Do short selling restrictions destabilize stock markets? Lessons from Taiwan

Short sellers have been routinely blamed for triggering, or exacerbating, stock market declines. The experience of Taiwan provides an interesting case study of the impact of short selling bans on stock returns volatility in a time series framework due to the length of time the short selling ban was in place there. Estimating several variants of an asymmetric GARCH model and a Markov switching GARCH model we find robust evidence that short selling restrictions raise stock returns volatility. The only qualifier is that the impact of short sale bans is a feature of the expansionary phase of business cycles. During recessions this effect dissipates.     

Do stock markets discipline US Bank Holding Companies: Just monitoring,or also influencing?

This paper presents evidence that bank managers adjust key strategic variables following a risk and/or valuation signal from the stock market. Banks receive a risk signal when they exhibit substantially higher (semi-)volatility compared to the best performing bank(s) with similar characteristics, and a valuation signal when they are undervalued relative to the average bank with similar characteristics. We document, using a partial adjustment model, that bank managers adjust the long-term target value of key strategic variables and the speed of adjustment towards those targets following a risk and/or negative valuation signal. We interpret this as evidence of stock market influencing. We show that our results are unlikely to be driven by indirect influencing by regulators, subordinated debtholders, retail or wholesale depositors. Finally, we show that the likelihood that banks receive a risk and/or valuation signal increases with opaqueness, managerial discretion and specialization.     

Does faith move stock markets? Evidence from Saudi Arabia

This paper investigates the effects of religious beliefs on stock prices. Our findings support the viewpoint that the religious tenets have important bearing on portfolio choices of investors. It is found that Shariah-compliant stocks have higher return and volatility than their non-Shariah compliant counterparts.     

Are the stock and real estate markets integrated in China?

This paper examines the dynamic short-run and long-run co-movement between the real estate and stock markets in China by employing a continuous wavelet method. We use gross domestic product and M2 (broad money supply) as control variables to eliminate the common factors of the two markets and to identify the real nexus between them. The empirical results show that the co-movement between real estate and stock prices is weak in the short run, except during the financial crisis period. Since the stock market is highly volatile, while real estate prices are relatively stable, the two markets are less correlated in the short run. The results also show that real estate prices affect stock prices in the long run, which supports the existence of a credit-price effect in China. Real estate prices remained very high in most time periods. Enterprises and individuals can obtain funds from bank loans to invest in the stock market, thus raising stock prices. These findings indicate that the two markets are generally segmented in the short run but are integrated in the long run. The stabilization of the real estate market is critical for stability in the stock market, but not vice versa. Additionally, investments in the two markets may not provide a high level of risk dispersion in the long run in China.

     

When do high‐level managers believe they can influence the stock price? Antecedents of stock price expectancy cognitions

Stock based rewards are often used to motivate high‐level managers to take actions to increase the stock price of the firm. However, numerous constraints may weaken the perceived link between individual effort and stock price appreciation for many recipients. This study introduces a new construct, stock price expectancy, which we define as individuals' perceptions of influence over their firm's stock price. We examined its antecedents in a sample of 349 high‐level U.S. managers and found that employment at corporate headquarters, firm size, hierarchical level, and contact with investment analysts predicted stock price expectancy perceptions. © 2010 Wiley Periodicals, Inc.     

Global restructuring—a place for ecology?

This introductory article summarizes the discussions and results of the Fifth Annual Greening of Industry Conference, Global Restructuring—A Place for Ecology?, held in Heidelberg, Germany, November 25–27, 1997. The Greening of Industry Network is concerned with the transition of industry towards sustainable production as an essential part of achieving a sustainable society. The Network conferences, held at different locations around the world, promote this goal by bringing together participants from different regions and with different backgrounds (academia, industry, governments and NGOs). The conferences are venues for information exchange, learning and dialogue about different aspects of the greening of industry and possible pathways to a sustainable society. © 1997 John Wiley & Sons, Ltd and ERP Environment.     

Sovereign default risk in OECD countries: Do global factors matter?

We study the determinants of sovereign default risk for a group of 23 OECD countries using quarterly data spanning the period between 2000:Q1 and 2016:Q3. Applying the recently developed panel dynamic heterogeneous common correlated effects estimator of Chudik and Pesaran (2015) our study innovates in considering potential endogeneity issues and cross-sectional dependence. We control for both global risk appetite and monetary policy stance, as well as country risk ratings. The results show that common factors are the main drivers of solvency risk for our set of countries. Specially relevant, we find that macroeconomic determinants are not significant predictors of long-term sovereign spreads.     

Do MNCs spur financial markets in corrupt host countries?

This study investigates how MNCs can sway the growth of financial markets in the developing countries with prevalent political corruption. Using annual data of panel of 22 developing countries and applying dynamic generalized method of moment (GMM) technique, we find foreign firms can spur financial markets in the developing countries through direct investment. Furthermore, our results indicate the stimulus effect of foreign investment on financial development is stronger in the more corrupt countries.     

Modelling and forecasting value at risk and expected shortfall for GCC stock markets: Do long memory,structural breaks,asymmetry, and fat-tails matter?

This paper addresses the question whether dual long memory (LM), asymmetry and structural breaks in stock market returns matter when forecasting the value at risk (VaR) and expected shortfall (ES) for short and long trading positions. We answer this question for the Gulf Cooperation Council (GCC) stock markets. Empirically, we test the occurrence of structural breaks in the GCC return data using the Inclan and Tiao (1994)’s algorithm and we check the relevance of LM using Shimotsu (2006) procedure before estimating the ARFIMA-FIGARCH and ARFIMA-FIAPARCH models with different innovations’ distributions and computing VaR and ES. Our results show that all the GCC market's volatilities exhibit significant structural breaks matching mainly with the 2008–2009 global financial crises and the Arab spring. Also, they are governed by LM process either in the mean or in the conditional variance which cannot be due to the occurrence of structural breaks. Furthermore, the forecasting ability analysis shows that the FIAPARCH model under skewed Student-t distribution turn out to improve substantially the VaR and the ES forecasts.     

Do option-like incentives induce overvaluation? Evidence from experimental asset markets

One potential reason for bubbles evolving prior to the financial crisis was excessive risk taking stemming from option-like incentive schemes in financial institutions. By running laboratory asset markets, we investigate the impact of option-like incentives on price formation and trading behavior. The main results are that (i) we observe significantly higher market prices with option-like incentives than linear incentives. (ii) We further find that option-like incentives provoke subjects to behave differently and to take more risk than subjects with linear incentives. (iii) We finally show that trading at inflated prices is rational for subjects with option-like incentives since it increases their expected payout.     

Do size and unobservable company factors explain stock price reversals?

We use daily price data from the Egyptian stock market and a Loser portfolio of 20 IPOs from the late 1990s that experienced dramatic 1-day price falls in the period 2004 to 2007 to estimate a 2-way fixed effects model of CARs. Observable covariates are company size and turnover growth and unobservables company and period fixed effects. Our results provide evidence of significant price reversal over the first 40 post-event days. Firm size is negatively correlated with post-event CARs, consistently with the argument that small firms have a stronger tendency to price-reverse due to greater informational opacity. But permanent, unobservable company-specific factors, account for a much larger percentage of post-event variation in stock prices and indicate an underlying heterogeneity in investor responses to initial price falls not uncovered before in the literature. Strong negative company effects following a price fall are found to presage reinforcing ‘long term’ price falls and strong positive company effects to presage countervailing ‘long term’ price reversals. At the extremes these company effects are sufficiently large to suggest that a trading strategy based on them would be profitable.     

Has recent financial crisis changed permanently the correlations between BRICS and developed stock markets?

The paper finds recent financial crisis has changed permanently the correlations between BRICS and developed U.S. and Europe stock markets. 70% of BRICS stock markets⿿ conditional correlation series demonstrate an upward long-run trend with the developed stock markets. Our results provide convincing evidence that the reducing diversification benefits are a long-run and world-wide phenomenon, especially after recent financial crisis.     

Invisible walls: Do psychological barriers really exist in stock index levels?

We investigate whether the levels of a stock market index contain any evidence of a behavioural bias depending on the proximity of the index level to ‘psychological barriers’. These are certain index levels (usually in multiples of 100) at which the market tends to stick before breaking out either up or down. Extant behavioural finance literature has attributed this to investors’ subjective perception of ‘something special’ about certain index levels where in fact no rational economic basis exists for such a perception. We carry out an empirical analysis of the NASDAQ Composite index and find that barrier effects are indeed present in that stock index. We employ simulation analysis to validate of our obtained results.     

Do Elections Matter for Economic Performance?

In mature democracies, elections discipline leaders to deliver good economic performance. Since the fall of the Soviet Union, most developing countries also hold elections, but these are often marred by illicit tactics. Using a new global data set, this article investigates whether these illicit tactics are merely blemishes or substantially undermine the economic efficacy of elections. We show that illicit tactics are widespread, and that they reduce the incentive for governments to deliver good economic performance. Our analysis also suggests that in societies with regular free and fair elections, leaders do not matter for economic growth.     

IT Outsourcing—A Source of Innovation? Microeconometric Evidence for Germany

Does IT outsourcing really influence firms' process innovativeness? We investigate this question with a distinguished view on manufacturing and service sectors. Previous studies suggest firms sourcing out IT services to external service providers are generally more process innovative. Based on a firm‐level data set comprising 1452 firms from the German manufacturing and services sectors, the econometric analysis confirms a positive and significant relationship between IT outsourcing and process innovation activity on an aggregate level. As proposed by our framework of differences between manufacturing and service firms, a more detailed analysis reveals that this positive relationship only holds for services firms. Copyright © 2016 John Wiley & Sons, Ltd.     

What drives herding in oil-rich,developing stock markets? Relative roles of own volatility and global factors

The main goal of this paper is to formally establish the volatility-herding link in the developing stock markets of the oil-rich GCC countries by examining how market volatility affects herd behavior after controlling for global factors. Using a regime-switching, smooth transition regression model (STR), we find significant evidence of herding in all Gulf Arab stock markets, with the market volatility being the more paramount factor governing the switches between the extreme states of non-herding and herding. The global variables comprised of the U.S. stock market performance, the price of oil and the US interest rate as well as the risk indexes including the CBOE Volatility Index (VIX) and the St. Louis Fed's Financial Stress Index (FSI) are found to be significant factors governing the transition to herding states. The findings stress the effect of contagion in financial markets, despite the restrictions established by the GCC policymakers in order to protect their markets.     

Commonality in liquidity among Middle East and North Africa emerging stock markets: Does it really matter?

This study investigates commonality in daily liquidity among 11 emerging stock markets from the Middle East and North Africa from January 2005 to June 2017. First, we test long memory in liquidity in these markets. Second, we select a number of factors eligible to affect liquidity commonality among local, regional and global factors. We find that regional and US factors do not explain liquidity variations in all the markets that exhibit low sensitivity to external factors. Our results are robust to the use of alternative proxies. The analysis in sub-periods confirms our results showing that most markets are not very sensitive to fluctuations and external shocks of liquidity. For international investors, stock markets in the Middle East and North Africa present an opportunity for further diversification, as these markets exhibit weak correlations between them and with the global market with regard to liquidity.     

Do liberal cities limit new housing development? Evidence from California

Traditional explanations for why some communities block new housing construction focus on incumbent home owner incentives to block entry. Local resident political ideology may also influence community permitting decisions. This paper uses city level panel data across California metropolitan areas from 2000 to 2008 to document that liberal cities grant fewer new housing permits than observationally similar cities located within the same metropolitan area. Cities experiencing a growth in their liberal voter share have a lower new housing permit growth rate.     

The emergence of a new industrial relations actor—the role of the citizens’ Advice Bureaux?

How do employees seek representation and how is workplace conflict resolved in the absence of trade unions? This article contributes to this debate by suggesting that employees are seeking advice and representation outside the traditional labour movement and from voluntary organisations such as the Cititzens’ Advice Bureaux (CABx).     

Paradise postponed: dilemmas facing shop stewards in the new South Africa—accommodation orresistance?

The growth of the shop stewards movement in South Africa prior to majority rule represented a challenge to the institutionalised managerial prerogative and cemented the position of black trade unions in the workplace, posing a threat to both Apartheid’s cheap labour system and also to the political control of the Apartheid regime. With the advent of majority rule in 1994, shop stewards are now expected to comply with, and co-operate in, the implementation of workplace changes which they would have traditionally opposed. This, plus the move towards Japanese-style ‘lean’ work practices, is creating farreaching challenges for the ‘New’ South African shop steward movement.