This paper analyses the dynamic properties among different credit risk indicators, by using credit default swap (CDS) spreads, asset swap spread (ASWPS) and the option adjusted spread (OAS) for a sample of firms from the EMU Corporate index of Merrill Lynch, during both pre and post Lehman Brothers bailout. We find that credit risk indicators price equally in the long run for the first part of the sample, while the linkage is less robust for the second. Moreover we show that the estimated no-arbitrage relations differ from those suggested by the theory, reflecting other elements than credit risk into prices. In the short run, the dynamic relation suggest a two-way linkage among different markets for credit risk. Results from long term dynamic analysis suggest that both CDS and ASWPS contribute equally to price discovery, while OAS market moves ahead of the derivative market for the pre-Lehman period, especially for European firms. On the other hand, CDS market is the main forum for credit risk after Lehman bailout, irrespective of geographical areas.
{"title":"Exploring the Empirical Properties Among Different Credit Risk Indicators for EMU Corporate Index","authors":"A. Carboni","doi":"10.2139/ssrn.1962857","DOIUrl":"https://doi.org/10.2139/ssrn.1962857","url":null,"abstract":"This paper analyses the dynamic properties among different credit risk indicators, by using credit default swap (CDS) spreads, asset swap spread (ASWPS) and the option adjusted spread (OAS) for a sample of firms from the EMU Corporate index of Merrill Lynch, during both pre and post Lehman Brothers bailout. We find that credit risk indicators price equally in the long run for the first part of the sample, while the linkage is less robust for the second. Moreover we show that the estimated no-arbitrage relations differ from those suggested by the theory, reflecting other elements than credit risk into prices. In the short run, the dynamic relation suggest a two-way linkage among different markets for credit risk. Results from long term dynamic analysis suggest that both CDS and ASWPS contribute equally to price discovery, while OAS market moves ahead of the derivative market for the pre-Lehman period, especially for European firms. On the other hand, CDS market is the main forum for credit risk after Lehman bailout, irrespective of geographical areas.","PeriodicalId":11800,"journal":{"name":"ERN: Stock Market Risk (Topic)","volume":"23 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2010-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81006370","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
With increased movement of investments across international boundaries owing to the integration of world economies, the understanding of efficiency of the emerging markets is also gaining greater importance. This paper investigates the weak form efficiency of the Colombo Stock Ex-change by analyzing returns on the two key indices of the exchange which are the All Share Price Index and the Milanka Price Index over a long term period commencing from the year 1985 up to the year 2009. Weak form efficiency is tested subjecting both the indices using returns both on a daily as well as a monthly basis testing the random walk hypothesis using four techniques of Autocorrelation and the use of a non-parametric test which is the runs test. Results of these tests prove that based on the daily returns that the market is weak form inefficient. When considering the monthly returns the runs test states that the market is efficient while Q statistic gives mixed results. The other tests are in line with the daily returns. The paper also considers anomalous behaviour in the Colombo Stock Exchange, with the intention of possibly identifying a day-of-the-week effect or a month-of-the-year-effect.
{"title":"Evidence for Weak Form Efficiency in Stock Markets: The Case of Colombo Stock Exchange","authors":"S. Fernando, P. Jayasinghe","doi":"10.2139/ssrn.2534900","DOIUrl":"https://doi.org/10.2139/ssrn.2534900","url":null,"abstract":"With increased movement of investments across international boundaries owing to the integration of world economies, the understanding of efficiency of the emerging markets is also gaining greater importance. This paper investigates the weak form efficiency of the Colombo Stock Ex-change by analyzing returns on the two key indices of the exchange which are the All Share Price Index and the Milanka Price Index over a long term period commencing from the year 1985 up to the year 2009. Weak form efficiency is tested subjecting both the indices using returns both on a daily as well as a monthly basis testing the random walk hypothesis using four techniques of Autocorrelation and the use of a non-parametric test which is the runs test. Results of these tests prove that based on the daily returns that the market is weak form inefficient. When considering the monthly returns the runs test states that the market is efficient while Q statistic gives mixed results. The other tests are in line with the daily returns. The paper also considers anomalous behaviour in the Colombo Stock Exchange, with the intention of possibly identifying a day-of-the-week effect or a month-of-the-year-effect.","PeriodicalId":11800,"journal":{"name":"ERN: Stock Market Risk (Topic)","volume":"88 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2010-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73397982","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The key concept underlying the Basel II framework for risk measurement and corresponding equity capital standards is that the existing regulations pertaining to credit risk will be individualised through reference to the internal ratings of banks. In accordance with the regulatory guidelines, Daniel Kaltofen, Stephan Paul and Stefan Stein develop an ‘optimised segmentation approach’ with regard to the credit default event and measure the implications for regulatory capital requirements. As regards methodology, they present an innovative technique and test it on a data set of approximately 413,000 motor vehicle loans. By classifying loans according to selective predictors of default, the authors find that banks can achieve significant savings in terms of ensuring a lower regulatory capital requirement. This provides banks with the opportunity to increase lending capacity. The technique overcomes the disadvantages of the more familiar standard methods used in today’s bank risk management and delivers more robust results.
《巴塞尔协议II》风险衡量框架和相应的权益资本标准的关键概念是，现有的信贷风险监管将参照银行的内部评级进行个体化。根据监管指导方针，Daniel Kaltofen, Stephan Paul和Stefan Stein开发了一种关于信用违约事件的“优化分割方法”，并衡量了对监管资本要求的影响。关于方法，他们提出了一项创新技术，并在大约413 000辆汽车贷款的数据集上进行了测试。通过根据选择性的违约预测因素对贷款进行分类，作者发现，银行可以在确保较低的监管资本要求方面实现显著节省。这为银行提供了增加贷款能力的机会。该技术克服了当今银行风险管理中使用的更熟悉的标准方法的缺点，并提供了更可靠的结果。
{"title":"Retail Loans and Basel II: Using Portfolio Segmentation to Reduce Capital Requirements","authors":"D. Kaltofen, Stephan Paul, Stefan Stein","doi":"10.2139/ssrn.2001386","DOIUrl":"https://doi.org/10.2139/ssrn.2001386","url":null,"abstract":"The key concept underlying the Basel II framework for risk measurement and corresponding equity capital standards is that the existing regulations pertaining to credit risk will be individualised through reference to the internal ratings of banks. In accordance with the regulatory guidelines, Daniel Kaltofen, Stephan Paul and Stefan Stein develop an ‘optimised segmentation approach’ with regard to the credit default event and measure the implications for regulatory capital requirements. As regards methodology, they present an innovative technique and test it on a data set of approximately 413,000 motor vehicle loans. By classifying loans according to selective predictors of default, the authors find that banks can achieve significant savings in terms of ensuring a lower regulatory capital requirement. This provides banks with the opportunity to increase lending capacity. The technique overcomes the disadvantages of the more familiar standard methods used in today’s bank risk management and delivers more robust results.","PeriodicalId":11800,"journal":{"name":"ERN: Stock Market Risk (Topic)","volume":"477 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2006-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85297650","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We investigate the risk-return relation in international stock markets using realized variance constructed from MSCI (Morgan Stanley Capital International) daily stock price indices. In contrast with CAPM, realized variance by itself provides negligible information about future excess stock market returns; however, we uncover a positive and significant risk-return tradeoff in many countries after controlling for the (U.S.) consumption-wealth ratio. U.S. realized variance is also significantly related to future international stock market returns; more importantly, it always subsumes the information content of its local counterparts. Our results indicate that stock market variance is an important determinant of the equity premium.
我们使用摩根士丹利资本国际(Morgan Stanley Capital international)每日股票价格指数构建的已实现方差来研究国际股票市场的风险收益关系。与CAPM相比，已实现方差本身提供的股票市场未来超额收益信息可以忽略不计;然而，在控制了(美国)消费-财富比率之后，我们发现在许多国家都存在积极而显著的风险-回报权衡。美国已实现方差也与未来国际股市收益显著相关;更重要的是，它总是包含其本地对应的信息内容。我们的研究结果表明，股票市场方差是股票溢价的重要决定因素。
{"title":"On the Risk-Return Relation in International Stock Markets, Forthcoming","authors":"Hui Guo","doi":"10.2139/ssrn.903818","DOIUrl":"https://doi.org/10.2139/ssrn.903818","url":null,"abstract":"We investigate the risk-return relation in international stock markets using realized variance constructed from MSCI (Morgan Stanley Capital International) daily stock price indices. In contrast with CAPM, realized variance by itself provides negligible information about future excess stock market returns; however, we uncover a positive and significant risk-return tradeoff in many countries after controlling for the (U.S.) consumption-wealth ratio. U.S. realized variance is also significantly related to future international stock market returns; more importantly, it always subsumes the information content of its local counterparts. Our results indicate that stock market variance is an important determinant of the equity premium.","PeriodicalId":11800,"journal":{"name":"ERN: Stock Market Risk (Topic)","volume":"35 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2006-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76143981","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article deals with specification and estimation of risk preferences, production risk, and technical inefficiency. It makes contribution in three separate areas of production economics. First, we model producers' attitude toward risk and derive risk preference functions (without assuming any parametric form of the utility function and any distribution of the error term representing production risk) when risk arises from production uncertainty and technical inefficiency. Second, the standard production risk model is extended to accommodate technical inefficiency and producers' attitude toward risk. Finally, the technical efficiency model is generalized to accommodate production risk and producers' attitude toward risk. Copyright 2002, Oxford University Press.
{"title":"Specification and Estimation of Production Risk, Risk Preferences and Technical Efficiency","authors":"S. Kumbhakar","doi":"10.1111/1467-8276.00239","DOIUrl":"https://doi.org/10.1111/1467-8276.00239","url":null,"abstract":"This article deals with specification and estimation of risk preferences, production risk, and technical inefficiency. It makes contribution in three separate areas of production economics. First, we model producers' attitude toward risk and derive risk preference functions (without assuming any parametric form of the utility function and any distribution of the error term representing production risk) when risk arises from production uncertainty and technical inefficiency. Second, the standard production risk model is extended to accommodate technical inefficiency and producers' attitude toward risk. Finally, the technical efficiency model is generalized to accommodate production risk and producers' attitude toward risk. Copyright 2002, Oxford University Press.","PeriodicalId":11800,"journal":{"name":"ERN: Stock Market Risk (Topic)","volume":"92 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2002-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75101024","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study examines the information content of Standard & Poor's common stock ranking changes. Since prior studies find Standard & Poor's common stock rankings provide investors with a measure of risk, a ranking change may signify a change in risk. Common stock ranking changes made by Standard & Poor's may provide investors with a low-cost means of predicting the direction of future market risk. Internal memoranda containing ranking changes from June 1985 through May 1987 were obtained directly from Standard & Poor's. Using a sample of 191 upgrades and 582 downgrades, results indicate that mean portfolio betas change following Standard & Poor's memorandum dates for ranking changes.
{"title":"The Information Content of Standard & Poor's Common Stock Ranking Changes","authors":"J. Felton, Pu Liu, Douglas Hearth","doi":"10.2307/3665657","DOIUrl":"https://doi.org/10.2307/3665657","url":null,"abstract":"This study examines the information content of Standard & Poor's common stock ranking changes. Since prior studies find Standard & Poor's common stock rankings provide investors with a measure of risk, a ranking change may signify a change in risk. Common stock ranking changes made by Standard & Poor's may provide investors with a low-cost means of predicting the direction of future market risk. Internal memoranda containing ranking changes from June 1985 through May 1987 were obtained directly from Standard & Poor's. Using a sample of 191 upgrades and 582 downgrades, results indicate that mean portfolio betas change following Standard & Poor's memorandum dates for ranking changes.","PeriodicalId":11800,"journal":{"name":"ERN: Stock Market Risk (Topic)","volume":"6 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"1991-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87349328","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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