COVID-19 Sentiment and the Chinese Stock Market: Evidence from the Official News Media and Sina Weibo

This study quantitatively measures the Chinese stock market’s reaction to sentiments regarding the Novel Coronavirus 2019 (COVID-19). Using 6.3 million items of textual data extracted from the official news media and Sina Weibo blogsite, we develop two COVID-19 sentiment indices that capture the moods related to COVID-19. Our sentiment indices are real-time and forward-looking indices in the stock market. We discover that stock returns and turnover rates were positively predicted by the COVID-19 sentiments during the period from December 17, 2019 to March 13, 2020. Consistent with this prediction, margin trading and short selling activities intensified proactively with growth sentiment. Overall, these results illustrate how the effects of the pandemic crisis were amplified by the sentiments.     

Starts and refutations of the Covid-19 rumors: Evidence from the reaction of the stock market

By manually collecting data on Internet-based rumors concerning COVID-19, we investigate the market reactions to the spread of such rumors and the government’s refutation of them. We find that frightening (reassuring) rumors have a negative (positive) impact on investors. The refutation of frightening rumors triggers a positive market response, whereas the refutation of reassuring rumors does not cause a significant market reaction. Further analysis shows that there is a stock price drift when frightening rumors are refuted by governments. Our conclusions remain robust after considering endogeneity. Our findings support the notion that epidemic-related rumors affect investors’ decisions, which add to literatures of the market responses of companies in the context of the COVID-19 pandemic and provide incremental evidence for the “the spiral of silence” theory.     

COVID-19, a blessing in disguise for the Tech sector: Evidence from stock price crash risk

In this paper we document that although COVID-19 has brought uncertainties to the overall economy, the Technology (tech) sector is the systematic beneficiary of the pandemic. Using a quasi-natural setup, we find a significant notion that the Stock Price Crash Risk (SPCR) of firms within the Tech sector decreases during the COVID-19 pandemic compared to the recent past and firms belonging to other sectors. Our analyses further reveal that firms in the Tech sector with stronger external monitoring and better information environment receive an even greater advantage from the pandemic. Overall, our study suggests that the higher systemic dependency on the Tech sector during the COVID-19 outbreak results in an economic benefit for this sector.     

COVID-19 social distancing and the US service sector: What do we learn?

This study investigates the impact of COVID-19 social distancing on the US service sector. Results from four industry indexes (hotels, entertainment, restaurants and airlines) indicate that conditional correlations among index pairs exhibited substantial increases. Iterated Cumulative Sums of Squares (ICSS) tests in dynamic conditional correlations show that while the relationship between airlines and entertainment venues is unstable, restaurants and hotels demonstrate stable co-movement. Markov regime-switching regression analysis suggests the pandemic is affecting mainly the entertainment and airline industries, with gradual deterioration in the hotel industry, led by small-market-cap companies. However, we see no evidence of a negative impact on the restaurant industry from the pandemic in our analysis period. This may be related to Maslow's hierarchy of needs. Based on our results, we recommend employment of effective working capital and supply chain management methods in the service sector to streamline the operations of affected companies. In addition, all other sectors should utilize appropriate methods of risk measurement and should take 'Black Swans' into account to incorporate a more accurate probability of unexpected events.     

Does CSR matter in times of crisis? Evidence from the COVID-19 pandemic

The debate over how firm stakeholder engagement is tied to preserving shareholder wealth has received growing attention in recent years, especially in the wake of the COVID-19 crisis. Against this backdrop, we examine the relation between corporate social responsibility (CSR) and stock market returns during the COVID-19 pandemic-induced market crash and the post-crash recovery. Using a sample of 1750 U.S. firms and two major sources of CSR ratings, we find no evidence that CSR affected stock returns during the crash period. This result is robust to various sensitivity tests. In additional cross-sectional analysis, we find some supporting evidence, albeit weak, that the relation between CSR and stock returns during the pandemic-related crisis is more positive when CSR is congruent with a firm's institutional environment. We also find that Business Roundtable companies, which committed to protecting stakeholder interests prior to the pandemic, do not outperform during the pandemic crisis. We conclude that pre-crisis CSR is not effective at shielding shareholder wealth from the adverse effects of a crisis, suggesting a potential disconnect between firms' CSR orientation (ratings) and actual actions. Our evidence suggests that investors can distinguish between genuine CSR and firms engaging in cheap talk.     

Private Equity: Accomplishments and Challenges

The authors provide an overview of the main accomplishments of private equity since the emergence of leveraged buyouts in the 1980s, and of the challenges now facing the industry—challenges that have been encountered before during three major growth waves and two full boom‐and‐bust cycles. In so doing, the authors review a large and growing body of academic studies responding to questions like these:

• (1) How have PE buyout companies performed relative to their public counterparts? And to the extent there have been improvements in operating performance and productivity gains, how have such gains been achieved? What role have PE firms played in this process?
• (2) Especially in light of the large fees and profit shares paid to the PE firms, or GPs, and the significant “control” premiums over market paid to the selling companies, how have the returns to the LPs that provide the bulk of the funding for PE funds compared to the returns earned by the shareholders of comparable public companies?
• (3) Apart from the high fees earned by its GPs, why is PE so controversial? Beyond their effects on productivity and benefits for investors, what are the employment and other social effects of buyouts and PE?
• (4) What are the prospects for future PE returns to their LPs, especially in light of the volume of capital commitments and high purchase multiples that were being paid, at least until the onset of the COVID pandemic? And what role, if any, should PE activity be expected to play in the recovery from the pandemic?

     

The impact of COVID-19 on the stock market crash risk in China

This study investigates the impact of the COVID-19 pandemic on the stock market crash risk in China. For this purpose, we first estimated the conditional skewness of the return distribution from a GARCH with skewness (GARCH-S) model as the proxy for the equity market crash risk of the Shanghai Stock Exchange. We then constructed a fear index for COVID-19 using data from the Baidu Index. Based on the findings, conditional skewness reacts negatively to daily growth in total confirmed cases, indicating that the pandemic increases stock market crash risk. Moreover, the fear sentiment exacerbates such risk, especially with regard to the impact of COVID-19. In other words, when the fear sentiment is high, the stock market crash risk is more strongly affected by the pandemic. Our evidence is robust for the number of daily deaths and global cases.     

Telecommunications— the new European frontier

In the context of deregulation in telecommunications, and at a time when American giants like IBM and AT&T are no longer prevented from competing on the European market, European countries must strengthen their level of cooperation in the telecommunications sector. In the current circumstances, only a regional realignment can enable the necessary investment to be made to acquire the industrial strength required in the face of competition. Such a realignment is also needed to provide European companies with a large enough internal European market, so that they can all acquire an international dimension to their operations. In the face of such challenges, will European telecommunications companies remain divided against each other, or will they come together in some form of cooperation? This article sketches out some possible scenarios and outlines strategies that could be adopted by European actors in the field of telecommunications.     

Combining data and text mining techniques for analysing financial reports

There is a vast amount of financial information on companies' financial performance available to investors in electronic form today. While automatic analysis of financial figures is common, it has been difficult to extract meaning from the textual parts of financial reports automatically. The textual part of an annual report contains richer information than the financial ratios. In this paper, we combine data and text mining methods for analysing quantitative and qualitative data from financial reports, in order to see if the textual part of the report contains some indications about future financial performance. The quantitative analysis has been performed using self‐organizing maps, and the qualitative analysis using prototype‐matching text clustering. The analysis is performed on the quarterly reports of three leading companies in the telecommunications sector. Copyright © 2004 John Wiley & Sons, Ltd.     

Asymmetric volatility spillover among Chinese sectors during COVID-19

Inter-sectoral volatility linkages in the Chinese stock market are understudied, especially asymmetries in realized volatility connectedness, accounting for the catastrophic event associated with the COVID-19 outbreak. In this paper, we examine the asymmetric volatility spillover among Chinese stock market sectors during the COVID-19 pandemic using 1-min data from January 2, 2019 to September 30, 2020. In doing so, we build networks of generalized forecast error variances by decomposition of a vector autoregressive model, controlling for overall market movements. Our results show evidence of the asymmetric impact of good and bad volatilities, which are found to be time-varying and substantially intense during the COVID-19 period. Notably, bad volatility spillover shocks dominate good volatility spillover shocks. The findings are useful for Chinese investors and portfolio managers constructing risk hedging portfolios across sectors and for Chinese policymakers monitoring and crafting stimulating policies for the stock market at the sectoral level.     

Does economic policy uncertainty drive the dynamic spillover among traditional currencies and cryptocurrencies? The role of the COVID-19 pandemic

The paper examines the dynamic spillover among traditional currencies and cryptocurrencies before and during the COVID-19 pandemic and investigates whether economic policy uncertainty (EPU) impacts this spillover. Based on the TVP-VAR approach, we find evidence of spillover effects among currencies, which increased widely during the pandemic. In addition, results suggest that almost all cryptocurrencies remain as “safe-haven” tools against market uncertainty during the COVID-19 period. Moreover, comparative analysis shows that the total connectedness for cryptocurrencies is lower than for traditional currencies during the crisis. Further analysis using quantile regression suggests that EPU exerts an impact on the total and the net spillovers with different degrees across currencies and this impact is affected by the health crisis. Our findings have important policy implications for policymakers, investors, and international traders.     

Effects of investor sentiment and country governance on unexpected conditional volatility during the COVID-19 pandemic: Evidence from global stock markets

This paper first investigates the relationship between investor sentiment, captured by internet search behaviour, and the unexpected component of stock market volatility during the COVID-19 pandemic. According to data on 12 major stock markets, our research indicates a positive correlation between the Google search volume index on COVID-19 and the unexpected volatility of stock markets. The result suggests that greater COVID-19-related investor sentiment during this pandemic is associated with higher stock market uncertainty.Our study further examines whether country-level governance plays a role in protecting stock markets during this pandemic and reveals that the unexpected conditional volatility is lower when a country's governance is more effective. The impact of investor sentiment and country governance on unexpected volatility after the initial shock of COVID-19 is also investigated. The findings demonstrate the importance of establishing good country-level governance that can effectively reduce stock market uncertainty in the context of this pandemic, and support continual policy development related to investor protection.     

Market segmentation,performance differences and strategic orientation - the case of German reinsurers

We apply the concept of strategic groups to the German reinsurance market. We use a cluster analysis to subdivide reinsurance companies into strategic groups and analyze the effect of a set of strategic choice variables on their performance. Furthermore, we examine the impact of the financial crisis of 2008 on the reinsurance sector. Our dataset encompasses 142 firm-year observations for the years 2004 until 2012. Our results indicate the existence of three strategic groups in the German reinsurance market. Moreover, we find that most strategic choice variables that characterize the individual strategic groups affect the reinsurers’ level of performance. Finally, we find that the reinsurers’ performance increased in the aftermath of the financial crisis. This holds in particular for professional reinsurance companies.     

The annual report tone and return Comovement—Evidence from China's stock market

Our paper uses A-share firms listed on Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE) to explore the role of the textual tone of Chinese listed companies' annual reports on Chinese equities' return comovement. Our paper finds that the tone embedded in A-share companies' annual reports significantly increases Chinese stocks' return comovement as the tone exacerbates information asymmetry and reduces the quality of information. In addition, the annual report tone has a prominent effect on Chinese stocks' return comovement for stocks with low institutional ownership, private ownership stocks, and stocks with low market shares. Further investigation shows that the impact of the tone of the annual report on Chinese stocks' return comovement is strong during economic expansions, and when investor sentiment is high. An additional examination on hidden information in the textual tone suggests that published financial data do not explain a substantial part of the textual tone that is associated with the increase in the comovement, suggesting that private information should enhance informational opaqueness in the stock market.     

Competition and financial stability in European cooperative banks

Cooperative banks are a driving force for socially committed business at the local level, accounting for around one fifth of the European Union (EU) bank deposits and loans. Despite their importance, little is known about the relationship between bank stability and competition for these small credit institutions. Does competition affect the stability of cooperative banks? Does the financial stability of banks increase/decrease when competition is higher? We assess the dynamic relationship between competition and bank soundness (both in the short and long run) among European cooperative banks between 1998 and 2009. We obtain three main results. First, we provide evidence in line with the competition-stability view proposed by Boyd and De Nicolò (2005). Bank market power negatively “Granger-causes” banks' soundness, meaning that there is a positive relationship between competition and stability. Second, we find that this fundamental relationship does not change during the 2007–2009 financial crisis. Third, we show that increased homogeneity in the cooperative banking sector positively affects bank soundness. Our findings have important policy implications for designing and implementing regulations that enhance the overall stability of the financial system and in particular of the cooperative banking sector.     

Information demand during the COVID-19 pandemic

We investigate the demand for financial information during the initial months of the COVID-19 pandemic. Using Google search data for individual stocks, we show that the Abnormal Google Search Volume Index declined significantly between March and June of 2020. We find a similar effect around earnings announcements dates, which confirms that the demand for financial information by retail investors declined during the pandemic. Our results are indicative of potentially important consequences for information diffusion, price discovery and market efficiency under extreme uncertainty. We discuss possible explanations for these results.     

Corporate Focus and Stock Performance International Evidence from Listed Property Markets

Does corporate focus translate into superior stock performance? We use 17 years of international data on 275 property companies from the U.S., British, French, Dutch and Swedish listed property share markets to answer this question. After analyzing corporate structures, we document significant differences in corporate focus strategies both between nations and firms and over time. By linking these focus profiles to risk-adjusted performance measures, we show that companies with high levels of geographical focus perform significantly better than the overall market. With regard to industrial focus, our results are mixed but again imply a positive relationship between corporate focus and stock outperformance. At the same time, our results show that the firm-specific risk of a company increases with higher levels of corporate focus. Hence, our results imply that within the real estate sector a focused strategy mildly increases both a firm’s return and risk.     

How resilient is the German banking system to macroeconomic shocks?

Macroeconomic stress testing studies often rely on rather short sample periods due to the limited availability of banking data. They may fail to appropriately account for the cyclicality in the interaction between the banking system and macroeconomic developments. In this paper, we use a newly constructed data set on German banks’ income and loss statements over the past 39 years to model the interaction between the banking sector and the macroeconomy. Our VAR analysis indicates that the level of stress in the banking sector is strongly affected by monetary policy shocks. The results rationalize the active behavior of central banks observed during periods of financial market crises.     

无锡新区:跨国公司业务代表谈如何面对WTO

不久前,在无锡新区国际咨询顾问委员会召开的第三届年会上,不少委员(这些委员大都是已在无锡新区投资的跨国公司亚太区或中国区的高级行政管理人员和长期以来始终关注无锡新区发展的国外跨国公司和投资咨询机构的高级管理人员等)就中国加入WTO与无锡新区跨世纪发展等重大问题进行了广泛、深入地讨论与论证。这些意见可供有关部门参考。本刊择其部分发言摘要刊发于后,以飨读者。     

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.