Comovements in the equity prices of large complex financial institutions

In recent years, mergers, acquisitions and organic growth have meant that some of the largest and most complex financial groups have come to transcend national boundaries and traditionally defined business-lines. As a result, they have become a potential channel for the cross-border and cross-market transmission of financial shocks. This paper analyses the degree of comovement in the equity prices of a selected group of large complex financial institutions (LCFIs), and assesses the extent to which movements are driven by common factors. A relatively high degree of commonality is found for most LCFIs although there are still noticeable divisions between sub-groups of LCFIs, both according to geography and to a lesser extent primary business-line.     

关于非银行金融机构参与外汇市场问题的研究

相比国际外汇市场,我国非银行金融机构参与外汇市场程度较低,这与外汇市场长期以来坚持实需交易原则有关,可考虑从适度放开自营交易、丰富产品等方面拓宽非银行金融机构参与外汇市场。     

The subprime asset-backed securities market and the equity prices of large complex financial institutions

In this paper, we investigate the relationship between the subprime asset-backed collateralized debt obligations (CDO) market and Large Complex Financial Institutions (LCFIs). We attempt to account for the dynamics between the ABX index returns and the banks’ equity returns through conditioning our analysis on the historical correlation between the variables. Three key results emerge from the analysis. First, we find a positive correlation between movements of the ABX index and the equity returns for all the LCFIs. Second, the volatility of ABX index returns tend to be transmitted to the volatilities of the equity returns of the financial institutions. Third, ABX prices changes lead equity returns changes of the European-based LCFIs. For the US LCFIs a two-way linkage emerges.     

Microfinance institutions,financial intermediation and the role of deposits

Microfinance institutions (MFIs), widely regarded as bankers to the poor, have extended their financial functions beyond lending to managing deposits. We empirically examine the influence of MFI deposit-taking on MFI financial performance. Using data of 1,301 MFIs worldwide, we find that an MFI's deposit level is an important determinant of its financial viability. However, the relationship is influenced by MFIs’ institutional type (for-profit or nonprofit) and the legal environment (common law or civil law). The results suggest that the positive financial impact of deposits has not been fully realised, reflecting the need to further improve cost management and revenue generation.     

Market‐based estimates of implicit government guarantees in European financial institutions

I exploit the price differential of credit default swap (CDS) contracts written on debts with different levels of seniority to measure the implicit government guarantees enjoyed by European financial institutions from 2005 to 2013. I determine that the aggregate guarantee increased substantially during the recent financial crises and peaked at an average of 89 bps in 2011. My analysis suggests that the extent of implicit support depends on the type of financial institutions and there exists a eurozone effect. Further investigation of feedback relationship shows that the guarantee implicitly offered by a government positively ‘Granger causes’ the sovereign's default risk.     

Better the devil you know: The influence of political incumbency on Australian financial market uncertainty

The Australian federal election cycle, which occurs approximately every 3 years, causes much media attention and invokes indecision regarding investment decisions in both the real economy and financial markets. This paper constructs measures of political uncertainty and formally explores their relationship with market uncertainty, as measured by implied volatility. The empirical evidence suggests that increasing (decreasing) levels of uncertainty around the election result induce higher (lower) levels of market uncertainty. In a case of the market preferring the devil it knows, an increasing (decreasing) likelihood of the incumbent party, whose economic policies are well-known, winning the election, reduces market uncertainty. The results remain significant even after controlling for a number of macroeconomic variables, and when an alternative GARCH framework is considered.     

Interest rate risk of German financial institutions: the impact of level,slope, and curvature of the term structure

We investigate here the sensitivity of the equity values of a large sample of German financial institutions to movements in the term structure of interest rates. While similar approaches rely on a single interest rate factor only, we quantify the exposure to changes in level, slope, and curvature, which are the driving factors of term structure changes. Our main findings are: (i) banks and insurances are exposed to level and curvature changes but only marginally to slope movements; (ii) the interest rate risk exposure depends on the banking sector investigated; (iii) level and curvature changes are priced in the cross-section of stock returns.

国外基本医疗保险体系中的商业参与——兼论公共物品供给

本文从国际经验借鉴的角度,根据基本医疗保险体系中的商业参与程度,选取了瑞士、澳大利亚和日本三个国家,对其基本医疗保险体系的特点和商业参与方式进行了阐述和总结。商业参与基本医疗保险这一公共物品的供给,是社会经济发展的必然,也是政府与市场的共同选择。当前,我国需要处理好政府部门与商保机构的衔接和职能分工,以提高基金运行效率、并维护参保者的合法权益。     

Computing the market price of volatility risk in the energy commodity markets

In this paper, we demonstrate the need for a negative market price of volatility risk to recover the difference between Black–Scholes [Black, F., Scholes, M., 1973. The pricing of options and corporate liabilities. Journal of Political Economy 81, 637–654]/Black [Black, F., 1976. Studies of stock price volatility changes. In: Proceedings of the 1976 Meetings of the Business and Economics Statistics Section, American Statistical Association, pp. 177–181] implied volatility and realized-term volatility. Initially, using quasi-Monte Carlo simulation, we demonstrate numerically that a negative market price of volatility risk is the key risk premium in explaining the disparity between risk-neutral and statistical volatility in both equity and commodity-energy markets. This is robust to multiple specifications that also incorporate jumps. Next, using futures and options data from natural gas, heating oil and crude oil contracts over a 10 year period, we estimate the volatility risk premium and demonstrate that the premium is negative and significant for all three commodities. Additionally, there appear distinct seasonality patterns for natural gas and heating oil, where winter/withdrawal months have higher volatility risk premiums. Computing such a negative market price of volatility risk highlights the importance of volatility risk in understanding priced volatility in these financial markets.     

Perks and the informativeness of stock prices in the Chinese market

While the literature shows that perks can affect firm values positively or negatively, we argue that firms with higher perks are more likely to be associated with a lower quality of financial reporting, which, in turn, can affect the informativeness of stock prices. Based on hand-collected data on perks from Chinese listed firms, we find that firms with lower perks are associated with higher informativeness of stock prices (or lower R-square). Moreover, the positive association between perks and R-square is shown to be weaker for firms with higher financial reporting quality through audit and earnings quality measures.     

传闻消息对我国上市公司股价影响的实证分析

本文通过有关我国上市公司的传闻消息对上市公司股价影响的实证分析,得出在消息公布日前2天以及后3天的时间段里,传闻消息对股价有正影响,从而给投机者带来了非正常收益,但是从长期来看,传闻消息不会给投资者带来任何非正常收益。另外,通过对各类传闻消息对股价影响的进一步分析,发现在诸类传闻消息中,主力类传闻对上市公司股价的影响最为显著,能给投机者带来很大的非正常收益。     

Statistical properties of demand fluctuation in the financial market

Numerical integration methods for stochastic volatility models in financial markets are discussed. We concentrate on two classes of stochastic volatility models where the volatility is either directly given by a mean-reverting CEV process or as a transformed Ornstein–Uhlenbeck process. For the latter, we introduce a new model based on a simple hyperbolic transformation. Various numerical methods for integrating mean-reverting CEV processes are analysed and compared with respect to positivity preservation and efficiency. Moreover, we develop a simple and robust integration scheme for the two-dimensional system using the strong convergence behaviour as an indicator for the approximation quality. This method, which we refer to as the IJK (137) scheme, is applicable to all types of stochastic volatility models and can be employed as a drop-in replacement for the standard log-Euler procedure.     

Overreaction to stock market news and misevaluation of stock prices by unsophisticated investors: Evidence from the option market

This paper examines investors' option activity on value and growth stocks before earnings announcements. The main finding is that unsophisticated investors enter option positions that load up on growth stocks relative to value stocks in the days leading up to earnings announcements. This occurs despite the fact that at earnings announcements value stocks outperform growth stocks by a wide margin. The paper's results provide evidence that unsophisticated option market investors (1) overreact to past news on underlying stocks and (2) mistakenly believe that mispriced stocks will move even further away from fundamentals at impending scheduled news releases.     

美国保险人财务危机处置制度对我国的启示

本文探讨的主旨在于研究美国保险监管机构处置面临财务危机的保险人的制度体系以及对国内相关制度的启示。通过介绍分析美国保险监督官协会制定的示范法以及据此订立的爱荷华州相关的法律,对督导、接管、重整以及清算这四种处置保险人财务危机的程序制度进行了系统的分析,并对保险保障基金以及抵消这两个在清算程序中至关重要的问题进行了探讨。通过对美国这一制度的具体分析,为国内的比较研究和实践立法提供有益的参考。     

隐性行业壁垒、市场集中度与中国保险经纪市场结构演进

对于保险经纪市场结构的研究,传统方法是运用市场集中度和市场壁垒指标,而由于我国正处在经济转型期,市场特点与发达国家有所不同,本文提出了隐性行业壁垒的分析方法。基于2005年~2009年保险经纪市场数据进行的两种不同的实证研究显示,我国保险经纪市场结构的演进趋势有所不同:传统分析方法的结果表明,保险经纪市场的总体特征是垄断性较低、竞争性较强,且呈现出竞争性逐步增强的趋势;隐性行业壁垒方法的结果表明,保险经纪市场中存在有较为明显的垄断性特征,且这种垄断性特征随着时间的变化呈现出增强的趋势,结论的差异值得保险经纪市场的监管者、参与者等利益相关者予以高度重视。     

Equity compensation and the sensitivity of research and development to financial market frictions

When financial market frictions exist, executives may have to decide which investment activities to reduce when internal funds decrease. Expenditures on research and development (R&D) may be particularly vulnerable because of the long-term nature of innovative activity. We find that equity compensation is associated with lower levels of firm R&D expenditures. Rewarding executives to incur more risk has little effect on R&D expenditures, but rewarding executives for higher returns reduces R&D expenditures and makes R&D expenditures more sensitive to financial market frictions. In contrast, cash compensation reduces the sensitivity of R&D expenditures to financial market frictions.     

Computations of Greeks in a market with jumps via the Malliavin calculus

Using the Malliavin calculus on Poisson space we compute Greeks in a market driven by a discontinuous process with Poisson jump times and random jump sizes, following a method initiated on the Wiener space in [5]. European options do not satisfy the regularity conditions required in our approach, however we show that Asian options can be considered due to a smoothing effect of the integral over time. Numerical simulations are presented for the Delta and Gamma of Asian options, and confirm the efficiency of this approach over classical finite difference Monte-Carlo approximations of derivatives.Received: July 2003, Mathematics Subject Classification (1991): 90A09, 90A12, 90A60, 60H07JEL Classification: C15, G12We thank M. Coutaud for contributions to the simulations.     

Transmission of future prices of corn of the Chicago Board of Trade to the Mexican spot market

In Mexico, the use of the coverage program of the Bureau of Market Services and Agricultural Market Development (ASERCA for its acronym in Spanish) is a tool that has been used by corn producers (mainly for white corn) for the acquisition of derived products in the CBOT (Chicago Board of Trade), the underlying element of which is US#2 grade yellow corn. In a high volatility environment regarding the prices of corn, the prices of CBOT should be adjusted with the spot domestic prices to incentivize Mexican producers to participate in the program. However, through a multivariate stochastic volatility analysis during the period of 2007–2012, it was shown that the future price of corn is not strongly related to the prices registered in some states of the country, therefore, it can be inferred that the coverage through the ASERCA program does not properly comply with its objective of protecting the national farmers that grow white corn, despite the fact that its use has increased.     

Systematic mistakes in the mortgage market and lack of financial sophistication

Institutions often offer a menu of contracts to consumers in an attempt to create a separating equilibrium that reveals borrower types and provides better pricing. We test the effectiveness of a specific set of contracts in the mortgage market: mortgage points. Points allow borrowers to exchange an upfront amount for a decrease in the mortgage rate. We document that, on average, points takers lose about $700. Also, points takers are less financially savvy (less educated, older), and they make mistakes on other dimensions (e.g., inefficiently refinancing their mortgages). Overall, our results show that borrowers overestimate how long they will stay with the mortgage.