Investor co-attention and stock return co-movement: Evidence from China’s A-share stock market

This study attempts to link investor co-attention to stock return co-movement in China's A-share stock market. On the one hand, stock price will co-move for stocks within the same industry and within the same market, which is labelled “return co-movement”. On the other hand, investor attention will also co-move as investors systematically search for relevant information for stocks of similar characteristics or as the stocks experience common information shocks, which is termed “investor co-attention”. The empirical evidence suggests that stock return co-movement can be explained by investor co-attention to a great extent, even after controlling for stock fundamentals and firm characteristics, and this effect is more salient for stocks with lower institutional ownership. Moreover, we employ large national lottery jackpots as exogenous shocks to investor attention. The empirical findings show that the co-movement of both investor attention and stock return increase on large lottery jackpot days, while investor co-attention contributes less to return co-movement on large lottery jackpot days. In summary, we offer an alternative explanation for return co-movement by observing the causal relationship between investor co-attention and stock return co-movement.     

How does investor attention matter for crude oil prices and returns? Evidence from time-frequency quantile causality analysis

This paper studies the time–frequency, nonlinear quantile relationship between investor attention (GSVI) and crude oil over the period from January 2000 to April 2020. To do so, the wavelet coherency, wavelet-based causality-in-quantiles test and quantile-on-quantile method are employed. The results indicate that first, the correlation between investor attention and crude oil is relatively high, and the highly correlated regions are concentrated from 8 to 16 months. In most cases, the GSVI is negatively correlated with the crude oil market. Additionally, under extreme market conditions, the explanatory ability is stronger than in the normal market, and it is greater in the low-frequency domain than in the high-frequency domain. Finally, investor attention has an apparent asymmetric impact on crude oil prices and returns at each scale, displaying a positive effect on the low quantiles of crude oil but a negative effect on the high quantiles across all quantiles of the GSVI. In the short term, when crude oil prices and returns are in a bear market, the larger volume of the GSVI has a greater impact on them. Moreover, the impact becomes greatest under extreme market conditions.     

Does the stock market really cause unemployment? A cross-country analysis

This study examines the relationship between the stock market and unemployment in 30 advanced and 11 developing and emerging countries. The results show that the unemployment rate and stock prices are cointegrated in all country groups; further, the causality between stock prices and unemployment appears in all country groups. Specifically, I found a particularly strong and one-way causal direction from stock prices to the unemployment rate in G7 countries. There is a strong bilateral causal relationship between stock prices and unemployment for other advanced countries. However, in the 11 developing and emerging countries, the causality test results indicate a strong Granger causality from unemployment to stock prices. The results for developing and emerging countries suggest that the unemployment rate can help forecast stock prices, but not vice versa. These findings complement existing studies and deliver useful implications for investors and policymakers, and suggest some new lines for future research.     

Can sustainable investments outperform traditional benchmarks? Evidence from global stock markets

To contribute to overcoming global sustainability challenges, investors have been increasingly interested in making sustainable investments and incorporating environmental, social and governance (ESG) criteria into their portfolio selection decisions and managerial activities. However, these investors and other agents interested in sustainable investment need updated and robust information to support their decision making. We analyzed the performance of several Dow Jones Sustainability Indices (DJSIs) and compared them with their respective market benchmarks from 2013 to 2018. The indices comprise the following regions and countries: the world, the Asia‐Pacific, Europe, emerging markets and the US. The analysis was conducted based on both classic and modern portfolio metrics. The results suggest that sustainable investment performance is still heterogeneous worldwide, but there is a promising opportunity for investors to obtain superior risk‐adjusted returns in certain regions while incorporating sustainable investment practices. The findings are of utmost importance to financial market practitioners, business managers, academics and other stakeholders interested in promoting investments, corporate practices and scientific knowledge to achieve the Sustainable Development Goals (SDGs).     

What drives the liquidity premium in the Chinese stock market?

This paper examines the dynamics of the liquidity premium in the Chinese stock market by adopting a multivariate decomposition approach to measure the individual contributions of various driving forces of the premium (such as firm size, idiosyncratic volatility, and market liquidity betas). By employing a wide range of liquidity measures, we show that liquidity premium is generally significant in the Chinese stock market. Furthermore, this premium is increasing in recent years starting from 2011; this observation is different from the United States market, in which the premium has declined over the years. Moreover, the multivariate decomposition approach highlights several asset pricing factors as the main driving forces of the premium. Based on the Amihud liquidity measure, the decomposition approach indicates that the size factor contributes 45–65% to the liquidity premium. However, the measure based on turnover suggests that idiosyncratic volatility accounts for at least 60% of the liquidity premium. In contrast, the global market liquidity beta does not significantly contribute to the premium. However, there is some evidence that the local market liquidity beta has become more significant in its impact on the premium during the period from 2011 to 2015. Our results imply that the findings on the liquidity premium in the Chinese stock market could be sensitive to the liquidity measure used and period of analysis.     

Dynamic interaction of risk–return trade-offs between oil market and China’s stock market: An analysis from the risk preferences perspective

The risk–return trade-off refers to the compensation required by investors for bearing risks, which can be viewed as the risk preference of investors in a market. The current study investigates the dynamic interdependence of risk–return trade-offs between China’s stock market and the crude oil market from the perspective of risk preference of investors, which is designed to explore the transmission process of investors’ risk preference in both markets. Specifically, this study applies the time-varying parameter GARCH-M model, namely TVP-GARCH-M model, to characterize the time-dependent risk–return trade-offs (investors’ risk preferences) in the crude oil and China’s stock markets, then examines their relationship through Granger causality tests. Results show that a variation in risk preferences of the oil market investors can dramatically cause a variation in risk preferences of the Chinese stock market investors, while the risk preference of investors in the Chinese stock market does not lead to that in the crude oil market, which is in accordance with expectations. The dynamic effect of investors’ risk appetite in the crude oil market is further examined by the TVP-VAR model. The findings of this work suggest that there generally exists a positive impact of investors’ risk preference in the oil market and that the effect is time-varying to a greater degree during the short and medium term. Moreover, responses of the Chinese stock market investors’ risk preference were more significant during the 2008 financial crisis. Additionally, the empirical results remain robust when applying alternative crude oil prices and China’s stock prices.     

Does weather impact the stock market? Empirical evidence in Taiwan

Psychological evidence suggests close relationships between weather and mood. Individuals feel in a more positive frame of mind on sunny than cloudy days. This study applies GJR–GARCH to examine the relationship among weather, stock returns and risk in Taiwan from 2001 to 2007. The empirical results indicate that precipitation does not significantly influence stock return and risk; likewise, sunshine hours and temperature insignificantly influence stock return, but do significant impact stock risk. These findings demonstrate that weather effect really exist in stock market, and can help investors in making innovative investment and management decisions.     

Does oil price variability affect the long memory and weak form efficiency of stock markets in top oil producers and oil Consumers? Evidence from an asymmetric MF-DFA approach

This study examines the asymmetric multifractality and the market efficiency of the stock markets in the countries that are the top crude oil producers (USA, KSA, Canada and Russia) and consumers (Brazil, China, India, and Japan) using an asymmetric multifractal detrended fluctuation analysis (A-MF-DFA) method. The results show evidence of an asymmetric multifractal nature for all markets. Moreover, the multifractality is stronger in the upward movement of the market returns, except in China. The degree of efficiency of the stock markets is shown to be time-varying and experienced a decrease during the 2008 global financial crisis (GFC), but an upside trend occurred during the recent oil price crash followed a significant decline during COVID-19. The stock markets have an anti-persistent feature during GFC and COVID-19, whereas they exhibit a long-term persistent feature during oil price crash. More interestingly, the efficiency of the stock markets of crude oil producers is lower in general than that of oil consumers. Furthermore, the efficiency of the stock market is lower in the downward movement of the market returns than in the upward movement. Asymmetry and oil price uncertainty index are the key driver of the stock markets and can serve as predictor of the stock market dynamics of top oil producers and top oil consumers particularly during COVID-19 and oil price crash.     

Career success for international professional women in the land of the equal? Evidence from Norway

This study investigates the career success of international expatriate women in Norway. Norwegian and international women were compared on both objective and subjective career success. Participants were 125 Norwegian women and 168 international expatriate women who answered a 58 item questionnaire. Although Norwegian women achieved higher career success than the expatriate group, these effects disappeared for objective career success when expatriate women had a high level of education, high English language competency and motivation. Motivation, self focused conflict resolution and language competency were positively associated with subjective career success. Results suggest that although being foreign can be a disadvantage in Norway, expatriate women can overcome this liability through investment in education, language and motivation. Implications for international expatriate women are discussed.     

Should the government directly intervene in stock market during a crisis?

Unlike foreign exchange markets where central banks frequently intervene, the governments strive not to intervene in the stock markets since intervention transmit negative signals and carry market-related side effects. The main reasons often cited in support of intervention are to bring price stability and to restore investors’ confidence. During the recent economic turmoil, opportunities for the governments to intervene in the stock markets were mainly exploited in emerging and developing countries. We study the outcome of the Russian government's intervention in its major stock market between September and October 2008. This intervention was intended to reverse the sudden and swift declining trend in traded security prices by altering the market's expectations. By using a combination of event study and a multivariate GARCH model, our findings does not support direct government intervention in the stock market during a crisis.     

Predicting crude oil prices: Replication of the empirical results in “What do we learn from the price of crude oil?”

In addition to their theoretical analysis of the joint determination of oil futures prices and oil spot prices, Alquist and Kilian (Journal of Applied Econometrics, 2010, 25(4), 539–573) compare the out‐of‐sample accuracy of the random walk forecast with that of forecasts based on oil futures prices and other predictors. The results of my replication exercise are very similar to the original forecast accuracy results, but the relative accuracy of the random walk forecast and the futures‐based forecast changes when the sample is extended to August 2016, consistent with the results of several other recent studies by Kilian and co‐authors.     

Can social media lead to labor market discrimination? Evidence from a field experiment

In this paper, we investigate the role of social media as a source of information for recruiters to discriminate applicants. We set up a field experiment over a 12‐month period, involving more than 800 applications from two fictitious applicants which differed in their perceived origins, which is an information available only from their Facebook profiles. During the experiment, an unexpected change in the Facebook layout reduced the salience of the information available on social media profiles. Before this change, a significant 41.7% gap between the two applicants callback rates highlights that personal online profiles are used by recruiters as a source of information to discriminate against applicants of foreign origin. After the layout change that mitigates our signal, the difference in callback rates fades away. This result suggests that the screening conducted by the employers does not go beyond the main pages of profiles. It also illustrates that design choices made by online platforms may have important consequences on the extent of discrimination.     

Forecasting stock market volatility: Can the risk aversion measure exert an important role?

In this paper, we predict realized volatility of stock return by utilizing time-varying risk aversion based on a simple linear autoregressive model. Our in-sample results suggest that time-varying risk aversion have significant impact for stock return volatility. In terms of out-of-sample forecasting performance, the empirical results indicate that the incorporation of time-varying risk aversion in the benchmark model can yield more accurate stock return volatility forecasts. Notably, the out-of-sample forecasting results confirm that our conclusions are robust when we apply alternative lag orders and alternative prediction evaluation periods. Finally, we study links between the prediction ability of time-varying risk aversion and the volatility of other stock indices and two kinds of crude oil, and find that the new predictor can effectively strengthen forecasting performance in most case. In view of the importance of volatility risk in the asset pricing process, our research is of great significance for financial asset participants.     

What factors drive the price–rent ratio for the housing market? A modified present-value analysis

We consider which factors determined the price–rent ratio for the housing market in 18 U.S. metropolitan statistical areas (MSAs) and at the national level over the period of 1975–2014. Based on a present-value framework, our proposed empirical model separates the price–rent ratio for a given market into unobserved components related to the expected real rent growth and the expected housing return, but is modified from standard present-value analysis by also including a residual component that captures non-stationary deviations of the price–rent ratio from its present-value level. Estimates for the modified present-value model suggest that the present-value residual (PVR) component is always important and sometimes very large at the national and MSA levels, especially for MSAs that have experienced frequent booms and busts in the housing market. In further analysis, we find that house prices in MSAs that have larger PVR components are more sensitive to mortgage rate changes. These are also the MSAs with less elastic housing supply. Also, comparing our results with a recent statistical test for periodically-collapsing bubbles, we find that MSAs with large estimated PVR components are the same MSAs that test positively for explosive sub-periods in their price–rent ratios, especially during the 2005–2007 subsample. Our approach allows us to estimate the correlation between shocks to expected rent growth, the expected housing return, and the PVR component. We find that the expected housing return and movements in the PVR component are highly positively correlated implying an impact of the expected housing return on house prices that is amplified from what a standard present-value model would imply. Our results also show that most of the variation in the present-value component of the price–rent ratio arises due to the variation in the expected housing return.     

Do landlords discriminate in the rental housing market? Evidence from an internet field experiment in US cities

This paper tests for racial discrimination in the rental housing market using matched-pair audits conducted via e-mail for rental units advertised on-line. We reveal home-seekers’ race to landlords by sending e-mails from names with a high likelihood of association with either whites or African Americans. Generally, discrimination occurs against African American names; however, when the content of the e-mail messages insinuates home-seekers with high social class, discrimination is non-existent. Racial discrimination is more severe in neighborhoods that are near “tipping points” in racial composition, and for units that are part of a larger building.     

Does recession drive convergence in firms’ productivity? Evidence from Spanish manufacturing firms

This paper provides evidence on the effect of recessions and expansions on the productivity growth rate of productivity leaders and followers. We use data of a representative sample of the Spanish manufacturing sector for the period 1991 and 2005. These data allow us to estimate firm level productivity for a relatively long period of time and provide us with firm level perception of the business cycle. We find that productivity tends to converge in recessions because, in these periods, the productivity growth of followers is higher than the productivity growth of leaders. This fact is consistent with theoretical models of managerial incentives and competition. A recession can be seen as an exogenous increase in competition that reduces demand and poses a threat of liquidation. This threat is higher for followers and is high enough to create asymmetric incentives to become more productive. We test the robustness of our results to sample selection and different productivity measure.     

Are regulations the answer for emerging stock markets? Evidence from the Czech Republic and Poland

Does the emergence of a stock market require a well-developed legal and/or regulatory system? Although historical work by Neal and Davis [Neal, L., & Davis, L. (2005). The evolution of the rules and regulations of the first emerging markets: The London, New York, and Paris stock exchanges, 1792–1914. Quarterly Review of Economics and Finance, 45, 296–311] and Stringham [Stringham, E. (2003). The extralegal development of securities trading in seventeenth century Amsterdam. Quarterly Review of Economics and Finance, 43, 321–344] suggests that securities markets have successfully developed with little government oversight, numerous authors [including Black, B. (2001). The legal and institutional preconditions for strong securities markets. University of California Law Angeles Law Review, 48, 781–855; Coffee, J. (1999). Privatization and corporate governance: The lessons from securities market failure. Journal of Corporation Law, 25, 1–39; Frye, T. (2000). Brokers and bureaucrats: Building market institutions in Russia. Ann Arbor: University of Michigan Press; Glaeser, E., Johnson, S., & Shleifer, A. (2001). Coase versus the Coasians. Quarterly Journal of Economics, 116, 853–899; Mlčoch, L. (2000). Restructuring of property rights: An institutional view. In L. Mlčoch et al. (Eds.), Economic and Social Changes in Czech Society After 1989. Prague: The Karolinum Press; Pistor, K. (2001). Law as a determinant for equity market development – the experience of transition economies. In Peter Murrell (Ed.), The Value of Law in Transition Economies (pp. 249–287). Ann Arbor: Michigan University Press; Stiglitz, J. (1999). Whither reform. Ten years of the transition. Keynote Address, Annual Bank Conference on Development Economics, Washington, DC, April 28–30, 1999; Zhang, X. (2006). Financial market governance in developing countries: Getting the political underpinnings right. Journal of Developing Societies, 2, 169–196] argue that the Czech Republic and other Eastern European governments need more regulation for their newly created stock markets. They maintain that the Warsaw Stock Exchange, which is seen as more regulated, has outperformed the Prague Stock Exchange which is seen as largely unregulated. Thus increased regulations are a key to increased performance. This article, however, maintains that the evidence from the Czech experience has been misinterpreted. This article provides an in depth case study of the Czech stock market and finds that (a) Czech capital markets have been hindered by government intervention from their beginning, (b) that the evidence on Poland's superior performance is not as strong as suggested, and (c) that Czech regulators seem to be unqualified, lack the proper incentives, and are unlikely to benefit the market. Under these circumstances it appears that Neal and Davis (2005:311) are correct that increased government involvement is unlikely to improve the situation.     

Risk reporting and stock return in the UK: Does market competition Matter?

This study examines the extent to which market competition influences risk reporting practice. It also explores how market competition affects the usefulness of risk reporting. The automated textual analysis measures the level of risk reporting [how much to report] and its tone [how it is reported] of UK FTSE 350 firms. The abnormal stock return is used as a proxy for the usefulness of risk reporting. In contrast to the proprietary cost hypothesis, our results indicate that the level of risk reporting is a positive function of market competition. Besides, UK firms are likely to disseminate more (less) negative (positive) news about their risks when market competition increases. However, after examining the informativeness of this reporting, we provide evidence that the level of reported risk information does not significantly enhance the abnormal stock returns of UK firms. Nevertheless, the tone of the reported risks carries incremental information indicative of a firm’s abnormal stock return, especially when market competition decreases. The findings suggest that firms are likely to alleviate their proprietary costs by framing their reporting of risk information in a way that deters potential competitors from entering their market and that market competition diminishes the perceived informativeness of such reporting. The results provide implications for investors as they should not acknowledge the disclosure of higher risk information when asking for more corporate transparency, as it lacks informativeness. Besides, policymakers may impose extra compulsory requirements on the UK firms to avoid reporting overly optimistic risk news to protect investors and avoid the adverse effects of this reporting.     

Are stock prices related to the political uncertainty index in OECD countries? Evidence from the bootstrap panel causality test

This study applies the bootstrap panel causality test proposed by Kónya (2006. Econ Modell 23, 978) to investigate the causal link between political uncertainty and stock prices for seven OECD countries over the monthly period of 2001.01 to 2013.04. This modeling approach allows us to examine both cross-sectional dependency and country-specific heterogeneity. Our empirical results indicate that not all the countries are alike and that the theoretical prediction that stock prices fall at the announcement of a policy change is not always supported. Specifically, we find evidence for the stock price leading hypothesis for Italy and Spain, while the political uncertainty leading hypothesis cannot be rejected for the United Kingdom and the United States. In addition, the neutrality hypothesis was supported in the remaining three countries (Canada, France and Germany), while no evidence for the feedback hypothesis was found.     

Limited attention,salient anchor,and the modified MAX effect: Evidence from Taiwan’s stock market

The literature documents that investors overweighing the right-tail probability pursue positively skewed assets, leading to lottery-like stocks overpriced. We find that the lottery anomaly primarily exists among stocks further away from their 52-week high prices. After attention-grabbing events with gambling features, inattentive retail investors become aware of certain stocks’ gambling traits and then net buy more lottery-like stocks, which further promotes the lottery anomaly. However, when such stocks are near their 52-week high price, retail investors tend to place little weight on the likelihood that the stock price will rise beyond the 52-week high, thereby reducing the skewness preference. Overall, our findings suggest that the perception of the 52-week high price as a price ceiling influences skewness preference, and that investor attention is the main determinant of whether anchoring bias affects skewness preference.