until June 2007, are evaluated and compared. The conditional dependency is allowed to vary across time, as a function of either historical returns or a combination of past return data and option-implied dependence estimates. Using prices of currency options that are available in the public domain, risk-neutral dependency expectations are extracted through a copula repre- sentation of the bivariate risk-neutral density. For this purpose, we employ either the one-parameter \Normal" or a two-parameter \Gumbel Mixture" specification. The latter provides forward-looking information regarding the overall degree of covariation, as well as, the level and direction of asymmetric dependence. Specifications that include option-based measures in their information set are found to outperform, in-sample and out-of-sample, models that rely solely on historical returns.

Short-horizon excess returns and exchange rate and interest rate effects

stocks. We examine the effects of foreign exchange (FX) and interest rate changes on the excess returns of U.S. stocks, for short-horizons of 1-40 days. Our new evidence shows a tendency for the volatility of both excess returns and FX rate changes to be negatively related with FX rate and interest rate effects. Both the number of firms with significant FX rate and interest rate effects and the magnitude of their exposures increase with the length of the return horizon. Our finding seems inconsistent with the view that firms hedge effectively at short-return horizons.

Time resolved bit error rate analysis of a fast switching tunable laser for use in optically switched networks

We investigate the use of different direct detection modulation formats in a wavelength switched optical network. We find the minimum time it takes a tunable sampled grating distributed Bragg reflector laser to recover after switching from one wavelength channel to another for different modulation formats. The recovery time is investigated utilizing a field programmable gate array which operates as a time resolved bit error rate detector. The detector offers 93 ps resolution operating at 10.7 Gb/s and allows for all the data received to contribute to the measurement, allowing low bit error rates to be measured at high speed. The recovery times for 10.7 Gb/s non-return-to-zero on–off keyed modulation, 10.7 Gb/s differentially phase shift keyed signal and 21.4 Gb/s differentially quadrature phase shift keyed formats can be as low as 4 ns, 7 ns and 40 ns, respectively. The time resolved phase noise associated with laser settling is simultaneously measured for 21.4 Gb/s differentially quadrature phase shift keyed data and it shows that the phase noise coupled with frequency error is the primary limitation on transmitting immediately after a laser switching event.

Bit-error rate performance of 20 Gbit/s WDM RZ-DPSK non-slope matched submarine transmission systems

Applying direct error counting, we assess the performance of 20 Gbit/s wavelength-division multiplexing return-to-zero differential phase-shift keying (RZ-DPSK) transmission at 0.4 bit/(s Hz) spectral efficiency for application on installed non-zero dispersion-shifted fibre based transoceanic submarine systems. The impact of the pulse duty cycle on the system performance is investigated and the reliability of the existing theoretical approaches to the BER estimation for the RZ-DPSK format is discussed.

Exchange Rate Policy and Economic Growth after the Financial Crisis in Central and Eastern Europe

In a paper on the effects of the global financial crisis in Central and Eastern Europe (CEE), the author reacts to a paper of Åslund (2011) published in the same issue of Eurasian Geography and Economics on the influence of exchange rate policies on the region’s recovery. The author argues that post-crisis corrections in current account deficits in CEE countries do not in themselves signal a return to steady economic growth. Disagreeing with Åslund over the role of loose monetary policy in fostering the region’s economic problems, he outlines a number of competitiveness problems that remain to be addressed in the 10 new EU member states of CEE, along with improvements in framework conditions supporting future macroeconomic growth.

Exchange rate overvaluation under hyperinflation: The case of Peru

This dissertation examines the behavior of the exchange rate under two different scenarios. The first one is characterized by, relatively, low inflation or a situation where prices adjust sluggishly. The second is a high inflation economy where prices respond very rapidly even to unanticipated shocks. In the first one, following a monetary expansion, the exchange rate overshoots, i.e. the nominal exchange rate depreciates at a faster pace than the price level. Under high levels of inflation, prices change faster than the exchange rate so the exchange rate undershoots its long run equilibrium value.^ The standard work in this area, Dornbusch (1976), explains the overshooting process in the context of perfect capital mobility and sluggish adjustment in the goods market. A monetary expansion will make the exchange rate increase beyond its long run equilibrium value. This dissertation expands on Dornbusch's model and provides an analysis of the exchange rate under conditions of currency substitution and price flexibility, characteristics of the Peruvian economy during the hyper inflation process that took place at the end of the 1980's. The results of the modified Dornbusch model reveal that, given a monetary expansion, the change in the price level will be larger than the change in the exchange rate if prices react more than proportionally to the monetary shock.^ We will expect this over-reaction in circumstances of high inflation when the velocity of money is increasing very rapidly. Increasing velocity of money, gives rise to a higher relative price variability which in turn contributes to the appearance of new financial (and also non-financial) instruments that report a higher return than the exchange rate, causing people to switch their demand for foreign exchange to this new assets. In the context of currency substitution, economic agents hoard and use foreign exchange as a store of value. The big decline in output originated by hyper inflation induces people to sell this hoarded money to finance current expenses, increasing the supply of foreign exchange in the market. Both, the decrease in demand and the increase in supply reduce the price of foreign exchange i.e. the real exchange rate. The findings mentioned above are tested using Peruvian data for the period January 1985-July 1990, the results of the econometric estimation confirm our findings in the theoretical model. ^