The effectiveness of the sunshine effect in Taiwan's stock market before and after the 1997 financial crisis

This study constructs a variety of GARCH models with the consideration of the generalized error distribution to analyze the relationship between the cloud cover and stock returns in Taiwan in the whole sample period (1986 to 2007) and in the two sub-sample periods (1986 to 1996 and 1997 to 2007). The data include Taiwan Stock Exchange Capitalization Weighted Stock Index, the primary eight stock sector indices, and the U.S. Dow Jones Industrial Average index to proxy the impact of U.S. stock market on Taiwan's stock market performance. The empirical finding of this study could be used to reconfirm the existence of the so-called sunshine effect. In addition, by comparing the long-run impulse multiplier effects of the cloud cover on the stock return in the two sub-sample periods; this study could examine the transition of the sunshine effect in Taiwan's stock market. The empirical results suggest that cloud cover has a significant negative impact on Taiwan's stock market, especially in the low cloud cover periods. Moreover, the pre-determined distribution of the error term plays an important role on the significance of the sunshine effect. The empirical result shows that most long-run multipliers are negative and the multiplier is more effective in the low cloud cover periods than in the high cloud cover periods.     

Published stock recommendations as investor sentiment in the near-term stock market

This paper investigates the role of published stock recommendations in print and online media as investor sentiment in the near-term German stock market. In line with extant literature on other sentiment measures, vector autoregressions reveal that past stock returns drive today’s sentiment, but not the other way around, and that sentiment is a powerful predictor of itself. In particular, sentiment based on printed analyst recommendations follows reversals, that is, when analysts face a stock market downturn, they see a buying opportunity and become optimistic.     

Global financial crisis and dependence risk analysis of sector portfolios: a vine copula approach

We use regular vine (r-vine), canonical vine (c-vine) and drawable vine (d-vine) copulas to examine the dependence risk characteristics of three 20-stock portfolios from the retail, manufacturing and gold-mining equity sectors of the Australian market in periods before, during and after the 2008–2009 global financial crisis (GFC). Our results indicate that the retail portfolio is less risky than the manufacturing counterpart in the crisis period, while the gold-mining portfolio is less risky than both the retail and manufacturing sector portfolios. Both the retail and gold stocks display a higher propensity to yield positively skewed returns in the crisis periods, contrary to the manufacturing stocks. The r-vine is found to best capture the multivariate dependence structure of the stocks in the retail and gold-mining portfolios, while the d-vine does it for the manufacturing stock portfolio. These findings could be used to develop dependence risk- and investment risk-adjusted strategies for investment, rebalancing and hedging which more adequately account for the downside risk in various market conditions.     

Monetary policy in a financial crisis

What are the economic effects of an interest rate cut when an economy is in the midst of a financial crisis? Under what conditions will a cut stimulate output and employment, and raise welfare? Under what conditions will a cut have the opposite effects? We answer these questions in a general class of open economy models, where a financial crisis is modelled as a time when collateral constraints are suddenly binding. We find that when there are frictions in adjusting the level of output in the traded good sector and in adjusting the rate at which that output can be used in other parts of the economy, then a cut in the interest rate is most likely to result in a welfare-reducing fall in output and employment. When these frictions are absent, a cut in the interest rate improves asset positions and promotes a welfare-increasing economic expansion.     

Currency crises and the stock market: empirical evidence for another type of twin crisis

We explore the dependency between currency crises and the stock market in emerging economies. Our focus is two-fold. First, the risk of a currency crisis rises as the foreign stake in the domestic stock market increases. Successful economies with high capital flows into their booming stock markets especially are prone to stock market-induced currency crises. Second, we apply the dividend growth model to show that stock markets crash in the run-up to a currency crisis. This new type of twin crisis is empirically tested by employing a logit framework using quarterly data for 33 emerging economies for 1994Q1–2007Q4.     

Global network finance: Institutional innovation in the global financial market place

The global financial crisis that began in 2007 revealed a fundamental weakness in the global financial system: extensive financial interdependence of financial relations unmatched by a governance regime of similar reach. As multinational banks sought to fortify their capital base in the wake of the unfolding crisis, Sovereign Wealth Funds (SWFs) and the banks’ home governments have become mutual stakeholders in some of the largest financial intermediaries with global reach. From the multitude of individual transactions has emerged a network of equity ties that spans the globe. These ties bridge institutional practices and governance regimes that previously operated largely independently of each other. They have the potential of fostering the emergence of a new governance regime for the global financial market place that deviates from earlier prognoses that globalization entails convergence on a single governance model. Instead, the newly created ties that jointly add up to a global financial network enable institutionally and organizationally diverse players to contribute their own perspectives as joint stakeholders in selected financial intermediaries, and indirectly, in the global financial system. This is likely to have important implications for the behavior of these actors in the future and the emergence of new governance solutions for the global market place. The paper discusses two recent cases of collaborative re-capitalization events to illustrate how this regime is evolving in practice.     

The impact of the financial crisis on the long-range memory of European corporate bond and stock markets

This paper investigates the presence of long memory in corporate bond and stock indices of six European Union countries from July 1998 to February 2015. We compute the Hurst exponent by means of the DFA method and using a sliding window in order to measure long range dependence. We detect that Hurst exponents behave differently in the stock and bond markets, being smoother in the stock indices than in the bond indices. We verify that the level of informational efficiency is time-varying. Moreover we find an asymmetric impact of the 2008 financial crisis in the fixed income and the stock markets, affecting the former but not the latter. Similar results are obtained using the R/S method.     

我国金融市场综合化转型及其监管回应

次贷危机暴露了美国自1999年金融现代化法以来的监管滞后,促使其创建目标性监管体制以控制全面市场风险.在我国,以金融控股集团为代表的双重市场转型进展迅速,必须优化各分业监管机构的协调机制.可以借鉴美国渐进式的改革思路,在现阶段依据<中国人民银行法>第九条制定实施细则,落实以央行为市场稳定性监管人的金融监管协调体制,并尽快启动对金融控股集团的全面监管.     

Financial market development,global financial crisis and economic growth: evidence from developing nations

Emerging and frontier markets in Africa have witnessed various economic and financial reforms aimed at integrating the domestic markets into the global financial market to attract investment. Whether these reforms promote high economic growth remains inconclusive. The paper applies the pooled mean group estimation technique to empirically re-investigate the link between financial market development, global financial crisis, and economic growth in selected African economies. The results strongly support our hypotheses that stock market and banking sector development promotes economic growth in the selected countries. Moreover, financial crisis reduce the positive effects of both the stock market and banking sector developments on economic growth. The study suggests that both the banking sector and stock market are important to deliver the long-run economic growth that the African region desired. Moreover, effort should be made to enact policy measures that would ensure development of the stock market which has received inadequate attention.     

Global imbalances,cross-market linkages,and the financial crisis: A multivariate Markov-switching analysis

Based on multivariate Markov-switching models, this paper presents new results on the interactions between global imbalances, credit spreads, housing markets, macroeconomic variables, commodities and equities during Q1-1987/Q1-2011. We show that rising global imbalances and the uncontrolled development of the US mortgage and housing markets have been deeply destabilizing the economy, with various shocks impacting subsequently equity markets and macroeconomic variables. But we also uncover, surprisingly, that the cross-market linkages with the commodity markets are strong. Finally, we identify that the US housing market lies at the epicenter of the crisis through its multiple and highly significant interactions with the other variables in the system (including the global imbalances). Sub-samples and alternative time series estimates are provided to check the statistical congruency of the various models.     

Channels of financial market contagion

This study aims to fill a gap in the current literature by determining which channels of financial contagion are the most significant in transmitting crises between countries. Initial results, using χ² contingency tables, indicate that there is a significant relationship between contagion and the inflation rate and between contagion and financial liquidity. A simultaneous comparison of the channels is then performed using a series of best subset logit regressions. These suggest that a combination of high inflation and an emerging market classification form the most significant subset in increasing the probability of a contagious event.     

Bond market and stock market integration in Europe: a smooth transition approach

This article investigates whether there has been a structural increase in financial market integration in nine European countries and the US in the period 1980 to 2003. We employ a GARCH model with a smoothly time-varying correlation to estimate the date of change and the speed of the transition between the low and high correlation regimes. Our test produces strong evidence of greater comovement across the board for both stock markets and government bond markets. Dates of change and speeds of adjustment vary widely across country linkages. Stock market integration is a more gradual process than bond market integration. The impact of European monetary union (EMU) is rather limited, as it has mainly affected the timing of bond market correlation gains (but hardly their size) and has had little discernible effect on stock market integration.     

Prediction of stock market turning points

This study investigates possible systematic relationships between the Dow Jones Industrial Average (DJIA) and its price/earnings (P/E) ratio, its dividend yield (D/P) ratio, and the Federal Funds Rate. Weekly data for this study were obtained fromTechnical Trends andBarrons covering a time period from February 23, 1985 to September 23, 1994. It was found that the P/E ratio led the market by about eight months with a correlation coefficient of 0.35, the D/P ratio led the market by 21 months with a correlation coefficient of 0.55, and that the Funds Rate led the market by five months with a correlation coefficient of –0.33.Any errors found in this paper are the sole responsibility of the author. The author would like to express sincere appreciation to John R. McGinley, Jr., Editor ofTechnical Trends, for providing the data series used in this study. Also, the author would like to thankBarrons for supplying a number of additional data items. Special appreciation goes to Melissa Luo who so diligently and carefully performed all the statistical calculations.     

Prequential analysis of stock market returns

The Brier score and a covariance partition due to Yates are considered to study the probabilistic forecasts of a vector autoregression on stock market returns. Probabilistic forecasts from a model and data developed by Campbell (1991 Campbell, JY. 1991. A variance decomposition for stock returns. Economic Journal, 101: 157–79.  ) are studied with ordinary least squares. Calibration measures and the Brier score and its partition are used for model assessment. The partitions indicate that the ordinary least squares version of Campbell's model does not forecast stock market returns particularly well. While the model offers honest probabilistic forecasts (they are well-calibrated), the model shows little ability to sort events that occur into different groups from events that do not occur. The Yates-partition demonstrates this shortcoming. Calibration metrics do not.     

财务危机预测模型的构建

基于Logistic回归模型,选取中国制造业上市公司作为样本对财务危机预测进行研究。从企业的盈利能力、营运能力、偿债能力、成长能力、现金流量等方面出发,选取了10个财务预警指标,经过回归分析得出,总资产收益率、总资产周转率、资产负债率、主营业务增长率、经营活动现金净流量对负债的比率五项财务指标对上市公司发生财务危机有重要影响。从而提出要从提高盈利能力、提升营运能力、增强偿债能力、提高成长能力、保障现金流的充足几方面来应对财务危机。     

金融虚拟化的道德风险及其市场影响:次贷危机的深层反思

由美国次贷危机引发的全球性金融危机和全球性经济衰退仍在蔓延之中,至今仍深未见底。从表面上看是美国房地产泡沫的破灭引发了次贷危机的爆发,但从本质上分析,次级抵押贷款证券化、衍生化和虚拟化过程中各参与主体的道德风险行为才是引发危机的真正根源。正是不断虚拟化所引发的市场信息不对称的加剧为各环节的金融中介提供了道德风险行为的空间;而金融中介道德风险行为的加剧和叠加则增加了金融市场的脆弱性,提高了金融市场的系统风险,最终导致危机的全面爆发。     

Forecasting the aggregate stock market volatility in a data-rich world

ABSTRACT

In this article, we utilize the basic lasso and elastic net models to revisit the predictive performance of aggregate stock market volatility in a data-rich world. Motivated by the existing literature, we determine several candidate predictors that have 22 technical indicators and 14 macroeconomic and financial variables. Our out-of-sample results reveal several noteworthy findings. First, few macroeconomic and financial variables and most of technical indicators have superior performance relative to the benchmark model. Second, combination forecasts are able to significantly beat the benchmark and some signal predictors Third, the lasso and elastic models with all predictors can generate more accurate forecasts than the benchmark and some other predictors in both the statistical and economic sense. Fourth, the lasso and elastic models exhibit higher forecast accuracy during periods of expansions and recessions. Finally, our findings are robust to several tests, such as different forecasting windows, forecasting models, and forecasting evaluations.     

Evidence of a stock market wealth effect using household level data

Using the household level data of urban households in Korea, this paper presents evidence for a statistically significant stock market wealth effect for the highest income bracket households who typically hold a large share of corporate stock.