We examine the effects of political uncertainty surrounding the outcome of U.S. presidential elections on financial market quality. We postulate those effects to depend on a positive relation between political uncertainty and information asymmetry among investors, ambiguity about the quality of their information, or dispersion of their beliefs. We find that market quality deteriorates (trading volume and various measures of liquidity decrease) in the months leading up to those elections (when political uncertainty is likely highest), but it improves (trading volume and liquidity increase) in the months afterwards. These effects are more pronounced for more uncertain elections and more speculative, difficult-to-value stocks (small, high book-to-market, low beta, traded on NASDAQ, or in less politically sensitive industries), but not for direct proxies of the market-wide extent of information asymmetry and heterogeneity among market participants (accruals, analysts' forecast dispersion, and forecast error). These findings provide the strongest support for the predictions of the ambiguity hypothesis.
{"title":"Political Uncertainty and Financial Market Quality","authors":"P. Pasquariello, Christina Zafeiridou","doi":"10.2139/ssrn.2423576","DOIUrl":"https://doi.org/10.2139/ssrn.2423576","url":null,"abstract":"We examine the effects of political uncertainty surrounding the outcome of U.S. presidential elections on financial market quality. We postulate those effects to depend on a positive relation between political uncertainty and information asymmetry among investors, ambiguity about the quality of their information, or dispersion of their beliefs. We find that market quality deteriorates (trading volume and various measures of liquidity decrease) in the months leading up to those elections (when political uncertainty is likely highest), but it improves (trading volume and liquidity increase) in the months afterwards. These effects are more pronounced for more uncertain elections and more speculative, difficult-to-value stocks (small, high book-to-market, low beta, traded on NASDAQ, or in less politically sensitive industries), but not for direct proxies of the market-wide extent of information asymmetry and heterogeneity among market participants (accruals, analysts' forecast dispersion, and forecast error). These findings provide the strongest support for the predictions of the ambiguity hypothesis.","PeriodicalId":374935,"journal":{"name":"PSN: Global Markets (Topic)","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116863416","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}
D. Arner, David C. Donald, S. Goo, R. Hu, Chen Lin, Bryane Michael, F. Song, W. Tong, Chenggang Xu, D. Wójcik, Simon X. B. Zhao
By the end of the 20th century, Hong Kong had emerged as one of the world's major international financial centres. Today, while finance remains central to Hong Kong's future, it is facing unprecedented challenges, in China, in the region and globally. In the context of China, the continuing process of economic reform and financial development raises many opportunities but at the same time brings into question Hong Kong's traditional role as the primary intermediary between China and the global financial system. At the same time, the global and European financial crises have raised fundamental questions about finance, exchange rate systems, the global position of China, and the future role of the renminbi, including Hong Kong's role therein. Reflecting the centrality of finance to Hong Kong, Article 109 of the Hong Kong Basic Law, ascribes the Hong Kong Government an obligation "to provide an appropriate economic and legal environment for the maintenance of the status of Hong Kong as an international financial centre." However, Hong Kong has yet to take a comprehensive approach to this obligation or to consider its strategic and practical implications. While the creation of the Hong Kong Financial Services Development Council (FSDC) is a very important step, more remains to be done. There is no question that Hong Kong has developed impressively and is performing very well as an international financial centre. This is clear and well established and is thus not the central theme of this report. Rather, this report seeks to consider areas where Hong Kong could do better. Thus, the central theme of this report focuses on the need for a more strategic approach to Hong Kong’s future as a financial centre, based on an analysis of academic and policy research and current expectations of best regulatory and commercial practice. This report is the first of a major research project on "Enhancing Hong Kong’s Future as a Leading International Financial Centre", funded by the Hong Kong Research Grants Council Theme-based Research Scheme. Throughout this report (and in the two others which will follow in 2015 and 2017) our analysis seeks to answer one specific question: What policies and legislative/regulatory changes will maximise the long-run, risk-adjusted value of financial activities to Hong Kong, given that other international financial centre policymakers react strategically to such policies? In addressing this issue, the report provides 21 recommendations focusing on five major areas: The first grouping addresses methods to help improve the way the public contributes to financial sector policymaking. The second group proposes ways that the directing minds of Hong Kong’s financial and commercial organisations can participate more actively in ensuring Hong Kong’s regulators adopt policies which actually improve Hong Kong’s competitiveness among international financial centres (rather than just copy international "best practice"). The third grouping looks a
{"title":"Assessing Hong Kong as an International Financial Centre","authors":"D. Arner, David C. Donald, S. Goo, R. Hu, Chen Lin, Bryane Michael, F. Song, W. Tong, Chenggang Xu, D. Wójcik, Simon X. B. Zhao","doi":"10.2139/ssrn.2427609","DOIUrl":"https://doi.org/10.2139/ssrn.2427609","url":null,"abstract":"By the end of the 20th century, Hong Kong had emerged as one of the world's major international financial centres. Today, while finance remains central to Hong Kong's future, it is facing unprecedented challenges, in China, in the region and globally. In the context of China, the continuing process of economic reform and financial development raises many opportunities but at the same time brings into question Hong Kong's traditional role as the primary intermediary between China and the global financial system. At the same time, the global and European financial crises have raised fundamental questions about finance, exchange rate systems, the global position of China, and the future role of the renminbi, including Hong Kong's role therein. Reflecting the centrality of finance to Hong Kong, Article 109 of the Hong Kong Basic Law, ascribes the Hong Kong Government an obligation \"to provide an appropriate economic and legal environment for the maintenance of the status of Hong Kong as an international financial centre.\" However, Hong Kong has yet to take a comprehensive approach to this obligation or to consider its strategic and practical implications. While the creation of the Hong Kong Financial Services Development Council (FSDC) is a very important step, more remains to be done. There is no question that Hong Kong has developed impressively and is performing very well as an international financial centre. This is clear and well established and is thus not the central theme of this report. Rather, this report seeks to consider areas where Hong Kong could do better. Thus, the central theme of this report focuses on the need for a more strategic approach to Hong Kong’s future as a financial centre, based on an analysis of academic and policy research and current expectations of best regulatory and commercial practice. This report is the first of a major research project on \"Enhancing Hong Kong’s Future as a Leading International Financial Centre\", funded by the Hong Kong Research Grants Council Theme-based Research Scheme. Throughout this report (and in the two others which will follow in 2015 and 2017) our analysis seeks to answer one specific question: What policies and legislative/regulatory changes will maximise the long-run, risk-adjusted value of financial activities to Hong Kong, given that other international financial centre policymakers react strategically to such policies? In addressing this issue, the report provides 21 recommendations focusing on five major areas: The first grouping addresses methods to help improve the way the public contributes to financial sector policymaking. The second group proposes ways that the directing minds of Hong Kong’s financial and commercial organisations can participate more actively in ensuring Hong Kong’s regulators adopt policies which actually improve Hong Kong’s competitiveness among international financial centres (rather than just copy international \"best practice\"). The third grouping looks a","PeriodicalId":374935,"journal":{"name":"PSN: Global Markets (Topic)","volume":"75 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114807467","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}
Brokers perform a key role in many financial markets. They introduce buyers to sellers, perform a useful role in price-discovery and provide a source of market information and commentary to market participants and the general public. In well-organized markets, brokers are trusted to be honest and to undertake these tasks in the best interests of their clients (buyers or sellers). But there is an inherent and well-understood conflict of interest in the role of the broker. Brokers are rewarded by their success in bringing buyers and sellers together, but their source of income is based solely on the completion of a successful transaction. Hence, there is a constant temptation for a broker to trade the best interests of their client for a completed deal. This paper examines the key role of brokers in the LIBOR manipulation scandal and using reports from published inquiries identifies the illicit activities of some brokers in assisting banks to manipulate the LIBOR benchmark. The perpetrators of these “white collar” crimes were traders and managers in some of the largest banks in the world but the manipulation would not have been as widespread or as successful without the willing participation and illegal actions of brokers in several firms. The paper argues that the actions of the traders in various banks around the world in the LIBOR manipulation scandal are examples of systemic operational risk, and in particular people risk. The paper makes specific suggestions to bank boards and regulators as to how such misconduct may be managed in future
{"title":"LIBOR Manipulation: Operational Risks Resulting from Brokers’ Misbehavior","authors":"P. Mcconnell","doi":"10.21314/jop.2014.148","DOIUrl":"https://doi.org/10.21314/jop.2014.148","url":null,"abstract":"Brokers perform a key role in many financial markets. They introduce buyers to sellers, perform a useful role in price-discovery and provide a source of market information and commentary to market participants and the general public. In well-organized markets, brokers are trusted to be honest and to undertake these tasks in the best interests of their clients (buyers or sellers). But there is an inherent and well-understood conflict of interest in the role of the broker. Brokers are rewarded by their success in bringing buyers and sellers together, but their source of income is based solely on the completion of a successful transaction. Hence, there is a constant temptation for a broker to trade the best interests of their client for a completed deal. This paper examines the key role of brokers in the LIBOR manipulation scandal and using reports from published inquiries identifies the illicit activities of some brokers in assisting banks to manipulate the LIBOR benchmark. The perpetrators of these “white collar” crimes were traders and managers in some of the largest banks in the world but the manipulation would not have been as widespread or as successful without the willing participation and illegal actions of brokers in several firms. The paper argues that the actions of the traders in various banks around the world in the LIBOR manipulation scandal are examples of systemic operational risk, and in particular people risk. The paper makes specific suggestions to bank boards and regulators as to how such misconduct may be managed in future","PeriodicalId":374935,"journal":{"name":"PSN: Global Markets (Topic)","volume":"66 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-03-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125893735","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}
On September 15, 2008, Lehman Brothers Inc. announced their filing for bankruptcy. The reaction of Lehman's competitors and market participants to this bankruptcy filing announcement provides a unique field experiment of how the insolvency spills over to other financial institutions and how interconnectedness might trigger a financial crisis. Specifically, we analyze transaction prices of major U.S. investment and commercial banks prior to and after the bankruptcy. By decomposing their equity bid-ask spreads, we find evidence that the bankruptcy contributed to increasing adverse selection risk as well as inventory holding risk. Moreover, we find supporting evidence that the degree of competition among market makers did decline. All three components did contribute to a significant rise in transaction costs. Interestingly, the relative contribution of each channel has remained roughly constant. Finally, there is little evidence about insider information within the banking industry just prior to the bankruptcy. In the case of Lehman's stocks the adverse selection component rises in the last days of trading prior to the bankruptcy filing announcement. Moreover, we find no evidence of an increase in the adverse selection component of potential bidders, from which we interpret that the market did not expect a take-over or merger. We explore the robustness of our decomposition by employing volume-synchronized probability of informed trading-measures and impact regressions on prices, quantities, and their respective innovations. In general, we find that information effects are rather short-lived except for the three days prior to the Lehman insolvency.
{"title":"Lehman Brothers: Did Markets Know?","authors":"Thomas Gehrig, Marlene Haas","doi":"10.2139/ssrn.2467009","DOIUrl":"https://doi.org/10.2139/ssrn.2467009","url":null,"abstract":"On September 15, 2008, Lehman Brothers Inc. announced their filing for bankruptcy. The reaction of Lehman's competitors and market participants to this bankruptcy filing announcement provides a unique field experiment of how the insolvency spills over to other financial institutions and how interconnectedness might trigger a financial crisis. Specifically, we analyze transaction prices of major U.S. investment and commercial banks prior to and after the bankruptcy. By decomposing their equity bid-ask spreads, we find evidence that the bankruptcy contributed to increasing adverse selection risk as well as inventory holding risk. Moreover, we find supporting evidence that the degree of competition among market makers did decline. All three components did contribute to a significant rise in transaction costs. Interestingly, the relative contribution of each channel has remained roughly constant. Finally, there is little evidence about insider information within the banking industry just prior to the bankruptcy. In the case of Lehman's stocks the adverse selection component rises in the last days of trading prior to the bankruptcy filing announcement. Moreover, we find no evidence of an increase in the adverse selection component of potential bidders, from which we interpret that the market did not expect a take-over or merger. We explore the robustness of our decomposition by employing volume-synchronized probability of informed trading-measures and impact regressions on prices, quantities, and their respective innovations. In general, we find that information effects are rather short-lived except for the three days prior to the Lehman insolvency.","PeriodicalId":374935,"journal":{"name":"PSN: Global Markets (Topic)","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125291669","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}
Emerging markets have in recent times become a great source of interest for companies due to the unique value that they have to offer. In spite of this, marketing products or services in emerging markets can pose a distinct set of challenges, apart from being a source of great opportunity that firms need to consider in order to succeed. Results can be obtained by employing a combination of the marketing mix variables over which the marketer has control. The 4P classification of the marketing mix, remains the most cited and the most often used classification of the marketing mix. However, the applicability and suitability of the 4Ps for implementation in emerging markets still remains a source of debate. The paper, based on previous literature, presents an account of the marketing mix (4Ps) and its application in emerging markets, as well as a discussion on whether or not they can be applied in emerging markets. Two main schools of thought have emerged in an attempt to explain how applicable the marketing mix is in the context of emerging markets. One school believes that the 4Ps is not applicable in emerging markets, while a second school of thought believes that the marketing mix is indeed applicable in emerging markets subject to contextual adaptations. The paper adopts the latter view and calls for an investigation into the application of the 4Ps marketing mix among customers in emerging markets, incorporating four key considerations: access, affordability, availability and awareness. Likewise, the paper suggests that the nature of marketing strategy formulation of different types of organizations for emerging markets can be better understood by investigating the level of economic development, economic growth, as well as the market governance pertaining within the particular emerging market.
{"title":"Application of the 4Ps in Emerging Markets","authors":"S. Boateng","doi":"10.2139/ssrn.2393121","DOIUrl":"https://doi.org/10.2139/ssrn.2393121","url":null,"abstract":"Emerging markets have in recent times become a great source of interest for companies due to the unique value that they have to offer. In spite of this, marketing products or services in emerging markets can pose a distinct set of challenges, apart from being a source of great opportunity that firms need to consider in order to succeed. Results can be obtained by employing a combination of the marketing mix variables over which the marketer has control. The 4P classification of the marketing mix, remains the most cited and the most often used classification of the marketing mix. However, the applicability and suitability of the 4Ps for implementation in emerging markets still remains a source of debate. The paper, based on previous literature, presents an account of the marketing mix (4Ps) and its application in emerging markets, as well as a discussion on whether or not they can be applied in emerging markets. Two main schools of thought have emerged in an attempt to explain how applicable the marketing mix is in the context of emerging markets. One school believes that the 4Ps is not applicable in emerging markets, while a second school of thought believes that the marketing mix is indeed applicable in emerging markets subject to contextual adaptations. The paper adopts the latter view and calls for an investigation into the application of the 4Ps marketing mix among customers in emerging markets, incorporating four key considerations: access, affordability, availability and awareness. Likewise, the paper suggests that the nature of marketing strategy formulation of different types of organizations for emerging markets can be better understood by investigating the level of economic development, economic growth, as well as the market governance pertaining within the particular emerging market.","PeriodicalId":374935,"journal":{"name":"PSN: Global Markets (Topic)","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-02-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130357741","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 analyse a stylized model of the world grain market characterized by a small oligopoly of traders with market power on both the supply and demand side. Crops are stochastic and exporting countries can impose export tariffs to protect domestic food prices. Our first results is that export tariffs are strategic complements and that for poor harvests equilibrium tariffs can explode (shedding some light on recent volatility in world food prices). We also show that the strategic interplay between governments of export countries and traders can give rise to a number of peculiar comparative statics. For example, it can be in the interest of traders to have poor harvests in one of the countries. Finally, we demonstrate that traders as well as consumers in import countries can benefit from cooperation between grain exporting countries.
{"title":"Crop Failures and Export Tariffs","authors":"P. Baake, S. Huck","doi":"10.2139/ssrn.2387510","DOIUrl":"https://doi.org/10.2139/ssrn.2387510","url":null,"abstract":"We analyse a stylized model of the world grain market characterized by a small oligopoly of traders with market power on both the supply and demand side. Crops are stochastic and exporting countries can impose export tariffs to protect domestic food prices. Our first results is that export tariffs are strategic complements and that for poor harvests equilibrium tariffs can explode (shedding some light on recent volatility in world food prices). We also show that the strategic interplay between governments of export countries and traders can give rise to a number of peculiar comparative statics. For example, it can be in the interest of traders to have poor harvests in one of the countries. Finally, we demonstrate that traders as well as consumers in import countries can benefit from cooperation between grain exporting countries.","PeriodicalId":374935,"journal":{"name":"PSN: Global Markets (Topic)","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128597536","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 investigates whether return dispersion (RD), proxied by the cross-sectional standard deviation of stock returns, captures variation in returns across German stocks between 1989 and 2010. I address existing evidence based on U.S. equity data that RD may serve as a proxy economic state variable. In the out-of-sample test I confirm the countercyclical character of RD and show that it loads significantly negatively on future equal-weighted average market return. Sorting stocks by their absolute loadings on RD, I uncover the negative pattern in simple average portfolio returns. Further analysis indicates that the negative relationship between absolute loadings on RD and future returns is present only in micro stock subgroup. This finding casts doubt on the RD as proxy for state variable. Instead, it suggests its relation to mispricing and idiosyncratic risk components. As a secondary results I confirm the existence of reversed size effect in German stock market over the considered period.
本文研究了收益率离散度(RD)是否能反映1989年至2010年间德国股票收益率的变化，该指标由股票收益率的横截面标准差(cross-sectional standard deviation)代表。我提出了基于美国股票数据的现有证据，即RD可以作为代理经济状态变量。在样本外检验中，我证实了RD的逆周期特征，并表明它对未来等加权平均市场回报具有显著的负负荷。通过对股票的绝对RD负荷进行分类，我发现了简单平均投资组合回报的负模式。进一步的分析表明，研发的绝对负荷与未来收益之间的负相关关系仅存在于微观股票亚组中。这一发现对RD作为状态变量的代理提出了质疑。相反，它表明了它与错误定价和特殊风险成分的关系。作为次要结果，我证实了在所考虑的时期内，德国股市存在反向规模效应。
{"title":"Return Dispersion, Size, and the Cross-Section of Stock Returns - Evidence from the German Stock Market","authors":"A. Waszczuk","doi":"10.2139/ssrn.2253793","DOIUrl":"https://doi.org/10.2139/ssrn.2253793","url":null,"abstract":"This paper investigates whether return dispersion (RD), proxied by the cross-sectional standard deviation of stock returns, captures variation in returns across German stocks between 1989 and 2010. I address existing evidence based on U.S. equity data that RD may serve as a proxy economic state variable. In the out-of-sample test I confirm the countercyclical character of RD and show that it loads significantly negatively on future equal-weighted average market return. Sorting stocks by their absolute loadings on RD, I uncover the negative pattern in simple average portfolio returns. Further analysis indicates that the negative relationship between absolute loadings on RD and future returns is present only in micro stock subgroup. This finding casts doubt on the RD as proxy for state variable. Instead, it suggests its relation to mispricing and idiosyncratic risk components. As a secondary results I confirm the existence of reversed size effect in German stock market over the considered period.","PeriodicalId":374935,"journal":{"name":"PSN: Global Markets (Topic)","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-11-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126125773","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}
Compliance with the "Santiago Principles" for sovereign wealth funds (SWF) remains measured. This underlines the inherent political nature of SWFs, as they reflect the norms and conventions of their sponsors as regards transparency. Like any voluntary standard, compliance relies on the goodwill of the organization, and ultimately the organization's sponsor. Compliance is furthermore complicated when varying interpretations are present as to the requirements of the standard. In this short essay, I offer an explicit treatment of transparency in its different forms such that SWFs, their sponsors, and external analysts have a discursive device for evaluating and communicating when and why (and why they think) certain non-disclosures are legitimate, or, more importantly, when and why transparency in one domain may diminish the significance of disclosure in other areas, thus reducing the significance of non-disclosure in those areas. The aim, then, is to encourage dialogue on non-disclosure in conjunction with the Santiago Principles, as doing so leads, in my view, to increased transparency overall.
{"title":"Enhancing the Transparency Dialogue in the 'Santiago Principles' for Sovereign Wealth Funds","authors":"Adam D. Dixon","doi":"10.2139/ssrn.2316123","DOIUrl":"https://doi.org/10.2139/ssrn.2316123","url":null,"abstract":"Compliance with the \"Santiago Principles\" for sovereign wealth funds (SWF) remains measured. This underlines the inherent political nature of SWFs, as they reflect the norms and conventions of their sponsors as regards transparency. Like any voluntary standard, compliance relies on the goodwill of the organization, and ultimately the organization's sponsor. Compliance is furthermore complicated when varying interpretations are present as to the requirements of the standard. In this short essay, I offer an explicit treatment of transparency in its different forms such that SWFs, their sponsors, and external analysts have a discursive device for evaluating and communicating when and why (and why they think) certain non-disclosures are legitimate, or, more importantly, when and why transparency in one domain may diminish the significance of disclosure in other areas, thus reducing the significance of non-disclosure in those areas. The aim, then, is to encourage dialogue on non-disclosure in conjunction with the Santiago Principles, as doing so leads, in my view, to increased transparency overall.","PeriodicalId":374935,"journal":{"name":"PSN: Global Markets (Topic)","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-08-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126218322","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}
Monica Billio, R. Casarin, F. Ravazzolo, H. V. Dijk
Interactions between the eurozone and US booms and busts and among major eurozone economies are analyzed by introducing a panel Markov-switching VAR model well suitable for a multi-country cyclical analysis. The model accommodates changes in low and high data frequencies and endogenous time-varying transition matrices of the country-specific Markov chains. The transition matrix of each Markov chain depends on its own past history and on the history of the other chains, thus allowing for modeling of the interactions between cycles. An endogenous common eurozone cycle is derived by aggregating country-specific cycles. The model is estimated using a simulation based Bayesian approach in which an efficient multi-move strategy algorithm is defined to draw common time-varying Markov-switching chains. Our results show that the US and eurozone cycles are not fully synchronized over the 1991-2013 sample period, with evidence of more recessions in the Eurozone. Shocks affect the US 1-quarter in advance of the eurozone, but these spread very rapidly among economies. An increase in the number of eurozone countries in recession increases the probability of the US to stay within recession, while the US recession indicator has a negative impact on the probability to stay in recession for eurozone countries. Turning point analysis shows that the cycles of Germany, France and Italy are closer to the US cycle than other countries. Belgium, Spain, and Germany, provide more timely information on the aggregate recession than Netherlands and France.
{"title":"Interactions between Eurozone and US Booms and Busts: A Bayesian Panel Markov-Switching VAR Model","authors":"Monica Billio, R. Casarin, F. Ravazzolo, H. V. Dijk","doi":"10.2139/ssrn.2353013","DOIUrl":"https://doi.org/10.2139/ssrn.2353013","url":null,"abstract":"Interactions between the eurozone and US booms and busts and among major eurozone economies are analyzed by introducing a panel Markov-switching VAR model well suitable for a multi-country cyclical analysis. The model accommodates changes in low and high data frequencies and endogenous time-varying transition matrices of the country-specific Markov chains. The transition matrix of each Markov chain depends on its own past history and on the history of the other chains, thus allowing for modeling of the interactions between cycles. An endogenous common eurozone cycle is derived by aggregating country-specific cycles. The model is estimated using a simulation based Bayesian approach in which an efficient multi-move strategy algorithm is defined to draw common time-varying Markov-switching chains. Our results show that the US and eurozone cycles are not fully synchronized over the 1991-2013 sample period, with evidence of more recessions in the Eurozone. Shocks affect the US 1-quarter in advance of the eurozone, but these spread very rapidly among economies. An increase in the number of eurozone countries in recession increases the probability of the US to stay within recession, while the US recession indicator has a negative impact on the probability to stay in recession for eurozone countries. Turning point analysis shows that the cycles of Germany, France and Italy are closer to the US cycle than other countries. Belgium, Spain, and Germany, provide more timely information on the aggregate recession than Netherlands and France.","PeriodicalId":374935,"journal":{"name":"PSN: Global Markets (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-08-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130990510","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}
Ulf Brüggemann, Aditya Kaul, C. Leuz, Ingrid M. Werner
Studying a comprehensive sample of stocks from the U.S. OTC market, we show that this market is a large and diverse trading environment with a rich set of regulatory and disclosure regimes, comprising venue rules and state laws beyond SEC regulation. We exploit this institutional richness to show that OTC firms subject to stricter regulatory regimes and disclosure requirements have higher market quality (higher liquidity and lower crash risk). Our analysis points to an important trade-off in regulating the OTC market and protecting investors: lowering regulatory requirements reduces the compliance burden for smaller firms, but it also reduces market quality. Received July 26, 2013; editorial decision July 8, 2017 by Editor Itay Goldstein.
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