Does the US-China trade war affect co-movements between US and Chinese stock markets?

This paper investigates the impact of the US-China Trade War on co-movements between US and Chinese stock markets. It particularly examines the time-varying stock market co-movement between the United States and China at market level, as well as at sector level, over the period from 3rd January 2017 to 23rd January 2020. The ‘event study’ analysis is employed to investigate the effect of US-China trade disputes news on co-movement dynamics, and the news announcement effects before and after the official start of the US-China Trade War (regarded as 6th July 2018) are examined separately in light of this phenomenon. We also identify structural breaks and spillover patterns of cross-market co-movements during different phases. The results indicate that co-movements amongst mainland China, Hong Kong and US stock markets are positively affected by news releases and, after 6th July 2018, are enhanced significantly. More precisely, there is also empirical evidence of positive announcement effects in stock market co-movements between the US and mainland China in specific sectors (particularly, Industrials and Information Technology). For international investors, this evidence suggests that the US-China Trade War has reduced the benefit of portfolio diversification in managing risk.     

Feasible momentum strategies: Evidence from the Swiss stock market

While there is little controversy on the profitability of momentum strategies, their implementation is afflicted with many difficulties. Most important, chasing momentum can generate high turnover. Though there are already several attempts to make momentum strategies less expensive with respect to transaction costs, we go a step further in the simplification of momentum strategies. By restricting our sample to Switzerland’s largest blue-chip stocks and choosing only one winner and one loser stock, we find average returns to our momentum arbitrage portfolios of up to 44% p.a. depending on the formation and holding periods. While unconditional risk models are at odds with momentum profits, stock market predictability and time-varying expected returns explain a large part of the momentum payoffs, including the post-holding period behavior of the winner and loser stocks (overreaction and subsequent price correction).

The impact of forced divestments on parent company stock prices: Buy on the rumor,sell on the news?

We measure how warnings of expropriation and forced divestments of private property affect the stock prices of parent companies. We use a unique database of 116 events in 12 countries from 2005 to 2013. Our results show that different types of warnings have significant negative effects on stock prices, and the largest effect is from a warning that takes the form of a transitory permit revocation. In the case of forced divestments, we find a significant negative impact when a permit is permanently revoked. However, nationalizations are associated with a positive market reaction.     

Investment performance of “environmentally-friendly” firms and their initial public offers and seasoned equity offers

We employ a sample of 748 environmentally-friendly (or “green”) firms listed on U.S. stock exchanges to extend studies of the effects of socially responsible investment (SRI) on stock investment returns and the performance of initial public offerings (IPOs) and seasoned equity offerings (SEOs). Our empirical tests document positive and statistically significant excess returns for our environmentally-friendly firms and their IPOs and SEOs, in contrast to our control IPO and SEO samples which underperform. In summary, a “green” equity premium is evident in returns calculated from a variety of benchmarks.     

Does personal experience with COVID-19 impact investment decisions? Evidence from a survey of US retail investors

This paper explores the link between personal experience with COVID-19 and US retail investors’ financial decision-making during the first COVID-19 wave. Do retail investors that have personally experienced COVID-19 change their investments after the pandemic outbreak, and if so, why? We use a cross-sectional dataset from an online survey of US retail investors collected in July and August 2020 to assess if and how respondents change their investment decisions after the COVID-19 outbreak. On average retail investors increase their investments during the first wave of COVID-19 by 4.7%, while many of them decrease their investments suggesting a high heterogeneity of investor behaviours. We provide the first evidence that personal experience with the virus can have unexpected positive effects on retail investments. Investors who have personal experience with COVID-19, who are in a vulnerable health category, who tested positive, and who know someone in their close circle of friends or family who died because of COVID-19, increase their investments by 12%. We explain our findings through terror management theory, salience theory and optimism bias, suggesting that reminders of mortality, focussing on selective salient investment information, and over-optimism despite personal vulnerable health contribute to the increase in retail investments. Increased levels of savings, saving goals and risk capacity are also positively associated with increased investments. Our findings are relevant to investors, regulators, and financial advisors, and highlight the importance of providing retail investors with access to investment opportunities in periods of unprecedented shocks such as COVID-19.     

疫情如何影响企业发展预期?——基于压力传导机制的实证研究

公共卫生事件对企业微观经济行为的影响尚未引起足够的关注。立足于中国当前的疫情背景和制度环境,本文利用最新的“企业开工力”问卷调查数据,考察了新冠肺炎疫情对企业发展预期的影响和机制。研究发现,疫情降低了企业在未来开展经济行为的意愿;机制分析表明,紧张的现金流是疫情降低企业行动意愿的重要途径,具体表现为疫情分别通过提高来自现金流、违约金、还付贷款和员工工资等方面的资金支付压力,进而降低企业的发展预期。进一步分析表明,企业在疫情爆发前的活跃程度越高、所在市级地区的营商环境越好,疫情对企业发展预期的负向影响会越强;而且,疫情与企业发展预期间的关系在不同程度上受到企业所在地区疫情状况以及企业产权性质、所属产业类别等异质性因素的影响。在使用一系列稳健性检验后,上述结论依然稳健。本研究将企业经济行为的影响因素拓展至公共卫生安全领域,不仅揭示了公共卫生事件影响企业经济行为的微观机理,而且还为疫情防控下政府出台扶持企业相关政策提供了决策参考。     

不确定性事件如何影响人民币汇率波动?——基于新冠肺炎疫情的事实分析与传导机制

以新冠肺炎疫情为研究窗口,基于汇率决定理论总结不确定性事件影响人民币汇率的传导机制,运用事件研究法实证分析发现:不确定性事件能在第一时间通过新闻报道中的危害性信息和结果未知性带来的负面情绪改变人们的心理预期,进而致使市场主体的风险偏好下降,影响其消费、投资等行为,使得生产、投资和出口下降;由于心理预期的形成需要时间,之后又需经生产、消费和投资的中介传导才能最终作用在汇率变动上,新冠肺炎疫情对人民币汇率的负面影响存在时滞效应;由于不确定性事件的类型和汇率制度背景等不同,新冠肺炎疫情与汶川大地震对人民币汇率的影响也有所差异.     

Stock markets’ reaction to COVID-19: Cases or fatalities?

In this paper, we examine the stock markets’ response to the COVID-19 pandemic. Using daily COVID-19 confirmed cases and deaths and stock market returns data from 64 countries over the period January 22, 2020 to April 17, 2020, we find that stock markets responded negatively to the growth in COVID-19 confirmed cases. That is, stock market returns declined as the number of confirmed cases increased. We further find that stock markets reacted more proactively to the growth in number of confirmed cases as compared to the growth in number of deaths. Our analysis also suggests negative market reaction was strong during early days of confirmed cases and then between 40 and 60 days after the initial confirmed cases. Overall, our results suggest that stock markets quickly respond to COVID-19 pandemic and this response varies over time depending on the stage of outbreak.     

中央银行沟通的金融市场响应——基于股票市场的事件研究

本文使用事件研究法分析我国中央银行沟通行为对股票价格走势的影响。研究发现,影响确实存在且影响方向和力度与央行沟通方式以及股票市场背景有关。具体而言:(1)书面沟通影响显著,口头沟通则无明显作用;(2)宽松性政策信息沟通产生了正向影响,紧缩性信息沟通影响为负;(3)沟通事件的影响主要体现为一种短期作用,并伴随着即时效应、预知效应和滞后效应;(4)在熊市或牛市的不同市场背景下,央行沟通对股价的影响存在非对称性。结果表明,央行的沟通手段对金融市场有重要影响。     

Effect of credit rating changes on Australian stock returns

We study the impact credit rating revisions have on stock returns of Australian firms rated by Standard & Poor's and Moody's. Our evidence is consistent with that documented in the USA showing that only downgrades contain price‐relevant information. The reaction is most significant when the downgrade: (i) is unanticipated; (ii) is for an unregulated firm; and (iii) reduces the firm's rating by more than one category.     

The Event Study Methodology Since 1969

This paper discusses the event study methodology, beginning with FFJR (1969), including hypothesis testing, the use of different benchmarks for the normal rate of return, the power of the methodology in different applications and the modeling of abnormal returns as coefficients in a (multivariate) regression framework. It also focuses on frequently encountered statistical problems in event studies and their solutions.