The Spanish Review of Financial Economics最新文献

Using the Efficient Method of Moments we estimate a continuous time diffusion for the stochastic volatility of some international stock market indices that allows for possible jumps in returns. These jumps are needed for a sensible characterization of the dynamics of the distribution of returns, even under stochastic volatility. Although the stochastic volatility model with jumps in returns tends to exaggerate the negative skewness relative to the sample moments, the inclusion of jumps strongly improves the ability of the model to replicate sample kurtosis. This contrasts with the failure of the pure stochastic volatility model in generating high enough kurtosis. Our results extend the limited available evidence from the U.S. market to several European stock market indices.

The New Capital Accord (Basel II) proposes a minimum threshold of 10,000 Euros for operational losses when estimating regulatory capital for financial institutions. But since this recommendation is not compulsory for the bank industry, banks are allowed to apply internal thresholds discretionally. In this sense, we analyze the potential impact that the selection of a specific threshold could have on the final estimation of the capital charge for covering operational risk, adopting a critical perspective. For this purpose, by using the Internal Operational Losses Database (IOLD) provided by a Spanish Saving Bank, we apply the Loss Distribution Approach (LDA) for different modelling thresholds. The results confirm the opportunity cost in which banks can incur depending on the internal threshold selected. In addition, we consider that the regulatory threshold, established by the Committee, could result inadequate for some financial institutions due to the relative short length of the current IOLDs.

Evidence concerning the impact of boards on firms’ governance and performance remains controversial. We explore the issue of board effectiveness by examining the supervisory role boards play and their advisory function. We examine the importance of these two roles in high technology contexts and control for the endogenous nature of the representative variables in boards. Our paper uses a sample of European firms to highlight that in high-tech industries the advisory function of boards provides higher explanatory power for performance than does the monitoring function, and that larger and less independent boards may improve governance and consequently enhance performance.

This paper evaluates the incidence of the board of directors, the nomination and remuneration committees (NRCs) and the ownership structure on the amount, composition and pay-performance sensitivity of the remuneration of executive directors. Using a panel of Spanish listed firms in the period 2005–2009, our results show that the increases in executives’ remuneration are linked to variations in shareholders’ wealth. We have also found evidence that the size of both the board and the NRC and the shareholdings of external large blockholders and executives affect the amount and structure of executive remuneration. Moreover, it is found that the existence of investment opportunities together with size and profitability all influence remuneration policy. Our results may have implications for policy makers regarding the composition of the board and NRCs as it have not be found that the presence of independent directors would restrain executives pay or increase of pay-performance sensitivity.

Interest rate risk is one of the major financial risks faced by banks due to the very nature of the banking business. The most common approach in the literature has been to estimate the impact of interest rate risk on banks using a simple linear regression model. However, the relationship between interest rate changes and bank stock returns does not need to be exclusively linear. This article provides a comprehensive analysis of the interest rate exposure of the Spanish banking industry employing both parametric and non-parametric estimation methods. Its main contribution is to use, for the first time in the context of banks’ interest rate risk, a nonparametric regression technique that avoids the assumption of a specific functional form.

On the one hand, it is found that the Spanish banking sector exhibits a remarkable degree of interest rate exposure, although the impact of interest rate changes on bank, stock returns have significantly declined following the introduction of the euro. Further, a pattern of positive exposure emerges during the post-euro period. On the other hand, the results corresponding to the nonparametric model support the expansion of the conventional linear model in an attempt to gain a greater insight into the actual degree of exposure.

This paper analyses the risk-taking behavior of a fund manager in response to prior performance by conducting a comparative analysis between ethical and conventional investment portfolios. We examine the influence on managerial risk taking of the compensation and employment incentives. Our analysis looks at the British and Italian markets. We find differences in behavior between the two groups, with ethical investment portfolios managers enjoying greater freedom for shifting the risk taken. We can also see a greater influence of employment incentives in risk decision taking with respect to the managers of conventional investment portfolios. The results we have obtained are very similar for both the British and Italian markets.

Many firms choose to refinance their debt. We investigate the long run effects of this extended practice on credit ratings and credit spreads. We find that debt refinancing generates systematic rating downgrades unless a minimum firm value growth is observed. Deviations from this growth path imply asymmetric results. A lower firm value growth generates downgrades and a higher firm value growth generates upgrades, as expected. However, downgrades tend to be higher in absolute terms. We also find that the inverse relation between credit spreads and risk free rate that structural models usually predict still holds in this setting, but only in the short run. This negative relation will turn to be null in the medium run and positive in the long run.

This paper proposes an ICAPM in which the risk premium embedded in variance swaps is the factor mimicking portfolio for hedging exposure to changes in future investment conditions. Recent empirical evidence shows that the fears by investors to deviations from Normality in the distribution of returns are able to explain time-varying financial and macroeconomic risks in addition to being a determinant of the variance risk premium. Moreover, variance swaps hedges unfavorable changes in the stochastic investment opportunity set, and is not a redundant asset because significantly expands the efficient mean-variance frontier. Thence, we should expect the variance swap risk premium to be priced in the market. We report relatively favorable evidence on the incremental pricing information associated with the variance risk premium, particularly at shorter horizons.

Abstract

This note provides the conditions needed to obtain a multi-country term structure model where both bond yields for each country and the expected rate of depreciation (over any arbitrary period of time) are known affine functions of the set of state variables. In addition, two main families of dynamic term structure models are shown to satisfy these conditions.