The paper analyses the interactions between the ‘cash’ market (MTS Cash) and the futures market (Eurex) of Italian government bonds in terms of liquidity, price correlation and volatility. Based on daily data, the growth of the Eurex market seems to support the tightening of the bid-ask spread of MTS Cash, all things being equal, thus confirming a healthy and efficient link between cash and futures markets. Against this backdrop, a high frequency analysis highlights some episodes of partial divergence between price developments of futures and cash markets, which might be related to differences in the microstructures of the two markets. The futures market is order driven while the cash market is quote driven; furthermore different types of participants are active in each market. At higher frequencies, episodes of unidirectional propagation of volatility shocks from BTP futures to the MTS Cash market materialize, with potential spillovers on cash market liquidity conditions. In this regard, it is also important to consider the role played by High Frequency Traders, whose activity in futures markets may well contribute to explaining the peculiarities in price dynamics highlighted by high frequency data.
{"title":"BTP Futures and Cash Relationships: A High Frequency Data Analysis","authors":"O. Panzarino, Francesco Potente, A. Puorro","doi":"10.2139/ssrn.2896831","DOIUrl":"https://doi.org/10.2139/ssrn.2896831","url":null,"abstract":"The paper analyses the interactions between the ‘cash’ market (MTS Cash) and the futures market (Eurex) of Italian government bonds in terms of liquidity, price correlation and volatility. Based on daily data, the growth of the Eurex market seems to support the tightening of the bid-ask spread of MTS Cash, all things being equal, thus confirming a healthy and efficient link between cash and futures markets. Against this backdrop, a high frequency analysis highlights some episodes of partial divergence between price developments of futures and cash markets, which might be related to differences in the microstructures of the two markets. The futures market is order driven while the cash market is quote driven; furthermore different types of participants are active in each market. At higher frequencies, episodes of unidirectional propagation of volatility shocks from BTP futures to the MTS Cash market materialize, with potential spillovers on cash market liquidity conditions. In this regard, it is also important to consider the role played by High Frequency Traders, whose activity in futures markets may well contribute to explaining the peculiarities in price dynamics highlighted by high frequency data.","PeriodicalId":341097,"journal":{"name":"ERN: Europe (Developed Markets) (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-09-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130973024","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 most controversial issues regarding EU international investment agreements are, on the one hand, the actual extent of the EU’s exclusive external competence over international investments and, on the other, the opportunity to include investor-state dispute settlement (ISDS) clauses in these agreements. The former issue is mainly a legal question, and it especially concerns the inclusion of portfolio investments in the EU’s exclusive external competence. In this respect, this article seeks to provide some insights on the opinion that the European Commission has recently requested from the Court of Justice on the free trade agreement between the EU and Singapore on the basis of the latest developments in the case law of the Court of Justice of the European Union. By contrast, the second issue is mainly a political question and focuses on the inclusion of ISDS in the investment chapter of the Comprehensive Trade and Economic Agreement (CETA) between the EU and Canada. In this respect, while highlighting the main criticisms of the inclusion of ISDS in CETA, it is argued that the right response to European concerns about ISDS provisions in CETA and in TTIP should not be the removal of ISDS from those agreements. Instead, in order to reduce the asymmetric conditions related to the regulatory powers of the parties to CETA, it would be opportune to ask whether it may be appropriate to adopt, in the EU, a system of control on foreign investments like the one existing in Canada and in the United States. In particular, it is demonstrated how the solution can be found in Articles 64(2) and 207(2) TFEU that could be used to adopt a regulation establishing an EU committee on foreign investment in charge of the review of inflow investments coming from non-EU countries in order to protect the EU’s general interests — first, EU security and welfare — just as the Committee on Foreign Investment in the United States and the Minister of Industry of Canada already do.
{"title":"Recent Developments in the Most Controversial Aspects of EU International Investment Agreements: Portfolio Investments and Investor-State Dispute Settlement","authors":"Ruggiero Cafari Panico, F. di Benedetto","doi":"10.2139/ssrn.3072401","DOIUrl":"https://doi.org/10.2139/ssrn.3072401","url":null,"abstract":"The most controversial issues regarding EU international investment agreements are, on the one hand, the actual extent of the EU’s exclusive external competence over international investments and, on the other, the opportunity to include investor-state dispute settlement (ISDS) clauses in these agreements. The former issue is mainly a legal question, and it especially concerns the inclusion of portfolio investments in the EU’s exclusive external competence. In this respect, this article seeks to provide some insights on the opinion that the European Commission has recently requested from the Court of Justice on the free trade agreement between the EU and Singapore on the basis of the latest developments in the case law of the Court of Justice of the European Union. By contrast, the second issue is mainly a political question and focuses on the inclusion of ISDS in the investment chapter of the Comprehensive Trade and Economic Agreement (CETA) between the EU and Canada. In this respect, while highlighting the main criticisms of the inclusion of ISDS in CETA, it is argued that the right response to European concerns about ISDS provisions in CETA and in TTIP should not be the removal of ISDS from those agreements. Instead, in order to reduce the asymmetric conditions related to the regulatory powers of the parties to CETA, it would be opportune to ask whether it may be appropriate to adopt, in the EU, a system of control on foreign investments like the one existing in Canada and in the United States. In particular, it is demonstrated how the solution can be found in Articles 64(2) and 207(2) TFEU that could be used to adopt a regulation establishing an EU committee on foreign investment in charge of the review of inflow investments coming from non-EU countries in order to protect the EU’s general interests — first, EU security and welfare — just as the Committee on Foreign Investment in the United States and the Minister of Industry of Canada already do.","PeriodicalId":341097,"journal":{"name":"ERN: Europe (Developed Markets) (Topic)","volume":"79 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122006347","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 paper analyzes stock-price reactions to stock recommendations published in printed Swedish media and also trading volumes at and around the publication day, bid/ask spreads, and the post-publication drift in recommended stocks for the period 1995-2000. Its small size and limited number of actors makes the Swedish stock market an interesting comparison to the U.S. stock markets. The positive publication-day effect for buy recommendations was almost fully reversed after 20 days, supporting the price-pressure hypothesis, and the effect for sell recommendations was negative and prices continued to drift down, supporting the information hypothesis. Analysts seem to hand their information to clients before publication, whereas no such information-leaking pattern was observed for journalists. The impact to recommendations from journalists was significantly larger than analyst recommendations, implying a tradeoff between the size of pre-publication cumulative abnormal returns and the publication-day effect.
{"title":"Swedish Stock Recommendations: Information Content or Price Pressure?","authors":"E. Lidén","doi":"10.17578/11-3/4-4","DOIUrl":"https://doi.org/10.17578/11-3/4-4","url":null,"abstract":"The paper analyzes stock-price reactions to stock recommendations published in printed Swedish media and also trading volumes at and around the publication day, bid/ask spreads, and the post-publication drift in recommended stocks for the period 1995-2000. Its small size and limited number of actors makes the Swedish stock market an interesting comparison to the U.S. stock markets. The positive publication-day effect for buy recommendations was almost fully reversed after 20 days, supporting the price-pressure hypothesis, and the effect for sell recommendations was negative and prices continued to drift down, supporting the information hypothesis. Analysts seem to hand their information to clients before publication, whereas no such information-leaking pattern was observed for journalists. The impact to recommendations from journalists was significantly larger than analyst recommendations, implying a tradeoff between the size of pre-publication cumulative abnormal returns and the publication-day effect.","PeriodicalId":341097,"journal":{"name":"ERN: Europe (Developed Markets) (Topic)","volume":"12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-06-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126139587","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}
German Abstract: Diese Studie testet mehrere alternative Indexierungsmethoden fur Aktienindizes am Beispiel des DAX 30 und MDAX fur den Zeitraum 2000 bis 2013. Einige dieser Methoden sind in letzter Zeit unter dem Begriff „Smart-Beta“ bekannt geworden. Die zentrale Erkenntnis ist, dass diese alternativen Indexierungsmodelle auch in Deutschland der Marktwertgewichtung vorzuziehen sind. In vielen Fallen liefern sie eine hohere Rendite, einige eine niedrigere Volatilitat, aber besonders hinsichtlich der Sharpe-Ratio, dem Rendite-Risiko-Verhaltnis, sind alle alternativen Methoden gegenuber der Marktwertgewichtung im Vorteil. Eine Carhart-Vier-Faktoren-Regression liefert interessante Einblicke in die Einflusse der bekannten Risikofaktoren auf die Rendite der verschiedenen Indexierungsmethoden. Zudem erreichen fast alle Strategien ein signifikantes Alpha. Diese Uberrendite kann in erster Linie durch eine geringere Krisenanfalligkeit im Vergleich zur Marktwertgewichtung erklart werden. Werden die Portfolios einmal pro Jahr umgeschichtet, sind diese Erkenntnisse auch nach Abzug der Transaktionskosten gultig.English Abstract: This paper investigates for the first time a variety of different smart beta strategies for the German DAX 30 and MDAX stocks sample. All strategies show a superior Sharpe-Ratio thanks to a higher return or lower volatility compared to the market index. Furthermore, most strategies show a significant Carhart-four-factor alpha for the time span from 2000 to 2013. For annual rebalancing, the outperformance still remains after controlling for transaction costs.
{"title":"Alternative Indexierung Am Deutschen Aktienmarkt (Alternative Indexation on the German Stock Market)","authors":"Jochim G. Lauterbach, Maximilian Overkott","doi":"10.2139/ssrn.2536411","DOIUrl":"https://doi.org/10.2139/ssrn.2536411","url":null,"abstract":"German Abstract: Diese Studie testet mehrere alternative Indexierungsmethoden fur Aktienindizes am Beispiel des DAX 30 und MDAX fur den Zeitraum 2000 bis 2013. Einige dieser Methoden sind in letzter Zeit unter dem Begriff „Smart-Beta“ bekannt geworden. Die zentrale Erkenntnis ist, dass diese alternativen Indexierungsmodelle auch in Deutschland der Marktwertgewichtung vorzuziehen sind. In vielen Fallen liefern sie eine hohere Rendite, einige eine niedrigere Volatilitat, aber besonders hinsichtlich der Sharpe-Ratio, dem Rendite-Risiko-Verhaltnis, sind alle alternativen Methoden gegenuber der Marktwertgewichtung im Vorteil. Eine Carhart-Vier-Faktoren-Regression liefert interessante Einblicke in die Einflusse der bekannten Risikofaktoren auf die Rendite der verschiedenen Indexierungsmethoden. Zudem erreichen fast alle Strategien ein signifikantes Alpha. Diese Uberrendite kann in erster Linie durch eine geringere Krisenanfalligkeit im Vergleich zur Marktwertgewichtung erklart werden. Werden die Portfolios einmal pro Jahr umgeschichtet, sind diese Erkenntnisse auch nach Abzug der Transaktionskosten gultig.English Abstract: This paper investigates for the first time a variety of different smart beta strategies for the German DAX 30 and MDAX stocks sample. All strategies show a superior Sharpe-Ratio thanks to a higher return or lower volatility compared to the market index. Furthermore, most strategies show a significant Carhart-four-factor alpha for the time span from 2000 to 2013. For annual rebalancing, the outperformance still remains after controlling for transaction costs.","PeriodicalId":341097,"journal":{"name":"ERN: Europe (Developed Markets) (Topic)","volume":"10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-06-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133227355","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 paper contributes to the understanding of the German two-tiered enforcement set-up. The first tier is represented by the private review panel FREP, which has been investigating IFRS financial statements since 2005 and ensures consistent and faithful application of the latter. The German securities regulator BaFin, as second tier to the mechanism, enforces disclosure of errors established by either FREP or BaFin and therefore substantiates the adverse disclosure mechanism. We investigate short-term reactions to error announcements published between 2006 and 2013 and find evidence for differences of investor reactions between the early and the current years of enforcement. Disentangling the contributing factors of error severity, we provide evidence that investor reaction is primarily associated with the impact of error announcements on profitability. In addition, we detect that the amount of errors established is negatively associated with investor reaction indicating that extensive error announcements have an attenuating effect on investor reaction. Yet we caution to blindly interpret these findings, since they are also subject to change over time and partially driven by outliers. Further multivariate analyses provide additional insights referring to determinants of investor reactions by examining effects of stated errors on core earnings, effects of errors triggered due to second-guessing the use of professional judgment, and changes of investor perception over time.
{"title":"Determinants of Investor Reactions to Error Announcements - Evidence from Germany","authors":"G. Ebner, Matthias Hoeltken, Henning Zülch","doi":"10.2139/ssrn.2583667","DOIUrl":"https://doi.org/10.2139/ssrn.2583667","url":null,"abstract":"This paper contributes to the understanding of the German two-tiered enforcement set-up. The first tier is represented by the private review panel FREP, which has been investigating IFRS financial statements since 2005 and ensures consistent and faithful application of the latter. The German securities regulator BaFin, as second tier to the mechanism, enforces disclosure of errors established by either FREP or BaFin and therefore substantiates the adverse disclosure mechanism. We investigate short-term reactions to error announcements published between 2006 and 2013 and find evidence for differences of investor reactions between the early and the current years of enforcement. Disentangling the contributing factors of error severity, we provide evidence that investor reaction is primarily associated with the impact of error announcements on profitability. In addition, we detect that the amount of errors established is negatively associated with investor reaction indicating that extensive error announcements have an attenuating effect on investor reaction. Yet we caution to blindly interpret these findings, since they are also subject to change over time and partially driven by outliers. Further multivariate analyses provide additional insights referring to determinants of investor reactions by examining effects of stated errors on core earnings, effects of errors triggered due to second-guessing the use of professional judgment, and changes of investor perception over time.","PeriodicalId":341097,"journal":{"name":"ERN: Europe (Developed Markets) (Topic)","volume":"48 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-03-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124120369","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 paper has two contributions to the International Financial Reporting Stands (IFRS) adoption literature. First is the scrutinizing impact of IFRS adoption on value relevance in the UK with TEST-A analysis under the H01 hypothesis. The second contribution is capturing the impact of IFRS adoption on key financial indicators of firms with the TEST-B analysis that hypothesizes H02. The statistical differences of items of two different reporting standards are examined with non-parametric tests as all input variables failed the Shapiro-Wilk and Lilliefors normality tests in TEST-A. The finding rejects the H01 hypothesis for BvMv, and agrees that IFRS has impact on value relevance. Besides, Ohlson’s (1995) model documents that the coefficient of dummy variable (MODE) is positive. Therefore, the analysis concludes that IFRS has positive impact on value relevance. The aftermath of TEST-B rejects the H02 hypothesis for all profitability ratios (ROE, ROCE, ROA, PM) and gearing ratios (GR). It concludes that profitability and gearing ratios are affected by IFRS adoption, whereas efficiency-liquidity ratios are not. Also, in Forward Stepwise regression analysis only ROCE, ROA, and PM ratios show significant results. The analysis documents positive and significant impact of IFRS on these three ratios.
{"title":"How IFRS Affects Value Relevance and Key Financial Indicators? Evidence from the UK","authors":"Yhlas Sovbetov","doi":"10.2139/ssrn.2394507","DOIUrl":"https://doi.org/10.2139/ssrn.2394507","url":null,"abstract":"This paper has two contributions to the International Financial Reporting Stands (IFRS) adoption literature. First is the scrutinizing impact of IFRS adoption on value relevance in the UK with TEST-A analysis under the H01 hypothesis. The second contribution is capturing the impact of IFRS adoption on key financial indicators of firms with the TEST-B analysis that hypothesizes H02. The statistical differences of items of two different reporting standards are examined with non-parametric tests as all input variables failed the Shapiro-Wilk and Lilliefors normality tests in TEST-A. The finding rejects the H01 hypothesis for BvMv, and agrees that IFRS has impact on value relevance. Besides, Ohlson’s (1995) model documents that the coefficient of dummy variable (MODE) is positive. Therefore, the analysis concludes that IFRS has positive impact on value relevance. The aftermath of TEST-B rejects the H02 hypothesis for all profitability ratios (ROE, ROCE, ROA, PM) and gearing ratios (GR). It concludes that profitability and gearing ratios are affected by IFRS adoption, whereas efficiency-liquidity ratios are not. Also, in Forward Stepwise regression analysis only ROCE, ROA, and PM ratios show significant results. The analysis documents positive and significant impact of IFRS on these three ratios.","PeriodicalId":341097,"journal":{"name":"ERN: Europe (Developed Markets) (Topic)","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132146487","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 estimate the announcement effects of the ECB's asset purchase programme (APP) on the euro exchange rate, global equity prices and bond yields. We find that the APP announcement caused a broad-based depreciation of the euro by signalling that the ECB's future monetary policy stance will remain accommodative. At the same time, the APP announcement boosted equity prices around the world by supporting investor confidence and reducing the risk of deflation and persistent stagnation in the euro area. Exchange rates appreciated more strongly vis-a-vis the euro in response to APP-related news for countries which are more integrated with the rest of the world overall, which exhibit less bilateral trade and financial integration with the euro area, which are under a more flexible exchange rate regime, and which are perceived to be more risky. Finally, we do not find any evidence that the APP announcement led to an increase in portfolios flows to emerging market economies. Quite the opposite, the ECB's APP seems to have induced a re-balancing by global investors out of emerging into advanced economies’ financial markets.
{"title":"Global Financial Market Impact of the Announcement of the Ecb's Extended Asset Purchase Programme","authors":"Georgios P. Georgiadis, J. Gräb","doi":"10.24149/gwp232","DOIUrl":"https://doi.org/10.24149/gwp232","url":null,"abstract":"We estimate the announcement effects of the ECB's asset purchase programme (APP) on the euro exchange rate, global equity prices and bond yields. We find that the APP announcement caused a broad-based depreciation of the euro by signalling that the ECB's future monetary policy stance will remain accommodative. At the same time, the APP announcement boosted equity prices around the world by supporting investor confidence and reducing the risk of deflation and persistent stagnation in the euro area. Exchange rates appreciated more strongly vis-a-vis the euro in response to APP-related news for countries which are more integrated with the rest of the world overall, which exhibit less bilateral trade and financial integration with the euro area, which are under a more flexible exchange rate regime, and which are perceived to be more risky. Finally, we do not find any evidence that the APP announcement led to an increase in portfolios flows to emerging market economies. Quite the opposite, the ECB's APP seems to have induced a re-balancing by global investors out of emerging into advanced economies’ financial markets.","PeriodicalId":341097,"journal":{"name":"ERN: Europe (Developed Markets) (Topic)","volume":"28 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128293232","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 frequency of zero returns has often been used as a proxy for illiquidity in the literature. Based on Euronext intraday data, we show that zero returns are significantly related to liquidity instead. We conduct an event study and run conditional logit regressions using spread, depth, dispersion and slope measures as liquidity variables. Although we find that zero returns are associated with less informed trading as previously outlined in the literature, this does not necessarily lead to higher illiquidity.
{"title":"Rethinking Zero Returns in the Liquidity Puzzle of a Limit Order Market","authors":"P. Mazza","doi":"10.2139/ssrn.2212101","DOIUrl":"https://doi.org/10.2139/ssrn.2212101","url":null,"abstract":"The frequency of zero returns has often been used as a proxy for illiquidity in the literature. Based on Euronext intraday data, we show that zero returns are significantly related to liquidity instead. We conduct an event study and run conditional logit regressions using spread, depth, dispersion and slope measures as liquidity variables. Although we find that zero returns are associated with less informed trading as previously outlined in the literature, this does not necessarily lead to higher illiquidity.","PeriodicalId":341097,"journal":{"name":"ERN: Europe (Developed Markets) (Topic)","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121633860","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 document that the yield-to-maturity of an USD-denominated bond, once the foreign exchange rate risk is hedged, could be higher by more than 150 basis points than a comparable EUR-denominated bond issued by the same Euro area country between 2008-2013. Using panel and matching techniques, we find that the pricing anomaly (i) is due to the lower haircuts applied to EUR-denominated bonds for the European Central Bank (ECB) liquidity operations; (ii) is strongly positively related to the amount of EUR-denominated bonds pledged in exchange for liquidity when the credit spreads of the sovereign issuer reach extreme levels; (iii) is strongly positively related to the amount of EUR-denominated sovereign bonds pledged in exchange for liquidity with a 3-year horizon; and (iv) widens during the ECB purchases of EUR-denominated bonds.
{"title":"Limits to Arbitrage: Empirical Evidence from Euro Area Sovereign Bond Markets","authors":"Stefano Corradin, María Rodríguez-Moreno","doi":"10.2139/ssrn.2247312","DOIUrl":"https://doi.org/10.2139/ssrn.2247312","url":null,"abstract":"We document that the yield-to-maturity of an USD-denominated bond, once the foreign exchange rate risk is hedged, could be higher by more than 150 basis points than a comparable EUR-denominated bond issued by the same Euro area country between 2008-2013. Using panel and matching techniques, we find that the pricing anomaly (i) is due to the lower haircuts applied to EUR-denominated bonds for the European Central Bank (ECB) liquidity operations; (ii) is strongly positively related to the amount of EUR-denominated bonds pledged in exchange for liquidity when the credit spreads of the sovereign issuer reach extreme levels; (iii) is strongly positively related to the amount of EUR-denominated sovereign bonds pledged in exchange for liquidity with a 3-year horizon; and (iv) widens during the ECB purchases of EUR-denominated bonds.","PeriodicalId":341097,"journal":{"name":"ERN: Europe (Developed Markets) (Topic)","volume":"268 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-07-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116245850","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 paper analyses the effects of newspaper coverage of macro news on stock returns in eight countries belonging to the euro area (Belgium, France, Germany, Greece, Ireland, Italy, Portugal and Spain) using daily data for the period 1994-2013. The econometric analysis is based on the estimation of a VAR-GARCH-in-mean model. The results can be summarised as follows. Positive (negative) news have significant positive (negative) effects on stock returns in all cases. Their volatility has a significant impact on both stock returns and volatility; specifically, an increase in news volatility is always associated with a decrease in stock returns. Markets are particularly responsive to negative news, and the reaction is bigger in the PIIGS countries, and during the recent crisis period.
{"title":"Macro News and Stock Returns in the Euro Area: A VAR-GARCH-in-Mean Analysis","authors":"G. Caporale, Fabio Spagnolo, Nicola Spagnolo","doi":"10.2139/ssrn.2472983","DOIUrl":"https://doi.org/10.2139/ssrn.2472983","url":null,"abstract":"This paper analyses the effects of newspaper coverage of macro news on stock returns in eight countries belonging to the euro area (Belgium, France, Germany, Greece, Ireland, Italy, Portugal and Spain) using daily data for the period 1994-2013. The econometric analysis is based on the estimation of a VAR-GARCH-in-mean model. The results can be summarised as follows. Positive (negative) news have significant positive (negative) effects on stock returns in all cases. Their volatility has a significant impact on both stock returns and volatility; specifically, an increase in news volatility is always associated with a decrease in stock returns. Markets are particularly responsive to negative news, and the reaction is bigger in the PIIGS countries, and during the recent crisis period.","PeriodicalId":341097,"journal":{"name":"ERN: Europe (Developed Markets) (Topic)","volume":"46 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115616176","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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