Investor flows and stock market returns

This study simultaneously analyzes the relation between aggregate stock market returns and cash flows (net purchases of equity) from a broad array of investor groups in the United States over a long period of time from 1952 to 2004. We find strong evidence that quarterly flows are autocorrelated for each of the different investor groups. We further document a significant and positive contemporaneous relation between stock market returns and flows of Mutual Funds and Foreign Investors.     

Asymmetric interdependencies between large capital cryptocurrency and Gold returns during the COVID-19 pandemic crisis

This article explores asymmetric interdependencies between the twelve largest cryptocurrency and Gold returns, over the period January 2015 – June 2020 within a NARDL (nonlinear autoregressive distributed lag) framework. We focus our analysis on the epicentre of the first wave of the COVID-19 pandemic from March 2020 to June 2020. During this crisis, cryptocurrencies are more correlated and more of them have returns that are cointegrated with Gold returns. Moreover, cryptocurrencies develop a long-term as well as a short-term asymmetric response to Gold returns during the COVID-19 period where most cryptocurrency returns respond more to negative changes and exhibit more persistence with Gold returns. Overall, our most important result confirms that the connectedness between Gold price returns and cryptocurrency returns increase in economic turmoil, such as during the COVID-19 crisis.     

Investor rewards to environmental responsibility: Evidence from the COVID-19 crisis

The COVID-19 shock and its unprecedented financial consequences have brought about vast uncertainty concerning the future of climate actions. We study the cross-section of stock returns during the COVID-19 shock to explore investors' views and expectations about environmental issues. The results show that firms with responsible strategies on environmental issues experience better stock returns. This effect is mainly driven by initiatives addressing climate change (e.g., reduction of environmental emissions and energy use), is more pronounced for firms with greater ownership by investors with long-term orientation and is not observed prior to the COVID-19 crisis. Overall, the results indicate that the COVID-19 shock has not distracted investors' attention away from environmental issues but on the contrary led them to reward climate responsibility to a larger extent.     

Investor attention,aggregate limit-hits,and stock returns

We develop a simple measure of investor attention by aggregating the number of days that a stock hits the upper or lower limit on a monthly basis. This attention proxy describes investor trading behavior and contains information of future stock returns. Using data from the Chinese equity market from 2002 to 2017, we provide extensive evidence that the investor attention captured by our measure negatively predicts cross-sectional stock returns, and the long–short trading strategy based on this attention measure produces significant economic value. We argue that the attention-motivated trading is the main cause behind the return predictability of aggregate limit-hits.     

Investor attention,ETF returns,and country-specific factors

Using the data of 47 single-country exchange-traded funds (ETFs) traded in the U.S. from 36 countries during 2004–2017, this research examines the impact of investor attention proxied by Google Search Volume Index and home country-specific factors on different quantile of their returns. Evidence first shows that compared with U.S. investor attention, home country investor attention largely correlates with low to medium ETF returns, supporting the attention-induced price pressure hypothesis. Second, home country-specific factors significantly affect ETF returns at different conditional quantiles. We also find that investors prefer investing in a country with strong similarity to that of the U.S., supporting the cross-country information asymmetry hypothesis. Third, an intervening effect of home country-specific factors exists on the relationship between U.S. investor attention and ETF returns. These findings should help government authorities find appropriate strategies to attract foreign investment and upgrade the value of their capital market as well as provide a reference on efficiency for equity investors.     

Dividends and share repurchases during the COVID-19 economic crisis

In this article, we examine dividends and share repurchases of S&P 1500 firms during the COVID-19 crisis characterized by the stock market crash and a relatively quick stock price recovery propelled by technology stocks. We find that the great majority of firms either maintain or increase the level of dividends during the crisis period. Yet, the relation between the dividend payout and reported earnings is negative and significant. This relation also holds for other types of payouts, including share repurchases and special dividends. Moreover, we find that both forecasted and realized earnings of up to 1 year into the future are negatively associated with current dividends, implying that existing payout policies are unsustainable in the longer term. Surprisingly, the difference-in-differences test shows that firms strongly affected by the COVID-19 crisis have higher dividend payouts (relative to net earnings) compared to unaffected firms. The same test indicates that strongly affected firms significantly reduce repurchases.     

Investor sentiment and aggregate stock returns: the role of investor attention

Review of Quantitative Finance and Accounting - We build on the intuitive, albeit overlooked, relationship between investor attention and investor sentiment to explore the open question of the...     

On equity market inefficiency during the COVID-19 pandemic

We show that during the weeks following the initiation of the COVID-19 pandemic, the United States equity market was inefficient. This is demonstrated by showing that utility maximizing agents over the time period ranging from mid-February to late March 2020 can generate statistically significant profits by utilizing only historical price and virus related data to forecast future equity ETF returns. We generalize Merton’s optimal portfolio problem using a novel method based upon a likelihood ratio in order to construct a dynamic trading strategy for utility maximizing agents. These strategies are shown to have statistically significant profitability and strong risk and performance statistics during the COVID-19 time-frame.     

Exploring the relationship between cryptocurrencies and hedge funds during COVID-19 crisis

In this paper, we investigated the relationship between cryptocurrency market and hedge funds in two different ways. First, we focus on the dependence between Cryptocurrency hedge funds and conventional hedge funds strategies using VAR and VECM models, while analyzing the impact of COVID-19 on the hedge funds' values. Secondly, we choose between ARDL and ARDL-ECM models to study the effects of cryptocurrency price changes on Crypto- Currency hedge funds' values during COVID-19 crisis. Our empirical findings demonstrate that there is substantial interactions between Crypto-Currency and conventional hedge funds. The COVID-19 pandemic has significant negative impact on the performance of the following hedge funds: Event Driven, Relative Value and Distressed Debt fund strategies, this has reflected in a significant drop in their values during this critical period. However, we demonstrate that COVID-19 pandemic did not affect the relationship between crypto-currency hedge funds and both bitcoin and Ethereum. These findings hold profound implications for hedge funds managers, cryptocurrency market main players and policy makers. Our study is crucial in forecasting the performance of these markets especially during global pandemics.     

Currency excess returns and global downside market risk

We assess cross-sectional differences in 23 bilateral currency excess returns in an empirical model that distinguishes between US-specific and global risks, conditional on US bull (upside) or bear (downside) markets. Using the US dollar as numeraire currency, our results suggest that global downside risk is compensated in conditional and unconditional, bilateral currency excess returns. This finding is mostly driven by the emerging markets' currencies in our sample. We also find that the link between the global downside risk and risks associated with a typical carry trade strategy is much weaker for emerging markets' currencies than for developed markets' currencies.     

Capital and credit market integration and real economic contagion during the global financial crisis

This study investigates the role of financial integration in the spread of global financial crisis. In particular, this study shows how the effect of the crisis on real business cycle co-movement varied for capital and credit market integration, using a sample of 58 countries in 2001–2013. During the global financial crisis, the United States – the epicenter of the crisis – experienced a severe downturn in the real economy, and other countries followed suit. We find that during the global financial crisis, the business cycle co-movements between the United States and the rest of the world were stronger when the level of capital market integration between them was higher. However, the co-movements were weaker when the level of credit market integration was higher. These findings are robust even when including investment channels, local fundamental factors, endogenous policy responses across countries, and alternative measures for financial integration and business cycle co-movements.     

Investor recognition and stock returns

It is well established that investment fundamentals, such as earnings and cash flows, can explain only a small proportion of the variation in stock returns. We find that investor recognition of a firm’s stock can explain relatively more of the variation in stock returns. Consistent with Merton’s (J Finance 42(3):483–510, 1987) theoretical analysis, we show that (i) contemporaneous stock returns are positively related to changes in investor recognition, (ii) future stock returns are negatively related to changes in investor recognition, (iii) the above relations are stronger for stocks with greater idiosyncratic risk and (iv) corporate investment and financing activities are both positively related to changes in investor recognition. Our research suggests that investors and managers who are concerned with firm valuation should consider investor recognition in addition to accounting information and related investment fundamentals.     

Daily pricing of emerging market sovereign CDS before and during the global financial crisis

In this paper, we study the determinants of daily spreads for emerging market sovereign credit default swaps (CDSs) over the period April 2002–December 2011. Using GARCH models, we find, first, that daily CDS spreads for emerging market sovereigns are more related to global and regional risk premia than to country-specific risk factors. This result is particularly evident during the second subsample (August 2007–December 2011), where neither macroeconomic variables nor country ratings significantly explain CDS spread changes. Second, measures of US bond, equity, and CDX High Yield returns, as well as emerging market credit returns, are the most dominant drivers of CDS spread changes. Finally, our analysis suggests that CDS spreads are more strongly influenced by international spillover effects during periods of market stress than during normal times.     

Evidence of oil market price clustering during the COVID-19 pandemic

We use hourly data on opening price, closing price, opening ask price, opening bid price, closing ask price and closing bid price to show that while oil prices are characterized by price clustering behavior, prices tend to cluster on numbers closer to zero than to one. Comparing the pre-COVID-19 sample with the COVID-19 sample, we find that evidence of price clustering is 8% more in the COVID-19 sample. We test the determinants of price clustering and find that as much as 30% of the price clustering behavior can be attributed to the COVID-19 pandemic. Finally, using a simple technical trading strategy, we do not find any evidence that the oil market is profitable in the COVID-19 period.     

Fast profits: Investor sentiment and stock returns during Ramadan

Observed by more than 1.5 billion Muslims, Ramadan is one of the most celebrated religious traditions in the world. We investigate stock returns during Ramadan for 14 predominantly Muslim countries over the years 1989-2007. The results show that stock returns during Ramadan are significantly higher and less volatile than during the rest of the year. No discernible declines in market liquidity are recorded. We find these results consistent with a notion that Ramadan positively affects investor psychology, as it promotes feelings of solidarity and social identity among Muslims world-wide, leading to optimistic beliefs that extend to investment decisions.     

Heterogeneously informed trading and the stock market efficiency during the COVID-19 pandemic

This study investigates the U.S. stock market efficiency from the symmetric and asymmetric perspectives during the COVID-19 pandemic. We explore that the pandemic boosts (hurts) the information role of symmetrically (asymmetrically) informed trading. Specifically, we find that the epidemic outbreak and infection scale strengthen (weaken) the stock return reaction to symmetrically (asymmetrically) informed trading. Evidence also indicates that the effect of symmetrically (asymmetrically) informed trading on stocks' permanent price shocks and price informational efficiency is enhanced (impaired) during the pandemic. Moreover, all these effects are consistently more intensive to informed buys.     

Investor information and bank instability during the European debt crisis

Outside of financial crises, investors have little incentive to produce private information on banks’ short-term liabilities held as information-insensitive safe assets. The same does not hold during crises. We compare the information effects of different policy interventions. We measure information production using credit default swap spreads during the Global Financial Crisis and the European debt crisis. We study abnormal information production around major events and find that capital injections reduced abnormal information production while early European stress tests increased it. High levels of information production predict bank balance sheet contraction and higher government expenditures to support financial institutions.     

Limited attention and the earnings announcement returns of past stock market winners

We document that stocks with the strongest prior 12-month returns experience a significant average market-adjusted return of 1.58% during the five trading days before their earnings announcements and a significant average market-adjusted return of −1.86% in the five trading days afterward. These returns remain significant even after accounting for transactions costs. We empirically test a limited attention explanation for these anomalous returns—that stocks with sharp run-ups tend to attract individual investors’ attention and investment dollars, particularly before their earnings announcements. Our analysis suggests that the trading decisions of individual investors are at least partly responsible for the return pattern that we observe.     

欧洲债务危机影响全球金融市场

2011年12月,国际清算银行（BIS）发布季度报告,指出欧债危机已成为影响全球金融市场的主要因素。文章结合这一报告从全球增长预期与货币政策应对、欧债主权债融资形势、欧洲银行融资及清偿力状况、全球溢出效应等多个视角系统而具体地回顾了2011年四季度以来欧债危机形势的演变及影响,以期为投资者分析与展望2012年全球金融市场前景提供参考。     

Assessing the safe haven property of the gold market during COVID-19 pandemic

This study examines the safe haven prowess of gold against some exogenous shocks due to the COVID-19 pandemic. We further make a comparison of our findings with those obtained for the period before it. Our results confirm the potential of gold market to serve as a safe haven during the pandemic albeit with a higher effectiveness before the pandemic. Further results suggest that gold consistently offers better safe haven properties than the US stocks as well as other precious metals like Silver, Palladium and Platinum regardless of the period. Finally, we find that the predictive model that accounts for uncertainties outperforms the benchmark model that ignores the same both for the in- and out-of-sample forecast analyses.