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.     

The impact and the contagion effect of natural disasters on sovereign credit risk. An empirical investigation

This paper investigates the relationship between natural disasters and the reaction of sovereign CDS spread in Europe. By applying an event study methodology during the period January 2007–December 2021 on an original database in which we identify 92 natural disasters in 17 European countries, we assess the reaction of the sovereign CDS market to a natural disaster. We find a heterogeneous response of the European sovereign risk to a natural disaster, as the response of the sovereign CDS market differs from region to region. The advent of a natural disaster can increase inequality between the regions due to the higher cost of credit for sovereigns and the reduced scope for manoeuvring public finances. Also, the results of the contagion effect confirm the hypothesis of a cross-border propagation effect, as natural disaster, in general, is not local event but spreads to other countries.     

The securitization of gold and its potential impact on gold stocks

We study the market impact of a very successful financial innovation – the SPDR Gold Trust exchange-traded fund (GLD). GLD holds physical gold, and provides traders with a convenient and cost-effective way to gain exposure to gold. We find that after the introduction of GLD, the liquidity of gold company stocks declined, and their adverse-selection risk increased. Over the two-month period after GLD’s introduction, the stocks’ relative effective bid-ask spreads increased by over 15%, while their adverse-selection cost, as measured by the price impact of trades, went up by more than 30%. Gold stocks also experienced significant negative abnormal returns (−12% on average) in the month after GLD started trading. Our findings suggest that GLD attracted traders, especially uninformed traders, away from gold company stocks, and that the resulting negative demand shocks and decrease in the stocks’ liquidity caused their prices to decline. Our results show that existing securities can be seriously adversely affected when a new security enters the market.     

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Natural hazards have become increasingly frequent in the Philippines, making the determination of risks associated with large-scale natural hazards and disasters in this area increasingly important. This study developed a method for estimating the risk of disasters from multiple hazards in this country at the province level. The locational probability and consequences of five natural hazards were analyzed over a 30-year period (1982–2011), and the disaster-risk potential of provinces was estimated based on the combined damage cost per capita from five hazards over that period. Information from the Center for Research on the Epidemiology of Disasters Emergency Disasters Database (CRED-EMDAT) was used to analyze the areas and populations affected, damage costs, and frequency and duration of five hazards (i.e. meteorological, climatological, hydrological, geophysical, and biological). The estimated values were then presented spatially using a geographic information system. The results suggested that meteorological hazards were the most common hazards affecting most provinces in the Philippines, whereas hydrological hazards produced the most damage. Small island provinces and coastal zones were among the areas with the highest disaster-risk potential. This assessment can aid in decision making with regard to financing disaster prevention schemes and in planning for the increasing occurrences of natural hazard-related disasters.     

Sentiment and stock prices: The case of aviation disasters

Behavioral economic studies reveal that negative sentiment driven by bad mood and anxiety affects investment decisions and may hence affect asset pricing. In this study we examine the effect of aviation disasters on stock prices. We find evidence of a significant negative event effect with an average market loss of more than $60 billion per aviation disaster, whereas the estimated actual loss is no more than $1 billion. In two days a price reversal occurs. We find the effect to be greater in small and riskier stocks and in firms belonging to less stable industries. This event effect is also accompanied by an increase in the perceived risk: implied volatility increases after aviation disasters without an increase in actual volatility.     

保险平滑政府自然灾害涉灾支出波动风险研究——以地震巨灾财政指数保险为例

我国重大自然灾害频发,导致政府财政救灾与灾后重建等涉灾支出波动较大,影响经济平稳运行,探索平滑财政涉灾支出波动风险的机制具有重要的现实意义.本文通过构建政府财政对地震巨灾救灾与重建支出负担积累模型,根据我国1990 ～2018年的地震损失数据,预测2019 ～2026年地震巨灾财政指数保险不同保险金额下,我国地震巨灾财...     

Advancing community resilience research and practice: moving from “me” to “we” to “3D”

Abstract

Research and practice aimed at enhancing community resilience to disasters such as hurricanes have focused primarily on the survival of individuals and the development of social capital and networks. Less consideration has been given to the dynamics of social-ecological conditions that can govern post-disaster outcomes. This article provides a rationale for moving research and practice towards an adaptive systems framework, drawing on the cascading challenges that Gulf of Mexico coastal communities have endured since the 2010 Deepwater Horizon (DWH) oil spill. The adaptive approach recognizes that, in some situations, crises can highlight avenues for improvement, where greater resilience can be achieved by addressing the dynamic context of a disaster. We discuss implications for clarifying interdependencies, bridging the science-society gap, and making course corrections through iterative processes. We also highlight how the approach might foster policy addressing global challenges such as changing climate conditions, rapid urbanization, and disease pandemics.     

Financial reporting consequences of natural disasters: Evidence from the impact of resource constraints at audit offices on non-affected clients

Disaster-affected clients demand significant additional effort from their audit office, and hence strain the audit office’s resources available to other non-disaster-affected clients. We consider audit offices with disaster-affected clients to be strained offices and find that, compared with clients audited by non-strained audit offices, non-disaster-affected clients audited by strained audit offices are more likely to have their financial statements restated. This result suggests the financial reporting quality of companies not directly exposed to disasters could also be negatively affected by the disasters, due to their auditors’ strained-resource issue. We further find such a negative effect is more pronounced when the degree of resource constraints is greater and when the audit office lacks client experience or industry expertise. We offer novel evidence of financial reporting consequences of natural disasters, focusing on the externality of disasters on companies not directly affected by disasters. The findings have important implications for regulators in making disaster-related policies, for auditors in managing their client portfolios, and for companies in making auditor choice decisions.     

An empirical analysis of the dynamic relationship between mutual fund flow and market return volatility

We study the dynamic relation between aggregate mutual fund flow and market-wide volatility. Using daily flow data and a VAR approach, we find that market volatility is negatively related to concurrent and lagged flow. A structural VAR impulse response analysis suggests that shock in flow has a negative impact on market volatility: An inflow (outflow) shock predicts a decline (an increase) in volatility. From the perspective of volatility–flow relation, we find evidence of volatility timing for recent period of 1998–2003. Finally, we document a differential impact of daily inflow versus outflow on intraday volatility. The relation between intraday volatility and inflow (outflow) becomes weaker (stronger) from morning to afternoon.     

Activation and variation of the United Nation’s cluster coordination model: a comparative analysis of the Haiti and Japan disasters

The coordinated response to extreme events is critical as illustrated by recent disasters in Haiti and Japan. As a way for coordinated provision of international humanitarian assistance to disaster-hit countries, the Office for the Coordination of Humanitarian Affairs (OCHA) developed cluster coordination model (CCM). With content analysis and network analysis of OCHA situation reports, this study checked four premises regarding activation of CCM, interaction between national and international actors, roles of proximity country, and level of cluster coordination. This study found that there were meaningful variations in implementing the CCM for 2010 Haiti and 2011 Japan disasters. From the analyses, we found that the current CCM may be vulnerable to black swan disasters; thus, extensive and active estimation of national disaster management capacities should be conducted to prevent collapse of national disaster management system. However, the reconciliation of state sovereignty and international humanitarian assistance also should be considered.     

Earnings Management of Firms Subjected to Product Price Controls

This study documents Australian firms' earnings management activities in response to product price controls established by the Australian government in the early 1970s. We predict that firms subject to price controls will adjust their discretionary accounting accruals downward to reduce reported net income and to increase the likelihood of approval of the requested price increase. To control for the confounding effect of performance, we analyse the performance of two groups of firms subject to price scrutiny prior to the event window and estimate the earnings management of these firms and a control group of firms during the period of scrutiny. Our results based on both longitudinal and a cross sectional experimental designs confirm that firms that were subject to the greatest scrutiny engaged in significant negative earnings management during the period of scrutiny, but not outside that period. Further, firms that were not subject to price controls did not engage in any significant earnings management during the same periods.
JEL classification: M41; M43     

Types of nonaudit service fees and earnings response coefficients in the post-sarbanes-oxley era

In this study, we partition the joint provision of nonaudit services (NAS) into audit-related, tax, and all other services, and examine whether these services have varying impacts on independence-in-appearance, as measured by earnings response coefficients, over an extended period following the enactment of SOX. Prior research examining independence-in-appearance generally focuses on the years surrounding SOX and uses an aggregate NAS measure despite anecdotal and experimental evidence that there may be heterogeneity in how investors perceive different types of NAS. We first show, consistent with prior research, that an aggregate measure of NAS does not, on average, significantly influence earnings response coefficients. We then partition NAS fees by type and provide evidence that investors have negative perceptions of audit-related NAS and positive perceptions of tax NAS, and that these two effects cancel out one another in aggregate. Further investigation reveals that our results are driven by firms with high levels of accruals and smaller firms, which further corroborates our findings. We also find that measures of financial dependence fail to fully capture the channels through which NAS influences investor perceptions. Lastly, we provide evidence that perceptions of tax NAS are, in part, driven by their effect on a firm's tax strategies.     

Measuring the Impact of Corporate Investment Announcements on Share Prices: The Spanish Experience

We bring together three disparate strands of literature to develop a comprehensive empirical framework to examine the efficiency of security analysts' earnings forecasts in Singapore. We focus specifically on how the increased uncertainty and the negative market sentiment during the period of the Asian crisis affected the quality of earnings forecasts. While we find no evidence of inefficiencies in the pre-crisis period, our results suggest that after the onset of the crisis, analysts (1) issued forecasts that were systematically upward biased; (2) did not fully incorporate the (negative) earnings-related news; and (3) predicted earnings changes which proved too extreme.     

Equity market response to natural disasters: Does firm's corporate social responsibility make difference?

This study investigates the role of corporate social responsibility (CSR) in explaining firms' stock performance in the wake of natural disasters in the United States. Using event study and multivariate regression analyses, we find that market performance of CSR firms is better than that of non-CSR firms when such disasters occur. We also highlight the importance of environmentally friendly practices in driving the performance of CSR firms. Our results indicate that firms practicing environmental CSR are more resilient to such disasters than nonenvironmental CSR firms. Cross-sectional analyses show that such positive market reaction of CSR firms is more pronounced when firms have low financial constraints, low information asymmetry, and high social capital.     

The Quality of Analysts' Earnings Forecasts During the Asian Crisis: Evidence from Singapore

We bring together three disparate strands of literature to develop a comprehensive empirical framework to examine the efficiency of security analysts' earnings forecasts in Singapore. We focus specifically on how the increased uncertainty and the negative market sentiment during the period of the Asian crisis affected the quality of earnings forecasts. While we find no evidence of inefficiencies in the pre-crisis period, our results suggest that after the onset of the crisis, analysts (1) issued forecasts that were systematically upward biased; (2) did not fully incorporate the (negative) earnings-related news; and (3) predicted earnings changes which proved too extreme.     

Insider trading as a signal of private information

There is substantial evidence that insider trading is presentaround corporate announcements and that this insider tradingis motivated by private information. Using real estate investmenttrusts that choose to reappraise themselves as our sample, weestablish that the appraisals contain information, but findno market response to the public announcement of this informationin these appraisals. We consider two possible explanations forthis inconsistency: the first that the appraisal informationis not highlighted in earnings reports and hence remains unobserved;and the second that insiders trade on the appraisal informationin the time that elapses between the appraisal and its publicannouncement We find strong support for the second hypothesis,with insiders buying (selling) after they receive favorable(unfavorable) appraisal news, especially for negative appraisals.We also find that positive (negative) appraisals and net insiderbuying (selling) elicit significant positive (negative) abnormalreturns during the appraisal period     

Profit Warnings and Timing

We find that profit‐warning announcements elicit a strong negative market response that is not sensitive to timing the warning in advance of the earnings announcement. Share prices begin to adjust about five days before a profit warning, and the market response is not complete until about five days after the warning. The accumulated response over the 11‐day period ending five days after the announcement is ?21.7%. The profit warning effect over the two‐day announcement period is 32 times the valuation effect upon subsequent release of the actual earnings. There is no evidence of a reversal after this period, and therefore no sign that the market response is excessive.     

What Doesn't Kill You Will Only Make You More Risk‐Loving: Early‐Life Disasters and CEO Behavior

The literature on managerial style posits a linear relation between a chief executive officer's (CEOs) past experiences and firm risk. We show that there is a nonmonotonic relation between the intensity of CEOs’ early‐life exposure to fatal disasters and corporate risk‐taking. CEOs who experience fatal disasters without extremely negative consequences lead firms that behave more aggressively, whereas CEOs who witness the extreme downside of disasters behave more conservatively. These patterns manifest across various corporate policies including leverage, cash holdings, and acquisition activity. Ultimately, the link between CEOs’ disaster experience and corporate policies has real economic consequences on firm riskiness and cost of capital.     

International transmission and business-cycle effects of financial stress

We analyze the international transmission of financial stress and its effects on global economic activity. Our analysis is based on country-specific monthly financial stress indices (FSIs) over the sample period 1970–2012 for 20 major economies. First, we show that co-movement between the FSIs increases during major financial crises and towards the end of our sample period. Second, we show that the risk of large financial stress spillovers to an economy increases with its level of economic openness. Third, we show – using a global VAR (GVAR) model – that (i) a financial stress shock in the US quickly transmits internationally, (ii) financial stress shocks have lagged but persistent negative effects on economic activity, and (iii) that a negative US demand shock induces only limited financial stress on a global scale. Finally, we show that spillovers of financial stress run mainly from advanced to emerging economies and not in the opposite direction.     

Motivation and Performance of Seasoned Offerings by Closed-End Funds

We examine the motivation and performance of closed‐end funds that engage in seasoned public or rights offerings. We find that closed‐end funds are more motivated to engage in seasoned offerings when their shares exhibit a relatively high premium (compared to their corresponding NAV) and have a high degree of liquidity. We also find a significant negative valuation effect on average in response to seasoned offerings by closed‐end funds. Our cross‐sectional analysis reveals that the valuation effect at the time of the seasoned offering is more unfavorable for funds that have relatively high expense ratios and are relatively large. Furthermore, we find that the closed‐end funds experience significant negative valuation effects over the three‐year period subsequent to the seasoned offering, implying poor post‐offering performance.