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A universal exponent governing foreign exchange rate risks International Review of Financial Analysis (IF 7.5) Pub Date : 2024-06-29 Klaus Grobys
Departing from previous studies, this paper uses power laws to model foreign exchange rate risks in terms of realized foreign exchange rate (FX) variances for daily and weekly data. Empirical tests based on daily data provide strong evidence for emergent market risk behavior manifested in a common power-law exponent governing the cross section of realized FX variances. We show that this emergent market
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State-dependent intra-day volatility pattern and its impact on price jump detection - Evidence from international equity indices International Review of Financial Analysis (IF 7.5) Pub Date : 2024-06-28 Ping Chen Tsai, Cheoljun Eom, Chou Wen Wang
Current price jump tests assume a constant intra-day volatility pattern (IVP) over sample period. We test this assumption by allowing IVP to depend on some state variables such as the sign of previous returns or the relative levels of volatility. Estimation results from 5-min GARCH model for four equity indices show that squared-return-based IVP weights increase in early morning hours when previous
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Competitive imitation and corporate innovation in private enterprises International Review of Financial Analysis (IF 7.5) Pub Date : 2024-06-24 Feng He, Longxuan Chen, Haomin Wu
The private economy has always been an important force in promoting the development of China's national economy. The unfair competition faced by private enterprises (PEs) compared to that faced by state-owned enterprises (SOEs) in many areas will induce the competitive imitation of PEs. We find that PEs' competitive imitation strategy significantly inhibits innovation, while increased agency costs
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Energy finance research: What happens beneath the literature? International Review of Financial Analysis (IF 7.5) Pub Date : 2024-06-20 Mingting Kou, Menglin Zhang, Yuanqi Yang, Hanqing Shao
Energy finance has grown rapidly and attracted considerable attention for the increasing interactions between energy and financial industries. However, the scope and boundary of energy finance are still unclear due to the diversity of emerging research topics. Therefore, this paper provides a profile of energy finance conducting bibliometric analysis from four dimensions: the intellectual base, research
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The effect of shale gas booms on environmental CSR activity International Review of Financial Analysis (IF 7.5) Pub Date : 2024-06-18 Changhwan Choi, Chune Young Chung
Using shale gas developments that are staggered across counties and time, we examine whether uncertain environmental risks affect firms' environmental CSR (corporate social responsibility). We find that firms headquartered in shale gas boom counties significantly increase environmental CSR compared with firms located in nonboom counties. Furthermore, we demonstrate that the impacts of shale gas booms
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Does digital literacy reduce intergenerational income dependency? International Review of Financial Analysis (IF 7.5) Pub Date : 2024-06-11 Haijun Wang, Chen Ge, Xiance Du, Yiqiang Feng, Weicheng Wang
Smoothing upward mobility channels and reducing intergenerational income dependence are important prerequisites for realizing the sustainable development of all humankind. Starting from the impact of digital economy on micro individuals, this paper explores the mechanisms of digital literacy on families' dependence on intergenerational income. The paper revealed the following findings: First, the improvement
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Biodiversity and stock returns International Review of Financial Analysis (IF 7.5) Pub Date : 2024-06-03 Feng Ma, Hanlin Wu, Qing Zeng
This study constructs the Biodiversity Risk (BR) index to investigate the impact of biodiversity risk challenges on financial markets. In this study, biodiversity risk is defined as the concern for risks to biodiversity and the associated negative impacts. The findings indicate that, both in- and out-of-sample, the BR index demonstrates robust predictive ability for the market risk premium. Moreover
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Ecological money and finance.Introducing sustainable monetary diversity International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-29 Raphaël Didier, Thomas Lagoarde-Ségot
This paper introduces a sustainability policy prototype introducing sustainable monetary diversity to attain the Sustainable Development Goals. It first presents a new monetary policy framework to endogenize the creation, circulation, and destruction of complementary currencies. It then analyzes the implications of this new policy setting on a battery of eco-systemic, economic, monetary, and financial
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Chief executive officer marital status and corporate credit ratings International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-29 Xiangshang Cai, Yang Gao, Zhiting Wu, Jiayi Yuan
In this study, we investigate the effects of CEO marital status on credit risk assessments. We find that firms with married CEOs receive more favorable credit ratings. We also find that firms with married CEOs have a lower bankruptcy risk, less exposure to business uncertainty shocks, and better institutional corporate social responsibility (CSR) performance, giving richer insights into potential mechanisms
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Firm leverage and employee pay: The moderating role of CEO leadership style International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-29 Balbinder Singh Gill, Jongmoo Jay Choi, Kose John
We investigate how a CEO's leadership style moderates the relationship between leverage and average employee pay. We first show that the relationship between leverage and average employee pay is negative, consistent with the leverage disciplinary hypothesis. Next, we examine how CEO leadership style moderates this negative effect. We find that CEOs with more charisma reduce the disciplinary effect
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Navigating ESG complexity: An in-depth analysis of sustainability criteria, frameworks, and impact assessment International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-24 Marianna Eskantar, Constantin Zopounidis, Michalis Doumpos, Emilios Galariotis, Khaled Guesmi
Environmental, social, and governance (ESG) criteria serve to gauge a company's sustainability and societal impact. The evaluation of a firm's performance on these ESG criteria involves a thorough examination of its practices and policies across various domains, encompassing environmental responsibility, labor standards, human rights, corporate governance, and community engagement. Despite the considerable
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Fund flow diversification: Implications for asset stability, fee-setting and performance International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-23 Lorenzo Casavecchia, Ashish Tiwari
We provide new evidence on the economic benefits to mutual fund families from having a portfolio of funds with diversified investor fund flows. We show that diversified fund families enjoy greater stability of assets under management, and experience significantly lower net cash outflows during an economic downturn. Given concave advisory fee schedules, the dominant industry fee structure, a reduction
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State ownership, probability of informed trading, and profitability potential: Evidence from the Warsaw Stock Exchange International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-21 Paweł Kropiński, Bartłomiej Bosek, Mikołaj Pudo
This study examines the probability of informed trading (PIN) for state-owned enterprises (SOEs) and how the market information asymmetry is affected during the COVID-19 crisis. The research challenges the assumption that state ownership is associated with poor governance structures and information transparency by investigating empirical evidence of information asymmetry in SOEs. The study uses the
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VIX-managed portfolios International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-21 Miloš Božović
We propose a simple portfolio management strategy that gauges the leverage based on the observed implied volatility index (VIX). The strategy involves taking less risk when the cumulative previous-month VIX is high and more when it is low. We show that the strategy yields more stable weights and thus requires less rebalancing than comparable strategies based on realized volatility. As a result, it
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Testing out-of-sample portfolio performance using second-order stochastic dominance constrained optimization approach International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-20 Peng Xu
Second-order Stochastic Dominance (SSD) criterion can be used to support portfolio decision making under risk and uncertainty. In this paper, we develop novel robust SSD criteria to capture the strength of dominance and portfolio optimization models utilizing these criteria to identify portfolios whose in-sample SSD dominance over a given benchmark is likely to hold also out-of-sample. The developed
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Institutional consensus after earnings announcements: Information or crowding? International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-20 Olga Klein, Daniel Klein
This paper examines information processing skills of institutional investors after earnings releases. If institutions correctly process earnings signals, their trades should push the price towards the new fundamental value. However, if they mechanically follow a positive-feedback strategy, Stein (2009) predicts that their crowding can lead to price overreaction. Splitting institutions by their investment
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Transmission mechanisms of the effects of geopolitical risk on energy returns and volatility International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-19 Yun Qin, Zitao Zhang
In this paper, we investigate the transmission mechanisms of the impacts of geopolitical risk on energy (crude oil, natural gas, heating oil) returns and volatility from June 28, 1990, to January 6, 2020, by using a quantile regression model. The results show that under the supply and demand channel, geopolitical risk increases energy returns and decreases energy volatility in different market conditions
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The price discovery in the renminbi/USD market: Two spot, two swap, and three forward FX rates International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-18 Yoshihiro Kitamura
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Empirical research on banks' risk disclosure: Systematic literature review, bibliometric analysis and future research agenda International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-18 Michael Mies
The purpose of this paper is to outline the current state of empirical research on banks' risk reporting. In addition to the development of the research field over time, regulatory trends and drivers for academic research on risk reporting will be derived. The review follows a triangulated approach: In addition to a qualitative content analysis based on the SLR, a quantitative bibliometric analysis
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Carbon emissions and liquidity management International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-17 John W. Goodell, Constantin Gurdgiev, Sitara Karim, Alessia Palma
Do higher carbon-emitting firms increase liquidity out of reluctance to invest in an era of rapidly changing climate policy concerns? Are rapidly escalating climate concerns placing higher carbon-emitting firms in a position where they are liquidity stressed? Liquidity management has long informed scholarly research in corporate finance. However, despite nearly universal interest in environmental aspects
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CEO power, internal control quality, and entrepreneurial innovation spirit in family enterprises International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-17 Weibin Li, Yingling Huang, Hongyong Zhou, Xin Liu
Using listed manufacturing enterprises in China from 2013 to 2020 as a sample, we find that CEO formal power, CEO integrated power, and internal control quality are positively and significantly related to the entrepreneurial innovation spirit of family businesses. CEO informal power, although not directly correlated, can enhance entrepreneurial innovation spirit by strengthening CEO formal power. In
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The impact of ESG profile on Firm's valuation in emerging markets International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-17 Birjees Rahat, Pascal Nguyen
Environmental, Social and Governance (ESG) factors are a critical input in emerging markets for managing risks, attracting capital, being competitive, and complying with evolving regulations. The firms prioritizing ESG are likely to drive innovation and enhance long-term value creation, making them more resilient in these dynamic markets. Therefore, a plausible link should exist between ESG and firm
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The higher the better? Hedging and investment strategies in cryptocurrency markets: Insights from higher moment spillovers International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-17 Xie He, Shigeyuki Hamori
This study aims to investigate whether conditional higher moments offer additional and distinct information compared to lower moments in spillover effect analysis, and to examine their relevance for portfolio construction and hedging strategies. We use the autoregressive conditional density (ACD) model to estimate the conditional skewness and kurtosis of nine major cryptocurrency markets. We explore
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Do bitcoin shocks truly Cointegrate with financial and commodity markets? International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-16 Mustafa Özer, Michael Frömmel, Melik Kamişli, Darko B. Vuković
This study examines the long-run relationships between Bitcoin and various financial and commodity markets. Utilizing a novel methodology termed the Implicit Asymmetric Combined Cointegration Test (IACC), an augmented variant of the Bayer Hanck combined cointegration method (BH), this research applies ten-minute frequency time series data to test asymmetric shocks associated with Bitcoin, stock markets
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Evolving energies: Analyzing stability amidst recent challenges in the natural gas market International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-13 Tarek Bouazizi, Ilyes Abid, Khaled Guesmi, Panagiota Makrychoriti
The study explores the heightened volatility in the natural gas market resulting from the recent health crisis. Utilizing ARMA-Spline-GARCH, ARMA-Spline-GJR models, and PLS regression, an analysis of daily data from January 7, 1997, to December 31, 2021, reveals an accentuated volatility during the crisis, primarily driven by extreme weather conditions and natural gas storage dynamics. The PLS regression
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The interplay among corporate bonds, geopolitical risks, equity market, and economic uncertainties International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-09 Saad Alshammari, Kostas Andriosopoulos, Olfa Kaabia, Kamel Si Mohamed, Christian Urom
This study examines the dynamic interconnectedness and dependence between the USA’s corporate bond market (CMD) and economic and equity market uncertainties, as well as geopolitical risk. Using quantile Vector Autoregressive (QVAR) and Wavelet Local Multiple Correlation (WLMC) techniques, we place particular emphasis on the periods corresponding to the Russian–Ukrainian war and the COVID-19 pandemic
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Realized normal volatility and maximum outlying jumps in high frequency returns for Korean won–US Dollar International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-07 Yi Chae-Deug
This paper analyzes the realized volatility and jumps of five-minute returns for the Korean won–US dollar exchange rate from June 2010 to April 2021. If standard normal distributed jump statistics are used, the jump probabilities of Korean won–US dollar are lower when jump occurrences are frequent, and the jump returns for Korean won–US dollar will be considerably underestimated. However, if we utilize
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Gold market volatility and REITs' returns during tranquil and turbulent episodes International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-06 Afees A. Salisu, Omokolade Akinsomi, Frank Kwakutse Ametefe, Yinka S. Hammed
We analyze the predictability of REIT returns based on gold market volatility for 11 sectors and five regions. Our findings show higher gains during volatile gold market conditions, but results vary in tranquil and turbulent periods. We observe sector-specific investment behavior in the REITs market during the pre-GFC, but the post-GFC and COVID periods show otherwise. REITs offer a safe haven ability
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New evidence of interdependence in forex markets: A connection of connection analysis International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-05 Tao Wu, Xiaotong Sun, Xin Xu, Nanfei Jia, Siyuan Xuan
Uncovering the complex connections among components is a fundamental approach to understand underlying mechanisms and then guide decision-making in forex markets. Previous works mainly focused on the connections between currency themselves, this work extends this issue by proposing a novel framework to investigate the connections between currency connections. Selecting ten major traded currencies as
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FinTech, systemic risk and bank market power – Australian perspective International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-04 Md Sohel Saklain
This study investigates idiosyncratic/firm-specific risk and systemic risk of FinTech firms and traditional financial institutions (FIs) in Australia. It also examines the impact of FinTech growth on bank market power. I find that stock return and idiosyncratic risk are higher in FinTech firms than in traditional FIs. Regarding systemic risk, FinTech firms are more exposed/vulnerable to systemic shocks
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Sector-specific calendar anomalies in the US equity market International Review of Financial Analysis (IF 7.5) Pub Date : 2024-05-03 Abbas Valadkhani, Barry O'Mahony
While previous studies have predominantly examined market-wide calendar anomalies, they have overlooked the seasonal patterns in each sector. This study bridges this gap by identifying sector-specific calendar anomalies within the US equity market. Using the longest available data (January 1999–December 2023) on sectoral exchange-traded funds (ETFs) without overlapping constituents, we statistically
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Financial fusion: Bridging Islamic and Green investments in the European stock market International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-28 Afzol Husain, Sitara Karim, Ahmet Sensoy
Given the historic decoupling nature of Islamic and green financial instruments with conventional financial markets this study investigated the interconnectedness of the European financial market with green and Islamic financial instruments amidst the unprecedented global dynamics and mounting uncertainties. Considering data from January 02, 2015, to October 03, 2023 and using TVP-VAR and Wavelet Coherence
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Time-frequency extreme risk spillovers between COVID-19 news-based panic sentiment and stock market volatility in the multi-layer network: Evidence from the RCEP countries International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-25 Yanshuang Li, Yujie Shi, Yongdong Shi, Xiong Xiong, Shangkun Yi
This study extends extant discussions on regional integration by exploring risk spillovers between news-based panic sentiment and stock market volatility among Regional Comprehensive Economic Partnership (RCEP) members during the COVID-19 pandemic. We innovatively estimate quantile-based spillover indices in both time and frequency domains and construct the multi-layer network. Both static and dynamic
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Assessing resilience to systemic risks across interbank credit networks using linkage-leverage analysis: Evidence from Japan International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-25 Haibo Wang
The banking crisis started in March 2023 was triggered by disproportion of deposit liability and assets. Applying balance sheets from 1999 to 2022, from the Japanese Bank Association, this study scrutinizes the durability of high-priority banking systems against damaging events in that industry. Eyeing the unique high-level savings in Japanese banking, this study investigates the impact of disproportion
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Uncertainty and cryptocurrency returns: A lesson from turbulent times International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-24 Barbara Będowska-Sójka, Joanna Górka, Danial Hemmings, Adam Zaremba
This paper explores the interplay between economic uncertainty and cryptocurrency behaviour. Using data spanning from April 2018 to December 2022, we examine the relationship between ten major cryptocurrencies and a repertoire of uncertainty measures covering geopolitical events, economic policy, and commodity, equity, and bond markets. Cryptocurrency returns exhibit dynamic and positive correlation
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Left-tail risk and UK stock return predictability: Underreaction, overreaction, and arbitrage difficulties International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-21 Maher Khasawneh, David G. McMillan, Dimos Kambouroudis
Recent studies challenge the standard model risk-return trade-off by showing inverse predictive power of firm-specific left-tail risk for future returns (i.e., left-tail momentum). In this work, we investigate the pricing of left-tail risk in UK stocks. Both the portfolio construction approach and Fama-MacBeth regressions reveal the underperformance of stocks with high left-tail risk. We examine alternative
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When acquirers are short on cash flow in M&A deals International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-21 Yaru Ren, Lin Li, Wilson H.S. Tong, Peter Lam
Studies on corporate takeovers are voluminous but typically assume that acquirers are not financially constrained. We show that acquirers' free cash flow (FCF) levels have significant impacts on their takeover activities and consequences. Acquirers with low FCF, despite their high levels of cash holdings, tend to pay in stocks rather than cash. The targets acquired by low-FCF acquirers are of inferior
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Machine-learning stock market volatility: Predictability, drivers, and economic value International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-20 Juan D. Díaz, Erwin Hansen, Gabriel Cabrera
We investigate whether machine learning (ML) techniques, using a large set of financial and macroeconomic variables, help to predict S&P 500 realized volatility and deliver economic value. We evaluate regularization methods (Ridge, Lasso, and Elastic Net), tree-based methods (Random Forest and Gradient boosting), and Neural Networks. We find that ML algorithms outperform the benchmark model (HAR) at
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Stock market prices and Dividends in the US: Bubbles or Long-run equilibria relationships? International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-20 Robinson Dettoni, Luis A. Gil-Alana, OlaOluwa S. Yaya
This paper presents a novel approach to identifying potential bubbles in the US stock market by employing alternative time series methods based on long memory, including fractional integration and cointegration, as well as duration dependence non-parametric models. To test for duration dependence, the paper employs a unique non-parametric hazard function estimation method, using monotonic P-splines
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The shape of the Treasury yield curve and commodity prices International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-20 Yasmeen Bayaa, Mahmoud Qadan
We decompose the U.S. yield curve into three latent factors – the level, slope and curvature – and explore the information content of the yield curve regarding the future evolution in oil, coal, copper, ethanol, gold, heating oil, natural gas, palladium, platinum, silver and zinc prices. Using data from January 1986 to November 2021, we find that the shape of the term structure is very informative
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Financial statement comparability and expected default risk International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-19 Yushi Wang, Yuan Feng, Zhangyao Zhu, Jia Liu, Yubin Li
This study investigates the effects of financial statement comparability on corporate expected default risk (EDF). Based on three different comparability measures, we find that financial statement comparability is negatively related to the EDF in the current and subsequent periods. This negative effect is most pronounced in the short term and in firms near default. Cross-sectional tests reveal that
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Social capital, syndication, and investment performance: Evidence from PE investing in LBOs International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-18 Jay Dahya, Betty (H.T.) Wu
This study examines the influence of social capital on leveraged buyout (LBO) investments. Exploiting proprietary global private equity data at the investment-level for leveraged buyouts, we find that alumni of Harvard's MBA program are more inclined to co-invest and form syndicates in LBO with each another. The phenomenon of Crimson pairing manifests in deals that involve uneven investments in co-investor
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Crime and covenants International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-18 Farhan Shazia
Crime is a major concern in the U.S., with implications for the allocation of resources due to the uncertainty associated with it. This paper examines whether the U.S. state property crime rate is a source of uncertainty that induces lenders to increase and tighten covenants as a result of increased risk. I found that greater crime exposure by borrowers leads lenders to impose higher and tighter covenants
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Is there an optimal level of leverage? The case of banks and non-bank institutions in Europe International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-18 Peter Cincinelli, Elisabetta Pellini, Giovanni Urga
In this paper, we evaluate whether banks and non-banks size and systemic risk are affected by their level of leverage. We implement a threshold analysis to a sample of European traditional banks and non-banks (Finance services and Real Estate Finance Services) over 2006:1-2019:4. We find that Finance Services show positive co-movements between leverage and size, independently of the level of leverage
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Does management tone matter in information disclosure? Evidence from IPO online roadshows in the SSE STAR market International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-18 Shengpeng Zhang, Yaokuang Li, Ruixin Liang, Yu He
This paper explores whether management tone in IPO online roadshows in the SSE STAR Market matters in information disclosure. We apply bag-of-words and machine learning methods to construct proxies for management tone, respectively. After conducting a series of empirical analyses, we find that management tone is positively associated with first-day stock returns and future operating performance after
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The impact of macroeconomic news sentiment on interest rates International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-17 Francesco Audrino, Eric A. Offner
We provide evidence that sentiment extracted from articles related to interest rates, inflation, and the labor market has the ability to explain short-term interest rate movements that cannot be accounted for by professionals’ and consumers’ expectations. Additionally, sentiment can pin down two short rate regimes that are correlated with the business cycle. By combining these results with a yield
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FinSentGPT: A universal financial sentiment engine? International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-17 Aref Mahdavi Ardekani, Julie Bertz, Cormac Bryce, Michael Dowling, Suwan(Cheng) Long
We present FinSentGPT, a financial sentiment prediction model based on a fine-tuned version of the artificial intelligence language model, ChatGPT. To assess the model’s effectiveness, we analyse a sample of US media news and a multi-language dataset of European Central Bank Monetary Policy Decisions. Our findings demonstrate that FinSentGPT’s sentiment classification ability aligns well with a prominent
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Diversifying and hedging REIT portfolios with cryptocurrencies: Evidence from global and regional REIT indices International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-16 Babatunde O. Odusami, Omokolade Akinsomi
Hedging the financial risk of portfolios of securitized real estate assets is daunting because of the unique nature of the underlying assets and because no direct market exists to trade on property-related derivatives. In this paper, we conduct a global study of the diversification and risk mitigation benefits of cryptocurrencies for REIT stocks. Specifically, we examine the dynamic relationship between
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Options illiquidity in an over-the-counter market International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-16 Jungkyu Ahn
This article reveals that the intensity of search determines whether illiquid currency options trade at premia or at discounts. For options in a standalone search market, illiquidity leads to price premia, as intermediating dealers, who are presumably short in the equilibrium, demand additional compensation. With the presence of listed options at exchanges, illiquidity results in price discounts, as
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Climate change exposure, shareholder wealth, and the adoption of the Paris agreement: A text-based approach International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-16 Pattanaporn Chatjuthamard, Simran Singh, Pornsit Jiraporn, Sang Mook Lee
Taking advantage of a distinctive measure of firm-specific exposure to climate change derived from sophisticated textual analysis, we examine the effect of climate change exposure on shareholder value using the signing of the Paris climate agreement. We find that companies more exposed to climate change experience more favorable market reactions to the adoption of the agreement. Specifically, a rise
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Trading activity of VIX futures and options around FOMC announcements International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-16 Hong-Gia Huang, Wei-Che Tsai, J. Jimmy Yang
This research investigates the information content of volatility trading in VIX derivatives under a high-frequency framework. We provide empirical evidence that the abnormal order imbalances of VIX futures and call (put) options are significantly negative (positive) during FOMC embargoes. Our results remain robust under various empirical approaches for examining FOMC announcements. We also find that
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Do ESG ETFs provide downside risk protection during Covid-19? Evidence from forecast combination models International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-16 Yujun Huang
This article examines the risk-related performance of ESG (Environmental, Social, and Governance) investments through the ETFs, with the employment of Oil & Gas ETFs as benchmark. We introduce the Value-at-Risk () and modified Sharpe Ratio () based on such measurement as representative of tail risk protection. The sample of this study is from March 2012 to January 2022, which covers the Covid-19 period
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Analyzing credit spread changes using explainable artificial intelligence International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-16 Julia Heger, Aleksey Min, Rudi Zagst
We compare linear regression, local polynomial regression and selected machine learning methods for modeling credit spread changes. Using partial dependence plots (PDPs) and H-statistic, we find that the outperformance of machine learning models compared to regression ones is mostly attributable to complex non-linearities and not to interactions. The PDPs are additionally used to perform a factor hedging
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Effect of stock liquidity on the economic value of patents: Evidence from U.S. patent data International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-16 Hyun Joong Im, Srinivasan Selvam, Kelvin J.K. Tan
Exploiting the Russell index reconstitutions as an exogenous shock, we show that an increase in stock liquidity is associated with an increase in the economic value of innovation. We also show that liquid stocks result in improved information production and institutional monitoring, which facilitate feedback effects and instill discipline in managers to prioritize economically valuable innovation.
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A consumption-based term structure model of bonds and equity International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-16 Masataka Suzuki
In this study, I propose a consumption-based asset pricing model to capture the dynamic properties of term structures of bonds and equity. I extend the long-run risks model by introducing a mean-reversion of dividend growth and the external habit formation of a representative agent. The mean-reverting dividend growth generates a negative equity term premium, while the habit formation augments the equity
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Beyond the veil: Mapping cryptocurrencies' ecosystem International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-16 Matteo Cavallaro, Alban Mathieu
This paper's objective is important for clarifying the economic characteristics of the cryptocurrencies' ecosystem and thus providing an interpretative grid for future research. Far from being limited to the Bitcoin's experience, the number of cryptocurrencies is large and new crypto-like assets are constantly being created. The multiplicity of cryptocurrencies raises questions about their similarities
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An examination of how executive remuneration and firm performance are influenced by Chair-CEO diversity attributes International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-16 Colette Grey, Antoinette Flynn, Douglas A. Adu
Advancing prior research, this study investigates the effect of Chair-CEO diversity on the relationship between executive remuneration and firm performance. Employing a unique sample of 262 UK listed firms from 2009 to 2020, our findings are five-fold. First, our findings suggest that Chair-CEO diversity is negatively associated with executive remuneration levels. Second, we document a positive relationship
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Unravelling the credit market shocks and investment dynamics: A theoretical and empirical perspective International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-16 Darja Zabavnik, Miroslav Verbič
This paper investigates the underlying credit market shocks that historically affected business investment in the Slovenian economy. In contrast to the existing literature, we explore more profound structural shocks beneath the credit demand and supply shocks. For the purpose of structural identification, we propose a theoretical model of the credit market that reveals the credit market imperfections
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Assessing the crypto market stability after the FTX collapse: A study of high frequency volatility and connectedness International Review of Financial Analysis (IF 7.5) Pub Date : 2024-04-16 Carlos Esparcia, Ana Escribano, Francisco Jareño