Grexit news and stock returns

During the first 8 months of 2015, there was an ongoing debate about whether or not Greece should remain in the euro area. Using an event study approach, we quantify the effects of Grexit-related statements made by six important euro area politicians (Merkel, Schaeuble, Tsipras, Varoufakis, Juncker, and Schulz) on intraday stock returns in Germany, Greece, and the euro area during the period of 1 January 2015–19 August 2015. We show that positive statements indicating that a Grexit is less likely lead to higher returns, and negative statements to lower returns. The overall impact of negative statements is more pronounced. The cumulative absolute effects on stock returns are sizeable as the statements contribute to a variation of up to 58 percentage points in the ATHEX. These large effects are of particular relevance as our study only captures an 8-month snapshot of the Greek Government debt crisis.     

Macroeconomic shocks and stock market returns: the case of Korea

This study examines the effects of macroeconomic shocks on key macro variables, including stock market returns in Korea, using the structural vector autoregression (SVAR) model. We suggest a three-variable SVAR model incorporating inflation, output growth and stock returns. We adopt a nonzero z-ratio restriction for the long-run identifying assumption to allow for economically meaningful relationships among variables. While our results support the negative (positive) relation of demand (supply) shocks to stock returns, we also find that demand shocks influence stock market variance more significantly than supply shocks do. The sub-period analysis finds that global market fluctuations during the global financial crisis have relatively little effect on Korean stock market performance. We also examine a generalized five-variable model that includes the foreign exchange rate and interest rate, confirming the results from the three-variable case.     

Investor sentiment,trading behavior and stock returns

This article examines how investor sentiment and trading behaviour affect asset returns. By analysing the unique stock trading dataset of the Korean market, we find that high investor sentiment induces higher stock market returns. We also find that institutional (individual) trades are positively (negatively) associated with stock returns, suggesting the information superiority (inferiority) of institutional (individual) investors. Investor sentiment generally plays a more important role in explaining stock market returns than investor trading behaviour.     

The relationship between South Asian stock returns and macroeconomic variables

This article investigates whether economic variables have explanatory power for share returns in South Asian stock markets. In particular, using data for four South Asian emerging stock markets over the period 1998–2012, the article examines the influence of a selection of local, regional and global economic variables in explaining equity returns; most previous studies that have examined this issue have tended to focus on only local and/or global factors. Important factors are identified by distilling the macroeconomic variables into principal components. Economic activities, real interest rates, real exchange rates and the trade balance represent local factors. Regional factors are represented by interregional trade and regional economic activity while global factors are represented by world financial asset returns and world economic activity. The vector autoregression results suggest that the South Asian markets examined are not efficient. Both local and regional factors can directly and indirectly explain Bangladeshi, Pakistani and Sri Lankan stock returns while the lagged returns of the Pakistani stock market and world economic activity can explain Indian stock returns.     

制造业企业出口和生产率的关系——新新贸易理论框架下对中国工业企业的微观分析

在新新贸易理论的框架下,对中国规模以上工业企业从总体和分行业两个方面检验中国工业企业出口对生产率增长的影响,发现出口同企业全要素生产率增长显著负相关.造成出口效应不显著的原因除了中国尚不完善的市场体系外,还与中国出口贸易中加工贸易比重过高、加工环节大都处于劳动密集型而且技术含量不高的水平、加工过程短、增值率不高有关.因此,中国如果减少加工贸易的出口,便可以在不影响生产率增长的基础上降低外部需求.     

Volatility transmission between Japan,UK and USA in daily stock returns

In the past, there are a lot of studies which conclude that the holiday, asymmetry and day-of-the-week effects influence stock price volatility. Most of the studies are based on a class of generalized auto-regressive conditional heteroskedasticity (GARCH) models. No one examines these effects simultaneously using stochastic volatility (SV) models. In this paper, using the SV model, we examine whether these effects play an important role in stock price volatilities. Furthermore, we consider spillover effects between Japan, UK and USA, where spillover effects in price level as well as volatility are taken into account. We are grateful to two anonymous referees for suggestions and comments. We also acknowledge Toshiaki Watanabe who gave us a lot of helpful suggestions and comments in the preliminary version of this paper. This research is partially supported from Japan Society for the Promotion of Science (Grant-in-Aid for Scientific Research (C) #18530158, 2006–2009, and Grant-in-Aid for COE Research) and the Zengin Foundation (Grant-in-Aid for Studies on Economics and Finance), which are acknowledged by H. Tanizaki.     

Productivity and R&D sources: evidence for Catalan firms

This paper draws on a sample of innovative Catalan firms to identify how two main sources of innovation – internal R&D and external R&D acquisition – affect productivity in the manufacturing and service industries. The sample comprises 1612 innovative firms from the fourth European Community Innovation Survey (CIS-4) during the period 2002–2004. We compare empirical results when applying the usual OLS and quantile regression techniques controlling with a non-parametric sample selection. Our results indicate the different patterns that are attributable to the two sources of innovation as we move up from lower to higher conditional quantiles. First, the marginal effect of internal R&D on productivity decreased as we moved up to higher productivity levels. Second, the marginal effect of external R&D acquisition increased as we moved up to higher productivity levels. Finally, empirical results show significant complementarities between internal and external R&D, which are higher for knowledge-intensive service sectors.     

Knowledge growth, complexity and the returns to R&D

The introduction of a production function of technology embodying laws of returns to research and development (R&D) is now standard practice in growth theory. This paper offers a critical evaluation, in the light of a generalized N–K model, of some recent contributions suggesting foundations for the existence of laws of returns to R&D. It is argued that such contributions fail to analyze the way in which research and development activity in the technological and scientific domains affect the dimension, the hierarchic structure and the complexity of knowledge search spaces. In the attempt at moving some analytical steps in this direction, this paper considers the possibility that modularity effectively counters the rise in complexity which would follow from idea growth and the increasing number of potential interactions between component ideas. It is argued that the force of the modularity argument finds its limits in the face of radical innovations that are general purpose, but entail a deconstruction and reconstruction of the hierarchy of technological interactions. It is also suggested that niche creation and knowledge spillovers elicit the early development and subsequent diffusion of such radical innovations.

Expected returns and expected dividend growth: time to rethink an established empirical literature

This article examines various state-space and VAR model specifications to investigate the contributions of expected returns and expected dividend growth to movements in the price-dividend ratio. We show that both models involve serious inference problems that need to be dealt with carefully. We propose procedures that offer more reliable inference results, and the corrected inferences indicate that the aggregate data of dividends and returns alone do not provide strong enough evidence to support the notion that the expected returns dominate the stock price variation. However, we show that an alternative measure of cash flows termed the net payout by Larrain and Yogo (2008) appears to lend strong support to the notion that the expected cash flow explains a large fraction of the firm value variation. This finding remains robust in both state-space and VAR decompositions with the corrected inference.     

On moment condition failure in German stock returns: an application of recent advances in extreme value statistics

This note reconsiders divergent results on the extremal behaviour of German stock returns that have been published recently. In particular, investigations of this issue have arrived at different conclusions regarding the finiteness of the second moment of the return distributions. Here we apply some newly developed, improved techniques for the estimation of the so-called tail index to the time series of returns on various German stocks. We find evidence indicating that in the vast majority of cases the tails are not fat enough to conform with an infinite-variance distribution. Conflicting results in previous studies are shown to be due to different a priori choices of the size of the tail region. First version received: Dec. 1998/Final version received: April 2000     

Beware of the crash risk: Tail beta and the cross-section of stock returns in China

We investigate the pricing of systematic tail risk measured by tail beta in the Chinese equity market. Using an array of tests, we examine the performance of more than 3,300 stocks for the years 1999 through 2018. Contrary to evidence from developed markets, we demonstrate a strong negative relationship between the tail beta and future returns. The effect is robust to many considerations and cannot be explained by established pricing factors or alternative risk or illiquidity measures. We link our findings to specific characteristics of the Chinese stock market.     

Examining the relationship between stock return volatility and trading volume: new evidence from an emerging economy

Using daily stock return data for individual stocks from an emerging economy, this article examines the relationship between return volatility and trading volume under the theoretical postulate of the mixture of distributions hypothesis. The results suggest that the contemporaneous trading volume as a proxy for latent information arrival to the market did not contribute to the removal of significant ARCH or Generalized Autoregressive Conditional Heteroscedasticity effects that are found in stocks at the first stage of the investigation. The same holds for the lagged volume except for one case. This, perhaps, suggests that the trading volume (contemporaneous or lagged) is not adequately conveying information to induce traders’ views of the desirability of trade and, therefore, points to the need for searching for other micro and macro variables to be used as potential proxy for information arrival to the stock market of the emerging economy.     

Bond rating changes and stock returns: evidence from the Spanish stock market

This study analyzes the effect of corporate bond rating changes by international agencies on stock prices. This topic has not yet been analyzed for the Spanish stock market, despite the growing importance of ratings in Spanish financial markets. On an efficient market, rating changes will only have an effect if they contain some new information. The results from an event study indicate that rating actions cause significant negative abnormal returns in issuing firms around the date of the announcement. This evidence indicates an informational effect related to downgrades, which supports the hypothesis that credit rating agencies provide information that may reduce the asymmetric information problem between firms and investors. In the case of upgrades, our results are compatible with a redistribution of wealth between bondholders and owners or with the reputation hypothesis.      

The nonlinear multidimensional relationship between stock returns and the macroeconomy

We use nonparametric dimension-reduction methods to extract from a set of 15 macroeconomic variables the risk factors that are priced in the stock market. The dominant factor moves with the business cycle but, because it is a nonlinear function of observed macroeconomic variables, it captures a rich set of interactions. Low-credit risk and low-inflationary expectations have a greater positive effect on stock returns when leading macroeconomic indicators are high relative to current economic activity, i.e. early in the business cycle as the economy emerges from recession. High-stock returns also arise in periods when the economy is booming relative to its leading indicators, but such periods tend to portend crashes.     

Technological paradigms,patterns of learning and development: An introductory roadmap

This paper presents an evolutionary microeconomic theory of innovation and production and discusses its implications for development theory. Using the notions of technological paradigm and trajectory, it develops an alternative view of firm behavior and learning. It is shown then how these are embedded in broader national systems of innovation which account for persistent differences in technological cappacities between countries. Finally, this bottom-up evolutionary analysis is linked with an institutional top-down approach, and the potential fruitfulness of this dialogue is demonstrated.We thank the discussants and participants at the workshop on Technology and Competitiveness in Developing Countries, Venice, 26/11/93, for their useful comments.The research leading to this work has benefited at various stages from the support of the Italian National Research Council (CNR, Progetto Strategico Combiamento Technologico e Crescita Economica) and of the International Institute of Applied System Analysis (IIASA, Austria).     

Environmental efficiency and labour productivity: Trade-off or joint dynamics? A theoretical investigation and empirical evidence from Italy using NAMEA

In this paper we test an adapted EKC hypothesis to verify the relationship between ‘environmental efficiency’ (namely emissions per unit of value added) and labour productivity (value added per employee). We exploit NAMEA data on Italy for 29 sector branches and 6 categories of air emissions for the period 1991-2001. We employ data on capital stock and trade openness to test the robustness of our results.On the basis of the theoretical and empirical analyses focusing on innovation, firm performances and environmental externalities, we would expect a positive correlation between environmental efficiency and labour productivity — a negative correlation between the emissions intensity of value added and labour productivity — which departs from the conventional mainstream view. The hypothesis tested is a critical one within the longstanding debate on the potential trade-off or complementarity between environmental preservation and economic performance, which is strictly associated with the role of technological innovation. We find that for most air emission categories there is a positive relationship between labour productivity and environmental efficiency. Labour productivity dynamics, then, seem to be complementary to a decreasing emissions intensity in the production process. Taking a disaggregate sector perspective, we show that the macro-aggregate evidence is driven by sector dynamics in a non-homogenous way across pollutants. Services tend always to show a ‘complementary’ relationship, while industry seems to be associated with inverted U-shape dynamics for greenhouse gases and nitrogen oxides. This is in line with our expectations. In any case, EKC shapes appear to drive such productivity links towards complementarity. The extent to which this evidence derives from endogenous market forces, industrial and structural change, and policy effects is discussed by taking an evolutionary perspective to innovation and by referring to impure public goods arguments.     

Linking Knowledge to Productivity: A Germany-Italy Comparison Using the CIS Database

This paper employs micro-aggregated data from the FirstCommunity Innovation Survey for assessing the contribution of the level and type of R & D spending, the purchase of new machinerywith embodied technological change, economies of scale, and information sharing with client and suppliers to productivity(total sales per employee) in German and Italian firms in 20 manufacturing industries. The regression analysis confirms theresults of previous studies that R & D and technological change embodied in new machinery and capital equipment aremajor factors affecting productivity at the firm level. However, the elasticity of productivity to both R & D and embodiedtechnological change is higher in Germany than in Italy. Conversely, information sharing with clients and suppliersrelated to innovation projects does not result in higher productivity, with the exception of a few industries (inparticular those producing traditional consumer goods) in Germany.     

The Sun Also Rises: Productivity Convergence Between Japan and the USA

The growth process for a technological leader is different from that of a follower. While followers can grow through imitation and capital deepening, a leader must undertake original research. This suggests that as the gap between the leader and the follower narrows, the follower must undertake more genuinely innovative R&D and possibly face a slower overall growth rate. The results of a dynamic panel equilibrium-correction model of productivity growth suggest that the productivity gap with the USA had a strong effect on the growth of Japanese manufacturing, and that changes in R&D intensity also made a significant contribution. Moreover, the effect of the productivity gap was significantly higher in industries that had higher R&D intensities, higher levels of human capital, and were more open to exports. This paper is based upon Chapter 5 of my D.Phil. thesis at the University of Oxford. It was partly written while I was a Visiting Scholar at the Foundation for Advanced Information & Research, Tokyo, and was supported by a Sanwa Bank Foundation Research Fellowship and ESRC grants R000234954 and R000237500.     

Demand and innovation in productivity growth

The labour productivity impact of demand and innovation is investigated in this paper combining insights from the Kaldorian and Schumpeterian traditions. After a review of studies in such traditions, a general model is proposed for explaining productivity growth in European manufacturing and service industries in the late 1990s, followed by two distinct specifications for the industries oriented toward product innovation, and for those where process innovation dominates. The empirical analysis is based on the match of the SIEPI‐CIS2 database developed at the University of Urbino and Eurostat Input–Output Tables at the industry level, for 22 manufacturing sectors and 10 services sectors. Six European countries are considered: Germany, France, Italy, the Netherlands, Portugal and the United Kingdom. The results show that productivity growth in European industries can be explained by a combination of technology factors and demand dynamics, confirming the complementarity of technology and demand effects. On the demand side, household consumption emerges as the most pervasive component of demand, able to stimulate greater efficiency in all manufacturing and service industries. Investment also has a role, focused however on the capital goods producing industries. On the technology side, the mechanisms of productivity growth are fundamentally different in the industries oriented towards product innovation and in those dominated by process innovation. This evidence supports the view that innovation in firms and industries can be associated to two contrasting strategies, searching either for technological competitiveness, through knowledge generation, product innovation and expansion of new markets, or aiming at greater cost competitiveness, through job reductions, labour saving investment, flexibility and restructuring.     

R&D and Productivity in German Manufacturing Firms

This papcr uses a new firm panel data set to explore the relationship between R&D and productivity in German manufacturing firms for the period from 1979 to 1989. The results confirm the view that K&D is an important determinant of productivity growth. In the cross-section, the elasticity of sales with respect to R&D capital is on the order of 14 per cent. Using fixed-effects estimators yields R&D elasticities of about 8 per cent. Assuming different depreciation rates for R&D capital has virtually no effect on these results. Differencing estimates improve considerably when growth rates are computed over longer time periods, suggesting that the divergence between time-series and cross-sectional estimates is driven by random measurement errors. The paper also considers differences between high technology and other firms. Cross-section and panel elasticity estimates of the R&D effect diverge considerably for the two groups, while the corresponding rate of return estimators display far less variation. There is some evidence that the R&D elasticity increased during the early 1980s, and that it fell sharply back to its 1979 value during the period from 1985 to 1989.