Market share instability and stock price volatility during the industry life-cycle: the US automobile industry

Market share instability, during certain stages of the industry life-cycle, has become a stylized fact in the industrial organization literature. In the finance literature, volatility in the form of excess volatility, i.e. the much larger volatility of stock prices than dividends (although stock prices should in theory trace the present value of future dividends), has given rise to controversies regarding stock price determination (Campbell and Shiller, 1988; Shiller, 1989). Recent evolutionary models, both theoretical and empirical, have tied the presence of market share instability to industry specific variables, such as specific periods in the industry life-cycle and specific “technological regimes”. The object of the paper is to explore whether there is a relationship between market share instability and stock price volatility and to what degree this relationship is connected to the concept of the industry life-cycle, and hence to industry specific factors. To do so, we explore the relationship in one particular industry, the US automobile industry. Since neither life-cycle nor finance theories attack this problem directly, we use insights from both approaches to build hypotheses which guide the data analysis. The empirical results confirm many of these hypotheses, suggesting that the degree of excess volatility is indeed partly affected by industry specific factors.     

中国股票市场微观结构的特征分析——买卖报价价差模式及影响因素的实证研究

本文根据股票市场微观结构理论 ,运用高频数据对我国深圳股票市场的买卖报价价差的变动模式进行实证分析 ,同时研究股票买卖报价价差的影响因素和成因 ,并建立和检验相应的模型 ,从而揭示我国股票市场的微观结构特征。     

我国证券市场正反馈交易的实证检验

正反馈交易是投资者依据证券t-1期收益高低决定其第t期买卖行为的一种交易策略,这种交易策略广泛存在于世界各国的证券市场中,使证券市场表现出超常的波动性。本文使用上证指数和深证指数对我国证券市场的正反馈交易进行了实证研究,结果显示我国证券市场同样存在显著的正反馈交易现象,这种现象降低了市场的稳定性。     

Technological Forecasting at the Stock Market

Under the assumption that competition (Darwinian in nature) reigns in the stock market, we analyze the behavior of company stocks as if they were species competing for investors' resources. The approach requires the study of dollar values and share volumes, daily exchanged in the stock market, via logistic growth functions. These two variables, in contrast to prices, obey the law of natural growth in competition, which like every natural law, is endowed with predictability. A number of unexpected insights about the stock market emerge. The forecasts indicate that whereas there is no looming crash in the near future, no significant growth should be expected either. The DJIA is to hover around 9500 depicting large erratic excursions above and below this level for a few years. The use of Volterra-Lotka equations demonstrates that the 1987 crash altered the stock-bond interaction from a symbiotic to a predator-prey relationship with stocks acting as predators. This research work has lead to the publication of the book An S-Shaped Trail to Wall Street by T. Modis, (Growth Dynamics, Geneva, 1999).     

我国证券市场流动性溢出效应的实证研究

2008年金融危机中的一个重要金融现象是流动性溢出效应.本文以我国沪深两市交易的国债和股票为样本,利用VAR技术分析了股票市场与债券市场之间的流动性溢出效应问题.由于我国股票市场的规模远大于交易所交易债券,我们发现存在显著的股市流向债市的流动性溢出效应,而债市流向股市的流动性溢出效应统计上却不显著.同时我们发现各个市场自身的收益率和波动率对其流动性也有着显著的影响.最后我们还发现两市自身的流动性存在着很强的自相关性.证据表明当我国资本市场出现流动性不足时,尤其要加强对股票市场流动性风险的防范和监管.同时也反映出我国要大力发展债券市场的必要,使股市和债市的流动性相互影响相得益彰.     

Long Range Dependence in the Indian Stock Market: Evidence of Fractional Integration,Non-Linearities and Breaks

This paper deals with the analysis of the Indian stock market prices using long range dependence techniques. In particular, we employ a variety of fractionally integrated models, which are very general in the sense that it allows us to incorporate structural breaks and non-linear structures. Our results indicate that the series corresponding to the NSE index is nonstationary and highly persistent, with an order of integration close to or above 1. The volatility, measured in terms of the squared returns indicates that the series is long memory, with an order of integration in the interval (0, 0.5). The results finally support the existence of a mean shift in the data at about January 2008, with the order of integration being around 1. Thus the Efficient Market Hypothesis (EMH) may be satisfied in the Indian stock market once a break is taken into account. However, the existence of short run dynamics suggests a degree of predictability in its behaviour.

     

Growth Cycles and Market Crashes

Market booms are often followed by dramatic falls. To explain this requires an asymmetry in the underlying shocks. A straightforward model of technological progress generates asymmetries that are also the source of growth cycles. Assuming a representative consumer, we show that the stock market generally rises, punctuated by occasional dramatic falls. With high risk aversion, bad news causes dramatic increases in prices. Bad news does not correspond to a contraction of existing production possibilities, but to a slowdown in its expansion. This economy provides a model of endogenous growth cycles in which recoveries and recessions are dictated by the adoption of innovations. Journal of Economic Literature Classification Numbers: O40, G12, O41, O30.     

The Influence of General Strikes against Government on Stock Market Behavior

Using a sample of 76 countries, this paper examines the impact of major strikes against government and its policies on stock market behavior. An occurrence of a general strike is detrimental to the value of equities, as documented by the ceteris paribus 6.11% fall in dollar-denominated stock market indices of the affected countries. This event is also accompanied by a statistically significant increase in risk, as measured by the standard deviation of returns and Value-at-Risk metrics. Taken together, these results imply that general strikes have serious ramifications for stock market investors.     

Inside the Crystal Ball of Finance: Understanding Financial Economists' Attitudes to Market and Society

Market economists are thought to wield tremendous power—not only over financial markets but over governments that stray from the ‘market way’. Still, there is mystery about what economists think, and how they form their judgements. This article reports results from a survey of over 50 financial market economists from leading financial institutions in Australia conducted in December 2003 and January 2004. It provides insight into the opinions of economists who impact on markets and policy, especially through media commentary. The article identifies their economic and social views, comparing them with the Australian public. We then examine how professional views of economists differ from their personal views. Differences in professional and private views—especially over the role of government and labour markets—are an opportunity to ponder how judgements are formed and used. We offer tentative answers to the question: do these professionals—highly paid for their opinions—occasionally self‐censor?     

Cyclical Dynamics of the Turkish Economy and the Stock Market

Abstract

We analyze the cyclical dynamics of the Turkish economy and the stock market as well as their interactions. We use hidden Markov models that are robust to parameter instability arising from major shifts in economic policy, which have been typically observed in the Turkish economy. These models provide estimates of turning points for the growth, business, and stock market cycles. We identify three states of growth cycles and two states of business cycles in Turkey characterized by different mean estimates. We find that the economy went through five recessions since 1987. Crises are characterized by sharp drops in economic activity and are preceded by slowdowns. These crises are typically followed by strong recoveries during which the economy grows above its long-run average rate. We show that the Turkish stock market goes through three regimes having distinct risk-return dynamics. Bear markets associated with negative returns precede every recession with an average lead time of three quarters, suggesting that the stock market may be a useful forward-looking indicator of the Turkish economy.     

Monetary Policy Announcements,Communication, and Stock Market Liquidity

Using the high‐quality intraday transaction data from 2001–2012, we investigate changes in stock market liquidity in response to the monetary policy announcements of the Bank of Korea (BOK). We find that liquidity impairment associated with informed trading occurs prior to the announcements but it disappears subsequent to the global financial crisis. In addition, liquidity impairment appears to become more severe with insufficient experts' predictability and accuracy rather than with policy rate change itself and unscheduled announcements. Finally, the Federal Open Market Committee (FOMC) announcements, changes in the Volatility Index (VIX), and trading by foreign investors play a limited role in explaining stock market liquidity changes. Overall, results indicate that central bank communication plays a significant role in reducing liquidity impairment by enhancing the predictability of policy actions, and therefore, mitigating information asymmetry.     

股权分置改革的效应研究--来自深市中小企业板的实证

股权分置改革的效应研究采用事件研究方法。事件研究是一种重要的研究方法,通过对事件发生前后一段时间内股票价格变化的研究,既可以估计某一特定事件的影响程度,也可以检验市场的有效性程度。笔者采用事件研究方法来研究股权分置改革对深圳股市中小企业板的影响,得出结论：股权分置改革事件对深圳股市中小企业板短期内股价走势有显著影响,深圳股市尚未达到半强式有效。     

An Empirical Study on Corporate Governance and Market Valuation in China

This paper empirically studies the relationship between the governance mechanisms and the market valuation of publicly listed firms in China. The authors construct measures for corporate governance mechanisms and measures of market valuation for all publicly listed firms on the two stock markets in China by using data from the firm’s annual reports. They then investigate how the market-valuation variables are affected by the corporate governance variables while controlling for a number of factors commonly considered in market valuation analysis. A corporate governance index is also constructed to summarize the information contained in the corporate governance variables. The index is found to have statistically and economically significant effects on market valuation. The analysis indicates that investors pay a significant premium for well-governed firms in China, benefiting firms that improve their governance mechanisms. Translated from Economic Research Journal, 2005, 2 (in Chinese)     

Virtual integration of financial markets: a dynamic correlation analysis of the creation of the Latin American Integrated Market

This article investigates the role of virtual integration of financial markets on stock market return co-movements. In May of 2011, the Chilean, Colombian and Peruvian stock markets virtually integrated their stock exchanges and central securities depositories to form the Latin American Integrated Market (MILA). We utilize the dynamic conditional correlation model proposed by Engle (2002) to identify a statistically significant positive correlation between these markets. Moreover, we find strong evidence that the creation of the MILA increased the levels of dynamic correlation between stock returns. A higher correlation was also found during the dot-com bubble and the 2007 financial crises. Our results imply a decline in gains from international diversification by holding portfolios consisting of diverse stocks of these countries.     

Modeling Jumps and Volatility of the Indian Stock Market Using High-Frequency Data

Recent advancements in technology have led to wide availability of high-frequency financial data. The aim of this paper is to study the behavior of the Indian stock market. In particular, we analyze the returns at 5 min interval from NSE using the index NIFTY and the stocks State Bank of India and Infosys. A non-parametric approach is taken to detect jumps in the return process. The analysis shows that index jumps relate very closely with the general market news and announcements while individual stock jumps are associated with company specific news. We find that volatility of the market is best captured by asymmetric power ARCH models.

     

Market share instability in Brazilian industry: a dynamic panel data analysis

The paper investigates market share instability in the context of Brazilian industry for the 1986–1998 period. The paper proposes the use of panel data unit root tests to access market share instability for a sample of industrial firms from different sectors and therefore generalizes related time series unit root tests proposed by Gallet and List (2001 Gallet, CA and List, JA. 2001. Market share instability: an application of unit root tests for the cigarette industry. Journal of Economics and Business, 53: 473–80.  ). The results mostly indicate that one cannot reject the hypothesis of market share instability and therefore there exist some degree of market rivalry in the Brazilian case.     

Does the stock market affect investment by Chinese firms? Some new evidence

During the 1990s, the Chinese government increasingly relied on the stock market as the major tool for state‐owned enterprise (SOE) reform and for the allocation of investment resources. This paper investigates the impact of stock market development in China on firm‐level capital investment by using a panel data set constructed by the author of all Chinese listed firms for the period 1992 to 1999. The results show that stock market valuation, as measured by Tobin’s q, has a highly independent, significant and positive influence on listed firms’ investment decisions, particularly during the stock market boom from 1996 to 1999. Given the sizable real effects of the stock market, deviations of stock prices from fundamentals can have substantially negative consequences. As a result, this study suggests that sensible regulation of the Chinese stock market is needed in order to enhance the efficiency of stock prices and facilitate an effective channeling of investment funds.     

Market Underreaction and Overreaction of Technology Stocks

Several studies have assessed stock market under- or overreaction of stocks and there is some agreement among them. However, there is much disagreement about what constitutes market underreaction or overreaction, and the conditions that cause it. The substantial variation in results among studies may be partially attributed to the types of firms that are contained in any sample. We investigate this premise by focusing on a sample of technology stocks that experienced an extreme change in stock price, along with a corresponding control sample of non-technology stocks that experienced a similar extreme change in stock price on the same day.

Based on the subsequent stock price behavior of each sample, we find a greater degree of overreaction within extreme positive changes in technology stock prices (winners) than in non-technology stock prices. In addition, we find a greater degree of underreaction within extreme negative changes in technology stock prices (losers) than in non-technology stock prices. When considering winners and losers collectively for technology and non-technology firms, it appears the market is overoptimistic when it initially revalues technology stock prices relative to non-technology stock prices.

The degree of under- or overreaction of technology stocks varies within the sample of technology stocks, and is conditioned on firm-specific characteristics. Overall, our results suggest that technology stocks exhibit unique stock price behavior subsequent to an extreme change in price, and that this unique behavior can even vary among technology firms according to firm-specific characteristics.     

The Dynamic Efficiency Gains from Introducing Capacity Payments in the National Electricity Market

Australia's National Electricity Market (NEM) has been a beacon for governments around the world considering power industry reform. However, while the energy‐only NEM has served Australia well since 1998, deep structural supply‐side faults exist. Competitive energy‐only markets do not have a stable equilibrium solution unless reliability constraints are violated, market power is exercised, or scarcity pricing operates unabated. But the political economy of electricity means none of this is likely. This research finds that by reducing the NEM price cap and introducing a ‘capacity payments pool’, a tractable and politically acceptable equilibrium can be established to facilitate timely plant entry.